A discussion on corruption in India based on Prof. Kaushik Basu's paper on minimizing harassment bribery



 Link to this post:
 https://profiles.google.com/raja.mitra.sg/posts/NfpR8ibzzTu

4/17 Raja Mitra: Thinking out of the box by Kaushik Basu, Chief Economic Advisor, Govt. of India :Give immunity to bribe givers, punish takers: http://www.indianexpress.com/news/immunity-for-corrupt/767947/

Here's another report from The Telegraph, U.K. on the same topic

http://www.telegraph.co.uk/news/worldnews/asia/india/8466645/Indian-proposal-to-legalise-bribes-to-government-officials.html
4/22 Debashis Guha: P. Sainath, as you might expect, opposes the idea:
Bribes: a small but radical idea
http://www.thehindu.com/opinion/columns/sainath/article1712689.ece
4/22 Raja Mitra: Debashis Guha - What's your take? Personally tend to agree with Gurcharan Das' view that it could be starting point but needs to be thought through in detail & expanded & amended as the need might be.
4/23 Raja Mitra: Kaushik Basu's full paper can be viewed / downloaded here:

http://finmin.nic.in/WorkingPaper/Act_Giving_Bribe_Legal.pdf

I understand that while Kaushik Basu would welcome informed & thought through feedbacks, one of his grouses presently is that a lot of people are commenting without even having read the paper in full.
4/24 Raja Mitra: An article on the proposed Anti-corruption legislation
http://www.hindustantimes.com/Back-to-the-drafting-board/H1-Article1-688980.aspx

Some issues & queries raised by me

"Some issues & queries. Why can't the existing CVC, Lokayukta system in place act as the deterrent anyway?"

" There are no dearth of laws in India & layers of bureaucracy too & the devil has always been in the implementation. How will Lokpal be any different? And what guarantees are there that this additional layer of the Lokpal & his office will eventually not add to corruption given the existing systemic deficiencies?"

" Finally consultative processes by the GOI arwecommendable but an ex-army driver turned 'activist', a dubious 'father-son' duo, supposedly activist lawyers, and the Lokayukta of Karnataka supposedly India's most corrupt state, are the co-opted members instead of experts & specialists from economics, finance, systems & administrative processes. If Santosh Hegde has done such a poor job as Lokayukta Karnataka how can he even be on such a committee instead of first being held accountable & answerable for his poor performance?"

Would welcome your views Rajive Chandra Debashis Mukherjee Debashis Guha Tirtha Mitra Ujjal Choudhury Arin Basu & anyone else who may have browsed this thread
4/24 Raja Mitra: Tirtha Mitra
Copying your comments from another forum on the issue so that all inputs are consolidated under one roof:

" There are two types of bribe. One is called a speed money. In this case you pay to get your work done in time. For getting your passport in time, you need to bribe the police who comes for verification. Politely the inspector will tell you - "Ham logon ko kuchh nasta pani milta hai.' Here I have not done any crime nor have I violated any law. This we call speed money. This is a sort of bakhsish or tips. Similarly you pay the Govt peon to get your file moved from one table to other or collect your challan etc. These are small bit and usually collected by the lowest level of poorly paid staff. But in the larger sum both the giver and taker are parties in the crime. We pay a hefty sum for registration of our house as bribe. This we do in our own interest to reduce the stamp duty payable. So here the giver is a party and encouraging corruption to reduce the amount legally payable. The practice is simple, you sell the apartment or house as incomplete construction at a lower value. Then you enter into a contract with the builder for finishing the construction. So the value of the property gets halved and so is the stamp duty. If I am doing this, it is in my interest. So I am also a party to corruption. The second type is most common in India and unless people themselves change their attitude, there is no way out."

" The point here is in all bribery both sides are involved. For big loan sanctions, it is stated that many pay a bribe but I never faced such a thing. But I know of people who paid huge amounts to get their loans sanctioned. In all such cases please note that the giver has either fudged his records or overvalued his assets to get a loan. The giver willfully paid the amount and he would complain more if there is an honest officer. I know of an honest Govt official heading some Govt corporation. The dishonest people are in trouble and they are trying their best to get him removed with political pressure. I am aware what used to happen in the past when the head used to be dishonest. Therefore, if bribery is stopped, it will cause lot of harm to the giver in most cases. Those who paid for 2G, do you think they did this under duress? They did so willfully as they got a pliable person to dance to their tunes. In India, most SMEs are operating with 50% cash business. They do not pay any tax or duty on these transaction in connivance to the officials. In most cases such people made the officer corrupt and then complain when the demand increases. You give meat to a vegan and when he starts enjoying it you feel it is not fair. Why did you give meat to him in the first place?"
4/26 Debashis Guha: I read Kaushik Basu's paper. Unfortunately, it's not really a paper, and does not contain any rigorous analysis. As Tirtha has pointed out above, the distinction between harassment and other bribes may not be entirely clear in all cases and may not be easy to make in legal terms.

My own, tentative, take is that this won't really work. Although the bribe taker knows that the bribe giver may turn on him later, and this I believe is the principal, game theoretic, point here, he also knows that this will only happen if there's an investigation later and that's quite unlikely since such petty bribery is very widespread and quite unlikely to be investigated. Besides, in many cases harassment bribes are actually paid by professional agents, and as Basu himself points out, reputational issues may trump legal considerations here.

I'd like to read Pranab Bardhan's paper, and some other work cited in the Basu paper before saying any more, since I don't know most of the rigorous work in this area. Unfortunately, I am too preoccupied these days to do much reading.
4/26 Arin Basu: I think Debashis has written what I had in my mind after my first reading of the paper. As Rajada has requested input, let me share some thoughts.

I am surprised that Prof Kaushik Basu has written this (for all the following reasons and as Sainath has pointed out, it works against the poor, most of whom are affected by the kind of "bribery" he is aiming this mechanism at.). At first I thought Gurcharan Das' s suggestion that these can be introduced in baby steps made sense, but then again, the way I see it, if you drill down to the root of the things, he is offering a solution based on a fundamentally untenable, somewhat amoral assumptions that are evidence-free. I am not sure how reasonable are these speculations, although the underlying theory as he explains in his paper is robust. Let's examine some of these.

First off, the original paper did not have any hard data, any statistical analysis or even textual analysis as a backdrop to his key thesis about the root of corruption or the typology of bribes that he has talked about. An entirely personal opinion based argument about bribery and corruption makes it hard to assess his proposition.

Second, I could not understand his central assumption behind the typology (I thought is was somewhat peculiar, the way typology of harassment versus non harassment bribery was presented. For example, since bribery as a process results in harassment, it was not clear why should one claim harassment as a phenomenon is orthogonal to the bribery process itself (think of it in another way, as if there are bribes that are non-harassing, and there are harassment to the public that are not corrupt practices in some form or other such as bribery). I'd have thought a component of the central thesis based on this typology doesn't really lead to anywhere. Then there was the other component of his central thesis that, it is OK (not to penalize at least) to pay bribe but not OK to ask for it, is perhaps based on an assumption (hard to tell) that bribery is some form of moral nihilism, or value neutral. In a situation such as this, what happens then to all the government fees one pays for the services rendered? Do they get added to the bribe in a situation where bribe payment is deemed legal? Also what happens in the situation where the official, having taken the bribe adds to government funds, in some way? Does that make the action of another official who does not resort to asking for bribe an act of deception to the exchequer of the opportunity money that are earned on behalf of the government by officials who ask for bribes from people, over and above whatever fees involved and turn them in? Given how these bribes are asked for and organized, a statute if passed may end up increasing bribery, is that a fair solution, is that even ethical? How does harassment bribe make it different from non-harassment bribe in the larger scheme of things?

Third, Prof Basu makes an explicit assumption that most people who end up paying bribes do not report bribes they paid in fear of being punished if these are revealed. Existing evidence does not suggest so. There are websites such as "i paid a bribe" (www.ipaidabribe.com) , zero rupee fake notes, and so on have opened a floodgate of self reported bribes, verifiable or not, and so far, no one has been punished for either setting up the databases or for encouraging people to tell the story or giving bribes, and at least reports of bribe givers being nabbed have not been common (else, how'd one support sting operations). These experiences make it uncertain if legitimizing bribe giving will make a difference in reporting rates. Having said that, it needs to be mentioned that his thesis is based on a robust theoretical assumption that asymmetrical punishment of the bribe taker will encourage the bribe payer to report the bribery process.

In summary, although the proposal is great on theory (considering from a game theoretic perspective), and assuming that people if not punished for giving bribes will report those who ask for bribes, there are reservations about this proposal because it lacks hard evidence, and has some ethical problems given the real situation in India. In the end, it's rather sad that a senior academic who is appointed to provide advice to the government is airing evidence-free, near naughty ideas and getting them published on government of India platform!
4/26 Debashis Guha: I believe Basu's argument is basically game-theoretic. If briber and bribed both are equally liable, then they have no incentive to defect from their criminal compact. If however, the briber is not liable, and can even get his money back, he has a strong incentive to defect and thus reverse the bribe payment. Thus the co-operative payoff matrix is converted into a prisoner's dilemma type of matrix, where defection is optimal.

However, this only works if the expected payoff from defection dominates the expected cost. For a one-shot game, this will depend upon the ease and chance of success of such a "bribe reversal action".

For a repeated game, reputational costs dominate, and as Basu's own caveat shows, the result may not hold. Note that even ordinary citizens may face a repeated game, if bribe seekers act in collusion. For instance, say you pay a bribe to secure your tax refund. Now you are thinking of ratting on the tax officer and getting your money back. Are you still going to do that if another friendly tax official calls and reminds you that you'll need a refund next year too?
4/26 Raja Mitra: I took some time out today to go & attend a seminar on Disinvestment & the Indian Economy' organized by the Indian High Comm. Singapore in conjunction with ISAS to which I had an invitation. I do skip several of these sessions organized by the IHC/ ISAS regularly. In this case, I was interested to attend because the speakers were Kaushik Basu, CEA, GOI & Secretary Disinvestment, GOI, Sumit Bose.. Of the two, Kaushik Basu of course spoke at some length on the Indian economy, including present indicators & future forecasts & trends.

He turned out to be quite a good speaker too, engaging & informative & did a good job of promoting the Indian economy which was the basic purpose of his talk I guess. Given the topic & the fairly tight time-schedule, questions on the corruption issue and on his 'paper' weren't quite appropriate. I did have a nice little chat with him later on the issue though and these are some of the highlights of that talk.

Kaushik Basu's CV & background can be seen by accessing the link below. Like some of us, his hometown happens to be Kolkata and he had his schooling at St. Xaviers', Calcutta.

http://www.kaushikbasu.org/bio.php

The 'paper' under discussion here is a mere starting point & an approach to the vast issue of corruption. There is certainly scope to build on it, expand its scope or even to suggest a different approach altogether. However he apparently felt miffed by the fact that quite a few people had commented on it or vehemently criticized it without even reading through it fully or thinking through the whole issue. Here's a rejoinder from him.

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=1naFQ_jJyOrdHuCVDXLar_6ZwNuiaswAb6nTz1ctu6SV0XV_m31tGt849lLhO&hl=en

I told him that we have had a fairly animated discussion on the whole issue on social media and the discussion was ongoing. I mentioned that we have no issues about sharing the whole thread with him in a while, provided such sharing was meaningful & would make a difference in the end. I also mentioned to him that the group involved in the discussion comprised of technocrats, executives, professionals, senior corporate managers, finance managers & specialists, economists, academics, present & ex-journalists & business correspondents among others. I further said that while some may be critical of certain aspects, everyone was really driven by a concern about the hot-button issue of corruption in all its forms & wanted to contribute in their own little way in helping to combat & curb the problem. He thought it was an excellent idea.

I do think that a group of the kind that I have just mentioned, would possibly have a lot more to contribute than some self-professed 'activists' & legal luminaries who have today virtually forced their way into a committee. Giving them the benefit of doubt, while some of their intentions may be laudable, I guess curbing small & big ticket corruption is a systemic issue which needs a whole host of insights, including economic & financial ones. While legal luminaries may be useful in drafting bills which are compatible with the laws of the land & the Indian constitution, surely they can't be the repositories of all wisdom on the topic.

To bring everyone up to speed I would like to share a brief interchange I had with Bibek Debroy earlier on the topic. As some of you may be aware, Bibek is an economist of considerable experience who, in addition to academia, has been involved in a series of consultancy & advisory assignments with the public sector & the government for some time now.

Some of the points made by Bibek Debroy during my exchanges with him earlier are summarized below. These & others have also been stated in his column in the Hindustan Times, included earlier in this thread.
1. Small ticket & big ticket corruption should be segregated clearly.
2. Economic offenders should be dealt with through a civil suit rather than a criminal one.

Please do add your thoughts, feedback & ideas to this thread.
4/27 Raja Mitra: Interesting article on Corruption in India

http://www.business-standard.com/india/news/arvind-subramanian-whatpm-can-do-about-corruption/433588/
4/27 Raja Mitra: Three articles which best sum up my thoughts about the 'activist' movement and the way the LokPal Bill drafting committee has been formed as a result.

http://www.britannica.com/blogs/2011/04/anna-hazares-misguided-fast/

http://www.indianexpress.com/news/hysteria-will-not-end-corruption/774100/0

http://www.indianexpress.com/news/of-the-few-by-the-few/772773/0
4/28 Raja Mitra: My thoughts on the approach suggested by Kaushik Basu are:

Keeping the scope limited to small-ticket corruption & 'harassment' bribes, this could work provided certain other factors are taken care of. Some of these would be:

1. Protection for the whistleblower. Quite often, the bribe-taker would be able to use influence, power conferred on him by his official position or various other associates, internal & external, to pressurize, browbeat & threaten the whistleblower into retracting his statement about bribe having been given to a particular person. Such protection has to be fast-tracked, made available on a sustained basis & overseen possibly by a non-related body or institution. For example, a routine complaint to the local police station that one or one's family is being threatened may not be good enough, given the fact that the bribe-taker can use influence or bring pressure to bear on the local police outpost to render them inactive at best or even get them to actively collude upto a point in threatening & browbeating the whistleblower.

2. Given the difficulties of actually proving that a bribe was given & the long tortuous process involving investment of time, money & the possible enlistment of external assistance (e.g. lawyers) in doing so, adequate help & additional sweeteners must be made available to the bribe-giver to induce him or her to even consider blowing the whistle in the first place. If the process involves enlisting the help of lawyers to prove the issue, such legal help must be made available to the whistleblower by the concerned authorities, F.O.C.
Returning the amount of bribe given to the whistleblower once the case has been proven beyond reasonable doubt may not quite be good enough incentive for the hassles the whistleblower has to go through, some of which I have mentioned earlier. Hence, in addition to returning the amount of bribe given, adequate sweeteners in terms of cash incentives or tangible rewards to the whistleblower would have to be made available as part of the system once the instance of having given a bribe is proved.

Other than one-off cases of 'harassment bribes', in instances where the whistleblower has to repeatedly deal with the department one of whose officials had asked for the bribe initially (e.g. the instance of getting tax refunds in subsequent years from the I.T. department, as has been so pertinently mentioned earlier), an independent scrutiny of such cases by a different department of the same institution or by an external agency on a long-term basis would be necessary to prevent recurrences or even 'threats' being uttered by the colleagues or associates of the accused official. To help the process of entrapment of the official(s) involved, all assistance must be rendered to the willing whistleblower to get conclusive evidence about a bribe being demanded or being given (e.g. setting up phone-taps quickly, being wired to record conversations etc.,).

The law needs to be changed to make punishment to the bribe-taker truly exemplary and a deterrent to others who may be contemplating asking for a bribe for services rendered. Dismissal from service and being asked to return the amount of the bribe and pay a penalty additionally alone may not be good enough. Adequate publicity through the media and imprisonment could be some of the exemplary deterrents considered. The thought of becoming a social outcast and an object of ridicule together with the immense difficulty of finding any kind of employment once someone is identified & proved to be a bribe-taker could be effective deterrents for many harbouring thoughts of joining the ranks of the bribe-takers.

The instances of big-ticket corruption including all those instances where the bribe-giver actually plays a proactive role in inducing a hitherto honest official or a senior functionary into crossing the Rubicon & becoming a bribe-taker for the first time would need to be dealt with separately in my view and hence are not being discussed here as part of this topic. Curbing such corruption would require a whole host of systemic, structural, legal & possibly even Constitutional changes which would have to be the subject of a separate discussion altogether.
4/28 Debashis Guha: I think that while Basu's idea makes some sense, it will be difficult to actually put it into operation. Let me take each point raised above in turn.

1. Threats to the whistle blower: This is a real possibility, especially when the whistle is blown on police or other enforcement personnel and will be extremely hard to prevent
2. Reward to the whistle blower: This may vitiate the entire process since the accused will be quick to claim that the charges were brought merely for financial gain and indeed such cases may occur fairly often. On the other hand, just the prospect of getting their money back may not be incentive enough for most folks harassed into paying bribes. The satisfaction from seeing the errant official dismissed or even behind bars may be a much stronger incentive.
3. The case of repeated interactions is a critical one. As many of us know, the act of paying a bribe is often twice removed from the actual payer. You make a lump sum cash payment to an agent or accountant. In turn, he employs a tout whose sole job is to make the right payments to the right people. There is little chance of such a tout turning informant, except perhaps as part of an elaborate sting operation.

As Basu's rejoinder to his critics, linked above, makes clear, his argument hinges upon the deterrent effect on briber-seekers, created by the prospect that the harassed bribe payer will blow the whistle later with no adverse consequences. The extent of this deterrence, as always, will depend on the credibility of the threat. My guess is that, at least initially, most bribe seekers may consider this threat as somewhat improbable. However, this perception may change if there are a lot of such cases, adequately publicised by the media.

I want to point out another interesting possibility. The proposed situation of a bribe payer who wants to turn whistle blower is not unlike someone today who is being harassed for a bribe. After all, he may turn whistle blower since he has only been solicited and that is not a crime. Indeed, as the recent NALCO case shows, this does happen sometimes. However, it doesn't happen very often and certainly its prospect has not proved to be a strong deterrent. Why? One reason, already pointed out, is the difficulty of the process of bringing the guilty to book. The other, more interesting reason, is that most bribe takers seldom seek a bribe directly, except for petty payments that are more like a tip. In order to pay a bribe, you have to know whom to pay, how much to pay and how to go about it. If you simply offer some payment to an official out of the blue, you may be rebuffed, since the party is wary about entrapment. This is why you have agents and touts who manage the process so that the transaction is "safe". Alternatively, a situation is created where the harassed citizen has to actively seek to pay the official, so that the onus of the crime falls upon the payer. This will be even more true in the proposed case, since lack of culpability will obviously not extend to payers who actively seek to pay.
4/28 Raja Mitra: Debashis Guha - thanks for sharing some perspectives & possibilities which are illuminating. I think this is really developing into a good discussion & exchange of views & ideas & I hope some of the others reading the various posts / comments will pitch in as well. Let's target to get in all ideas, thoughts & views, after which we will treat the thread as closed & I'll mail out the link to Kaushik Basu for whatever it is worth.

29th April : Incidentally just happened to see this report on anti-corruption & the recommendations being formulated by the NAC. Leads me to wonder whether there are now too many individuals / institutions / organizations working on coming up with 'solutions' , often at cross-purposes. Could it become a classic case of too many cooks spoiling the broth?
http://www.indianexpress.com/news/nac-unveils-a-sweeping-anticorruption-strategy/783290/0
4/29 Rajive Chandra: I feel Kaushik Basu's approach is theoretical though I like the principles and the thought process of his hypothesis. Key areas of concern:
* The whistleblower theory that should factor in the power equation . the bribetakers are strong henchmen who can make life difficult for the harassment briber. It is oftentimes difficult to prove because the touts keep changing (moving target) and the real McCoy seldom sticks his hand out . We are touching the tip of the iceberg as the bribe taking money trail has deep and long winded roots which the naive giver cannot identify.

* Mr. Basu's model addresses the long tail of harassment bribes whereas it should actually follow the Parretto's principle and address the key cases that impact the economy. He seems to be bogged down by drivers/ license passport cases . To implement and get a critical mass will take a long time and this wonderful idea will be by then buried in strands of time

* Any model which he constructs should be scalable and flexible in the Indian context and capable of measurement and action

* He has not communicated his ideas properly as most people perceive him to be trying to make bribery legal. I must confess I did the same until Raja enlightened me.

* Needs to look at how ideas can spread virally particularly successful cases as not sure how he can estimate that bribery demand curve will sharply plummet.
4/30 Raja Mitra: On a somewhat tangential note, am wondering whether small-ticket harassment corruption should even feature among the top 3 priorities on the agenda, while tackling the overall issue of corruption, small-ticket & big-ticket, in all its avatars.
5/1 Raja Mitra: Soutik Basu, the BBC's India correspondent comments on Kaushik Basu's proposal:

http://is.gd/UqGip8
5/1 Arin Basu: Mention also then Jean Dreze's argument, here:

http://www.indianexpress.com/news/the-bribing-game/780094/0

/Arin


Sent from my iPad
5/1 Debashis Guha: Jean Dreze's argument is quite ingenious, and it turns on something we have emphasised above: the likely high cost of whistle blowing.

Raja, I too was wondering whether small ticket bribery even deserves this much attention. Indeed, why is it that corruption is always very high on most people's agenda, but other issues, say, health care and education, are not really such hot button issues?
5/1 Raja Mitra: Debashis Guha - Corruption has become a hot button issue possibly owing to the 2G Telecom scam & before that the CWG scam both of which received extensive media coverage. Correct me if I am wrong but topics like education, healthcare, infrastructure, skill development, employment generation don't seem to be media favourites exactly.

Surprisingly the government seems quite willing to have at least part of its agenda set by talk shows where people are virtually frothing at the mouth while exhibiting their self-righteous indignation or by tele-evangelized fasts performed by latter-day Gandhi avatars surrounded by a motley bunch of high-profile activists, dubious godmen & self-appointed knights in shining armour.

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