Thoughts on corruption

"Corruption is the market mechanism for privileged access" - C K Prahalad.

I came across this quote/definition while reading a chapter extract from C K Prahalad's "Fortune At the Bottom of the Pyramid". It has been a long time since i have given corruption some serious thought and this statement made me think quite a bit. At the end of an intense thinking session I had number of perspectives and insights into the economic and ethical implications of corruption as we deal with it in our day to day lives.

While thinking of the economic implications of corruption I got the following insights into the nature of corruption:

• As long as there is a consumer surplus in a price regulated environment (most government services are price regulated so as to make them affordable to all strata of the society), there is always a scope for corruption. Those consumers that hold a higher surplus are more likely to seek a more privileged access (be it in the form of reduced processing time or a higher evaluation in a dispute like situation) and are more likely to encourage the practice of corruption. Even people who enjoy the slightest of a surplus may give in to corrupt practices. Any form of governmental price fixing or supply restrictions on privately provided goods and services can also lead to a market for "privileged access" (read corruption) in the private sector.
• According to C K Prahalad, the most important factor that aids corruption is the lack of transparency in government processes, which in turn makes the completion of a transaction with the government a highly time consuming experience. This in turn causes the people at the "bottom of the pyramid" to consider the time value of money and therefore forces them to add to their costs in two more dimensions, one the price paid to the broker or intermediary who is getting the work done, and two the bribe needed for the government official to perform his duty. I couldn't agree more with his analysis on this subject.
• As much as private enterprises could raise the the cost of essential goods and services, given the flexibility that they hold in differential pricing, they may turn out to be a better alternative than fixed price government services. Public perception is very forgiving towards the private enterprise in providing a differentiated service/good at differential prices. Effectively private enterprise in a slightly regulated market could possibly reduce the need for corruption in a society where there is a high differential between the haves and the have not s.

These are not observations that have no technical basis, these can be proven using various economic models of demand and supply and i am quite convinced of the truth in these arguments.

On a more philosophical note, i found quite a few ethical applications of the term corruption as taken in the context of "privileged access".

When we tip the security guard so that he sorts our mail more carefully than that of our neighbors, or we tip the waiter a little more so that we get the most prized "romantic" seats at the restaurant, or when we pay that extra tip to the gas delivery boy expecting a more prompt delivery of the gas cylinder, aren't we all giving in to our perceived need of a "privileged access"? In effect are we all being corrupt in these simple actions that we perform day to day without giving it a second thought!

There are a lot more personal and professional scenarios in which i could try to apply this definition of corruption, focusing mainly on the words "privileged access" and i find it fascinating that so many routine actions of mine fall into the bucket of "corruption".

Perhaps there is a different definition of corruption when it comes to ethical and moral actions that I need to seek out ... but for today my quest stops here ... more perhaps sometime later in the year ...

Gandhian Thoughts

I had a chance to attend the Gandhi Colloquium at IIM Bangalore. The theme of the colloquium was “Gandhi, Governance and the Corporation”. I was impressed by some of the thoughts that the eminent speakers (Prof Dwijendra Tripati, Prof N Balasubramanian, Prof Peter DeSouza, Prof Pratap Bhany Mehta) put forth as a part of the introductory session in the morning.

Key takeaways from the lectures:

- Gandhian philosophies have not had a widespread acceptance in the corporate world

- The philosophy of trusteeship is focal point for corporate embracement of Gandhian thought

- Trusteeship involves a sense of debt to society; an organization exists to serve the society and the context of the society in which it exists

- Gandhi believed that an individual or a corporation had to earn just as much as was “reasonably” required and any amount earned in excess of this was expected to be returned to the society, since it was “excess” wealth that was accumulated unduly and it belonged to the society and not the corporation or the individual (Contrast this with socialism, looks like Gandhi’s philosophy was geared towards voluntary actions for equitable distribution of wealth unlike the “socialist” thought of Government enabled distribution of wealth!)

- Gandhi was perhaps the only political figure who was aware of the communal tinderbox that India could evolve into at the time of independence

- Gandhi placed a great emphasis on the aspect of friendship, friendship across groups to which an individual belonged

I find myself resonating with a lot of the thoughts that were put forth. I believe that socialism, an excellent concept, can never be imposed. Voluntary socialism as espoused by the “trusteeship” philosophy is perhaps sustainable. It is perhaps necessary that this philosophy is inculcated as a way of life in Indian society. Is it going to be successful? Gandhi was convinced that it would succeed, yet today 50 years after his death there is still no clear answer. Even I am not fully convinced of the efficacy of “trusteeship”.

To get a wider perspective on trusteeship:

http://www.gandhi-manibhavan.org/gandhiphilosophy/philosophy_trusteeship.htm

Summed up in one paragraph:

“Supposing I have come by a fair amount of wealth—either by way of legacy, or by means of trade and industry—I must know that all that wealth does not belong to me; what belongs to me is the right to an honorable livelihood, no better than that enjoyed by millions of others. The rest of my wealth belongs to the community and must be used for the welfare of the community.”