Sunday, October 07, 2012

The Banality of Corruption

Hi all,

Reproduced below is an email I had sent originally to an egroup of my ex-colleagues from the State Bank of India (sbi91@googlegroups.com) and later to my school egroup (loba83@yahoogroups.com) and other friends on 12 June 2011. This has been taken from my Gmail "Sent mail" archive (and therefore is verifiable).

Incidentally, I had first talked the idea of "inclusve loot" in my blog post titled 'Inclusive growth and its necessary corollary “inclusive loot"' dated 20 December, 2010 which can be read at this link:

http://ranjansr.wordpress.com/2010/12/15/inclusive-growth-and-its-corollary-%e2%80%9cinclusive-loot%e2%80%9d/

The difference between the above post on Wordpress and the later email version dated 12 June 2011 was the introduction of the idea of banality of corruption with a reference to Hannah Arendt's "banality of evil".

Today (7 October, 2012), I happened to come across an article by Udayan Namboodiri (posted on 7 December, 2011 on the website of the newspaper Pioneer) titled "The banality of evil" which also looks at corruption from the perspective of "banality" and which also makes a reference to Hannah Arendt.

In this context, as will be apparent from the time sequence given above, I had first referred to Hannah Arendt (in the context of the "banality of corruption") in my emails to my bank and school egroups on 12 June 2011, i.e., well before publication of Udayan Namboodiri's article in Pioneer. (Incidentally, about 80 odd people in all would have received this email (reproduced below) and many would probably still have it in their inbox archive.)

Therefore, I can confirm that my reference to Hannah Arendt and the extension of her idea to corruption was not borrowed from anywhere else. However, I also notice that the term "banality of corruption" itelf has been around for some time (a cursory google search shows it was used as early as 4 January 2006 ( http://econlog.econlib.org/arc... ) suggesting that many others have made the same connection.


Best regards,
Ranjan Sreedharan


---------- Forwarded message ----------
From: Ranjan Sreedharan
Date: 12 June 2011 11:28
Subject: Inclusive loot as the other side of inclusive growth
To: sbi91 sbi91@googlegroups.com
Hi all,
Some time back, I had talked about the link between inclusive growth and inclusive loot. Since then, I've developed the idea further and now it's become a full fledged article. Some of you here who have been casually following my posts in this forum would perhaps believe that the reason I keep predicting dire things for India is because of NREGS. That would be a mistake. The fact is, there have been a lot of things going wrong with the UPA government, which I keep summing up under the umbrella term "intelligence deficit".
Besides, a common deficiency in the way our debates on economic policies are conducted has to do with a failure to understand that good policies take time, say, three and four years, to be revealed as "good", while bad polcies may appear "good" for one, two and even three years, but usually not beyond. (An exception is land reforms which appeared "good" for about 30 years).
Anyway, in this article, I take a look at one of the larger forces that have been unleashed in India over the past few years, i.e. corruption. I argue that given the core philosophy of this government, corruption is a very natural outcome, that there really is no cause for suprise.
I welcome your comments.
regds, ranjan

Inclusive loot as the other side of inclusive growth

Ranjan Sreedharan

Notwithstanding the general consensus in India, the idea of inclusive growth is a fallacy, even with its powerful tug at the heart in ways that makes us all want to believe in it without troubling ourselves too much by having to dissect its logical foundations. We are happy that it makes us happy because we feel this warmth in the heart and that warmth itself becomes a delusional destination. It is delusional because in the realm of economic policy, the only thing that ultimately matters is the long term consequences of the policies that you happen to put in place. The original intent behind the policy is ultimately irrelevant. For instance, the original intent behind socialism was that workers of the world should unite and create a “worker’s paradise”. That the reality it gave birth to had no correspondence with the original intent is well known and to this day remains one of the greater tragedies of recent history.

The idea of inclusive growth is flawed because it presents a choice that is just not there on the table in real life. The only available choices are between fast growth and less fast (or slow) growth. In practice, inclusive growth can only mean slower growth compared to your potential. This is a point I have already dealt with in detail in my essay, “The fallacy of inclusive growth”.

Recent events in India have added a new dimension to this debate. Is all the talk about inclusive growth a mere façade for “inclusive loot” by a class of self-serving politicians? Or, is it that even if the original intent was not so, things are turning out this way?

Now that there is a fair amount of evidence, the logical link that binds the two together is not hard to figure out. Inclusive growth is necessarily about spending huge amounts of public money on welfare, ostensibly with the aim of doing good to the poor of the country. At the same time, it is common knowledge that higher outlays on welfare are accompanied by greater pilferage and more money lost to leakages. In simple terms, the more money you spend, the more it gets siphoned off.

However, this is not the end of it. A little thought would suggest that given the context of how governments in India function, when you double the expenditure on welfare, corruption would more than double because the level of oversight and control that can be exercised over how the money is spent is not simultaneously doubled. For example, where an efficient set-up restricts pilferage to 10 percent out of a budget spend of, say, ten million rupees, the same set-up would likely see a 15 percent siphoning off when expenditure doubles to twenty million rupees. In the doubling from ten to twenty million, the amount lost to leakage increases more than proportionately from one to three million rupees.

There’s also another powerful reason why, given time, this would indeed turn out to be the case. No one is born corrupt. People become corrupt for a variety of reasons, perhaps most important being that when we see the many examples around us of people who are corrupt and merrily getting away with it, it conveys a seductive message that there is an easy way to an easy life, well worth the “minor” risks.

Link it further to the environment created by an activist government where spending on multiple“welfare” schemes is forever on the rise, which generates ever more examples of people around you who are “merrily getting away” with it. Corruption now becomes a self-fulfilling prophecy. Mrs. Sonia Gandhi was recently heard bemoaning the “shrinking of the moral space” in India’s political class today. Actually, a lot of it is intrinsic to the path she has laid out for the country and therefore is of her own making.

The German-Jewish political theorist Hannah Arendt coined the phrase “banality of evil” to describe the actions of the Nazi war criminal Adolf Eichmann. Conventional wisdom was that evil men do evil things. Hannah Arendt offered the insight that there are occasions when evil can also be a function of thoughtlessness; particularly the tendency of ordinary people to obey orders and conform to mass opinion without critically thinking about the consequences of their action or inaction (Wikipedia). In the same way, I believe there is also a “banality of corruption”that takes it beyond the simplistic notion that corruption is a stand-off between the uncompromisingly honest versus the fundamentally dishonest. It is not. In real life, it is more often about ordinary people conforming to prevailing standards of a lax morality, untroubled by their conscience because even the conscience operates within a frame of reference. This is to say that in a tribe of cannibals, the individual cannibal will never ever suffer the pricks of conscience.

Now, despite all the leakages, the money spent by the government does give rise to a sizable constituency of free riders who are privileged to live off the handouts from the government. Sooner than later, between the free riders and the looters—whose numbers are also substantial because loot takes place at the bottom of the pyramid as well—the numbers swell into a critical mass that becomes a powerful vested interest dedicated to maintaining the status quo, no matter what the larger costs to the country are.

This then becomes a reform-resistant country where the cracks (when they appear) are promptly papered over and bad policies keep piling up because any kind of course correction would involve making too many people unhappy. And since economics based on delusion has a strictly limited shelf life, matters cannot go on like this indefinitely. Typically then, reform-resistant economies wake-up into a nightmare with a full-fledged crisis on hand which now makes reforms imperative. All of a sudden, the political will to carry out reforms is also easier to muster.

By this logic, India would soon be running into another “1991” moment, maybe not so severe, but serious enough to give rise to the next set of real reforms, as opposed to the tinkering at the edges that passes off for reforms these days. And yes, all the recent talk about our deteriorating “macro-economic fundamentals”has to be seen as the beginning of this process of heading into a wake-up call; another 1991 moment that will force our hands into the next set of far-reaching reforms.


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