Nitin Desai: The politics of corruption

Part of the problem is our unwillingness to fund political parties as a matter of duty.

The 2004 ranking of countries in the Corruption Perception Index, prepared by Transparency International, places India at the 90th rank out of 145, sharing that spot with Gambia, Malawi, Mozambique, Nepal, Russia and Tanzania.

The ranking is based on information from some 15 surveys and has to be treated as a reliable measure of how the world of global business sees us. All of the Asian countries, China included, that we may wish to compare ourselves with rank above us.

Many believed that corruption in India was a product of rent seeking in the licence-permit raj. That regime is now largely dismantled. Yet the cancer of corruption continues.

How are we to explain and understand this?

The root of the problem lies in the way our democratic process works and the recent elections have demonstrated that in ample measure. Even in the bad old dirigiste days, this was the case.

There is a story of a minister who was sacked because he retained a part of what he collected for his party. He protested that this was true of all ministers and pointed to the performance of the then commerce minister.

He was told that there was a difference since the commerce minister retained 10 per cent and gave 90 per cent to the party, while the proportions in his case were the other way around.

The dismissed minister was not impressed and argued, "Ah! Look at his turnover and look at mine!"

The rot has now spread beyond politics. The administrative apparatus was always implicated, with bureaucrats joining the gravy train. But now it has infected the law and order system.

The nexus between politicians and gangsters is now well known. In fact, our standards have fallen so much that all we demand of a politician is that he should not be a history-sheeter.

And even that we cannot ensure. The judicial system, except in its higher reaches, shows dangerous signs of decay. All of this is taking place in a social context where caste and communal tensions are increasing.

The result is a huge loss of legitimacy.

If we are to tackle this problem, we need a linked set of reforms in our political and administrative process. The right place to begin is in the working of the electoral system.

We do have laws that regulate electoral funding and the Election Commission has been especially effective ever since the days of Seshan the Stern.

But the laws themselves and their application are frankly farcical. The law permits candidates an expenditure of around Rs 2 per voter in Lok Sabha elections.

The average expenditure is probably ten times this amount. Even the administrative cost of running an election amounted to around Rs 20 per voter for the 2004 elections, according to Election Commission estimates.

Clearly, the law will be breached and the Supreme Court in a 1994 judgement said: "The existing law does not measure up to the existing reality ... The provision has ceased to be even a fig leaf to hide the reality."

The monies expended by political parties have filled the breach. There are rules and disclosure requirements about these that are supposed to act as a check.

But look at what has been reported for the 2004 elections (Statement of Expenditure of Political Parties in General Elections 2004 and Legislative Assemblies of Andhra Pradesh, Karnataka, Orissa and Sikkim at http://eci.gov.in/MiscStats/misc_fs.htm).

The two major parties, the Congress and the BJP, reported expenditures of around Rs 125 crore and Rs 100 crore, respectively. This works out to roughly Rs 30 lakh per candidate or around Rs 2 per voter.

Surely, the actual expenditure must have been much higher. The reported figures for some of the other parties are frankly an insult to intelligence. Lalu Prasad's RJD reported spending only Rs 68 lakh, or around Rs 1.5 lakh per candidate, that is around 10 paise per voter!

The reporting on major contributors (those who gave more than Rs 20,000) is hysterical. One return is from a Paramarth party, located in Kamla Nagar, which reports contributions of nearly Rs 1 crore, the bulk of it from one company.

Their return is exceeded only by the Samajwadi Party, which reports contributions from several district presidents of the party amounting to about Rs 1 crore, 6 contributions from some firms in Aligarh, and a Rs 1 lakh contribution from a Mr Yadav who seems to be connected to the Kushti Mahasangh.

The returns for the two principal parties are not available on the website. If they were they would perhaps make for equally entertaining reading.

The funding of political parties and processes is a clearly major source of corruption. Part of the problem is our unwillingness to fund political parties as a matter of duty, without any expectation of any quid pro quo. Such disinterested but voluntary funding did happen during the independence struggle and perhaps for a few years thereafter. It was also visible in the post-emergency 1977 elections.

In both cases, citizens responded to the demand for political contributions out of a deep sense of commitment and loyalty rather than as a business investment for future returns.

Political funding as part of industry-level lobbying does take place. A typical instance is the support provided by trade associations to parties that promise the policies they desire.

In this intermediate case, the quid pro quo is not individualised and the relationship is between an economic interest group and a political party. The links between the BJP and traders associations, or between the CPM and trade unions, are part of political folklore.

The most pernicious is the more individualised connection between particular profit seekers in the business world and particular individuals in the political process.

Here public policy is distorted not to favour an industry or trade but to favour an individual. The favours can be, for instance, unjustifiable preferences in purchase and construction contracts, or pressures on public enterprises to favour someone, or tax changes designed to aid an individual company.

One reason for the growth of this type of one-on-one corruption is the desire of political leaders to monopolise control over political funds in order to exercise autocratic control over the party apparatus.

That is why the modalities of fund mobilisation have shifted from informal "taxation" at the local level to rake-offs on favours dispensed at the state and central level.

Political corruption and political style are connected. The former cannot be eliminated unless the latter changes. As long as political parties are run as personal satrapies for a leader and his kinfolk, one-on-one corruption will continue.

Leaders will sell favours to the highest bidder in order to retain their control of political funds. A drastic reform of political parties enforced by law is essential to ensure that the party system serves a democratic rather than a dynastic purpose.

Beyond this, we must look at the regulation of lobbies and their expenditure on political activities and to a measure of public funding for parties and electoral activity.

A later article will deal with this and ways of addressing bureaucratic malfeasance in greater detail. But these steps will not amount to anything unless the political class accepts its culpability.

A flawed and a corrupt political system, in the final analysis, is a judgement on the moral worth of those who run it. Politicians, almost by definition, have a heightened sense of self-worth.

They must pursue electoral reform simply out of self-respect.

The author is former chief economic advisor, the government of India, and former UN under sectretary general.