The first major corruption scandal in independent India was in 1962 when the chief minister of Punjab was accused of malfeasance -and condoned by Jawaharlal Nehru. Since then it has been one damn thing after another in an accelerating mode. The AgustaWestland affair is merely the latest.
Why does this happen? Is it a flaw in our genes or is it a structural problem? The answer lies in a cruel combination of two ideas of which India is a willing victim: one from economics and one from politics.
One of the earliest topics to be taught in economics courses is called "externalities". The message basically is that what one person does (or doesn't do) impacts others. This is called an externality.
The impact of these externalities can be positive or negative. The positive impact - in a sharp demonstration of how original economists can be - is called "positive externality"; the negative impact, you got it, is called "negative externality".
Is there a corresponding externality concept about ideas? Has anyone ever systematically analysed the negative externalities of good ideas?
For instance, how do religions spawn such belligerence while explicitly advocating the opposite? How does the practice of a religion by its adherents result in their violence against non-adherents?
How did Marx's accurate view of the dynamics of history lead to such awful ideas for the economy and society? Has anyone examined the externalities of his analysis of history?
How does the perfectly equitable notion of universal franchise result in horribly negative externalities for society as a whole in the form of consistently wrong choices?
There could be many more such examples.
After an exhaustive list of good social science ideas has been prepared the question that needs asking is this: what is the balance between the positive and negative externalities of social thought?
Science has a method for determining this balance. But social science doesn't. The reason probably is that much of social science thought is based on normative principles - what ought to be rather than what is - and therefore tends to be prescriptive, and that in a one-size-fits-all way.
The externalities are thus regarded as being entirely positive. No consideration is given, or attempt made, to provide the negative ones.
Keynesian monster
John Maynard Keynes' thoughts provide a near-perfect example of this. Like all other great social thinkers, he meant well. But he failed to consider the Frankenstein he was proposing.
Keynes' prescription, as an answer to the Great Depression of the 1930s, was that when demand falls short of supply at the level of the entire economy, the state must compensate by spending more. This was a good idea, though not a very original idea because Chanakya had assigned much the same role to the state.
But the 20th century differed from his era (350-275 BCE) in that it allowed people to choose their rulers via a vote. Post-1945, the combination of Keynes and democracy as the absolute and must rules for societies has become a millstone around our necks. The temptation before politicians to use the Keynesian idea - which was intended to solve a specific problem relating to industrial over-capacity - has led to governments to spend on all manner of things that should ideally be left to private spending.
Indeed, post 1945, an idea has taken hold that it is moral for the state to spend beyond its means, which suits politicians perfectly. The European crisis today is a direct and most perverse example of what happens when Keynes is combined with democracy. Greece is the most extreme example but the others are not far behind.
Country after democratic country has been a victim of this seductive combination. The ones that are not are more the exception rather than the rule.
Inviting corruption
Among the developing countries that have chosen universal franchise, one important negative externality has been corruption. Keynes inspired spending by the state is the equivalent of giving a machine gun to a bunch of monkeys.
(And, in the fashion of economists if I may add a lemma, the bigger the democracy the greater has been the corruption. You can check this out for yourself.)
The reason is simple: as democracies become larger in width (number of voters) and depth (the number of elections), the need for funds rises. Siphoning from state spending is low hanging fruit, an irresistible temptation to pluck low-hanging fruit.
Either all politicians calculate that since everyone is helping themselves why should he or she be the only one to not do so; or they calculate (like milkmen who add little bits of water) a little bit will not do any harm.
Either way, the taxpayers get screwed.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
