Bribery as mugging
Published by Yazad Jal November 26th, 2004 in GovernanceParth at Spontaneous Order asks a sharp question:
My personal example: my younger brother has a house in Detroit with electricity, water, phone connections. I’ve an apartment in Delhi with similar connections. Every other month or so, the telephone linesman would knock on the door, “Kaise he SAAB?!” You know what he is asking, surely not how you are. I pay up at least once in a while, otherwise my phone would go ‘dead.’ Similar story for the guy who comes to read the electricity meter–he makes a wrong ‘reading’ and the government company says you must first pay the bill and then file a complaint for refund! Looking from outside I look like a corrupt, morally weak guy–of not so good character in Sivasankaran’s words. My brother on the other hand hasn’t paid a bribe, ever in the US. A man of outstanding character, isn’t it?
But, would my brother be as morally upright if he were living in Delhi? Would I be as morally corrupt if i were living in Detroit?
Many anti-corruption crusaders look at the bribe giver and the bribe asker as being somehow equally corrupt. Parth’s piece points out why this is most probably not true. In some cases the person paying the bribe is being mugged — in a civil manner, of course!
Extortion is the word that springs to mind.
I’m glad at least with multiple phone companies we’re not still dependant on the MTNL phone guys.
Hi,
My econ prof asked a pertinent question. Why is it that govt organizations function well in some countries and don’t in others? I would extend it further to state, “Why are govt officials less corrupt in English speaking countries than in others?” [Protestent ethic?]
[This is an aside from the discussion on competition. Corruption is rather high even in the private sector in India - ever dealt with the procurement dept of some big IT companies?]
On India’s corruption, the linked essay by Hilton Root of Hoover Institution is worth a skim:
http://www-hoover.stanford.edu/publications/epp/82/a.html
I had once approcahed the Nagpur ACB (Anti-Corruption Bureau) for getting some matters straight. As soon as they learnt that the matter didn’t involve lacs of rupees, they lost interest.
It’s more to do with the _people_ that run the system rather than the system itself I guess.
Why is it that Singapore is so much more successful at attacking corruption than India? Are citizens of Singapore naturally more morally upright than Indians?
Or for an even clearer example, compare East and West Germany in the 1980s or Hong Kong and mainland China today. Both were ruled by people who share a common culture but in one case managed to operate a rights-respecting limited government while their counterparts ruled or rule over an extremely corrupt regime.
Furthermore, levels of corruption in the U.S. vary quite a bit according to region or city. Some cities have notoriously corrupt municipal administrations (Chicago and Philadelphia come to mind) while others are much better governed. And things were much worse before the 1960s.
It seems that institutions matter a great deal in reducing corruption.
Parth can find an answer to his question by simply evaluating teh answers he finds to these 3 questions:
1. What is the Income Tax level in India and the US. What portion of his income does his brother pay in terms of - federal tax, state tax, municipal tax, not to mention the sales tax on all goods and services which includes electricty and telephone (I beleive the FCC levies its own communications tax).
Hint: I have a feeling that his brother pays several times the tax rate that Parth does.
2. Then he should ask what is the real price that he pays for his telephone service/electricty.
Hint: accounting for discrepancies in electricty generation, I have a feeling that Parth pays much less than his brother for telephone service.
3. Then Parth should ask what is the average salary that a linesman in the US makes as compared to one in India
Hint: I have a feeling that a linesman in the US makes hundreds of times more in salary than his Indian counterpart.
Put all the results from 1,2 and 3 together and Parth should have an answer to why he has to bribe while his brother does not. In effect they probably pay in total the same amount of money for the same service - the only difference is that his brother pays it upfront to the Government and AT&T while Parth pays on an ad hoc basis directly to the lineman.
My econ prof at university termed this sort of corruption “unofficial ad hoc indirect taxation” as in macro terms it is no difference to the economy and actually apart from the inconvenence, makes no difference to Parth either - the service would still cost the same in Mumbai as they would in Detroit.
Ck, it gives rise to services like Les Conciergeswho interact with the bureaucracy on behalf of consumers. Imagine the employment benefits and the trickle down effects of corruption. :-)
A small detail that Ck seems to neglect is that most Indians also earn far less than Americans do, and the total cost of the service for them increases quite dramatically when one factors in bribes that have to be given, also as an old Swaminomics article points out, giving a bribe maynot always give you the expected results because there is a possibility of finding some honest guy in between who won’t take a bribe and in that case the bribes paid en route are sunk.
The impact on economic activity is that either people don’t engage in economic activity which involves government regulators and bribe-seekers, or they factor in the bribes as a cost of production/consumption. Besides bribes and bribe-seekers add to the opacity of the system and drive away or demoralise those who really do want to make an honest living, but find that without brown envelopes changing hands there is no living to be made. Additionally as Quizman points out an industry develops around the brown envelopes, which further intensifies the opacity of the system, driving more good people away.
Then Ck comes along and laments that Capitalism is about giving power to a bunch of crooks who are only bothered about making money and do not care about morality and ethics.
YOur claim is easily verified - ask Parth how much he makes and what his borhter makes and then calculate the PPP in real terms. I think you will find that in terms of purchasing power, ther eis not that much difference betwen the two.
Bribery is very much entrenched in Capitalism - In India it takes place at the individual level, in the West in takes place at the level of corporations… only in the US they are called Campaign Donations. It would appear to the average US citizen that he does not have to pay any bribes but in fact the companies who he buys services from all pay bribes and happily pass the costs on to him in the form of higher rates.
Heres an example of a ‘bribe’ the US way. Read the article and then tell me who really suffers at the end of this.
It is definitely not Verizon which no doubt paid for the governer’s campaign - it is the consumer who will pay at the end of the day by being denied benefits and access to better technology.