Thursday, January 6, 2011

On Corruption - Cultural aspects

Dec 31, 2010

Getting corruption right

By Jagdish Bhagwati
I JUST returned from India, where I was lecturing to the Indian Parliament in the same hall where United States President Barack Obama had recently spoken.
The country was racked by scandal. A gigantic, ministerial-level scam in the mobile telephone sector had siphoned off many billions of dollars.
But several of the MPs had also been taken aback on discovering that when Mr Obama spoke to them, he had read from an 'invisible' teleprompter. This had misled his audience into thinking that he was speaking extemporaneously, a skill that is highly regarded in India.
Both episodes were seen as a form of corruption: one involved money, the other deception. The two transgressions are obviously not equal in moral turpitude. But the Obama episode illustrates an important cross-cultural difference in assessing how corrupt a society is.
Transparency International and occasionally the World Bank like to rank countries by their degree of corruption, with the media then ceaselessly citing where each country stands. But cultural differences between countries undermine the legitimacy of such rankings - which are, after all, based on surveys of the public.
What Mr Obama was doing was a common enough practice in the US (though one might expect better from an orator of his ability); it was not so in India, where such a technique is, indeed, regarded as reprehensible.
India certainly has corruption, like almost every other country. But India also has a culture in which people commonly assume that everyone in public life is corrupt unless they prove otherwise. Even a blind man will tell Transparency International: 'I saw him take a bribe with my own eyes.'
Indeed, a distinguished Indian bureaucrat, a man of unimpeachable character, once told me that his mother had told him: 'I believe you are not corrupt only because you are my son!'
So, if you ask Indians whether their governance is marked by widespread corruption, they will answer with gusto: yes! But their exuberance biases India's global ranking relative to more empirically minded countries.
A similar bias arises from the occasional tendency to view political patronage elsewhere as being more corrupt than the same practices at home.
For example, when the 1997-98 East Asian financial crisis broke, there followed a systematic attempt to pin the blame on the affected countries: 'crony capitalism' allegedly had somehow crippled their economies! In other words, the acquaintances and benefactors of East Asian leaders were 'cronies', whereas those of US leaders were 'friends'?
In fact, it was clear that the culprits were the International Monetary Fund and the US Treasury, which had encouraged a shift to capital-account convertibility in these countries without understanding that the case for free capital flows was not symmetrical with the case for free trade.
But where substantial corruption can unambiguously be found, as it often can, one must recognise that it is not a cultural given. On the contrary, it is often the result of policies that have fed it.
India in the 1950s had a civil service and a political class that were the envy of the world. The loss of virtue must be traced to the all-pervasive 'Permit Raj', with its licensing requirements to import, produce and invest, which grew to gargantuan proportions. High-level bureaucrats quickly discovered that licences could be bartered for favours, while politicians saw in the system the means to help important financial backers.
Once that system took root, corruption percolated downward, from senior bureaucrats and politicians, who could be bribed to do what they were not supposed to do, to lower-level bureaucrats, who would not do what they were supposed to do unless bribed. Clerks would not bring out files, or get you your birth certificate or land title, unless you greased their palms.
But if policies can create corruption, it is equally true that the cost of corruption will vary with specific policies. The cost of corruption has been particularly high in India and Indonesia, where policies created monopolies that earned scarcity rents, which were then allocated to officials' family members.
Such 'rent-creating' corruption is quite expensive and corrosive of growth. By contrast, in China, the corruption has largely been of the 'profit-sharing' variety, whereby family members are given a stake in the enterprise so that their earnings increase as profits increase - a type of corruption that promotes growth.
In the long run, of course, both types of corruption are corrosive of the respect and trust that good governance requires, which can undermine economic performance in its own right. But that does not absolve us of the responsibility to define corruption properly - and to acknowledge obvious and important cultural differences in how it is understood.
The writer is professor of economics and law at Columbia University and senior fellow in international economics at the Council on Foreign Relations.

A thin line between piety and sin

By John McBeth
IS NOTHING sacred? For some time now I have wondered, perhaps naively, why there is not more public outrage over the corruption that attends the annual haj pilgrimage to Mecca, a lifetime goal for many Indonesian Muslims.
Now, thanks to a Tempo magazine investigation, we learn that the Religious Affairs Ministry has allegedly been giving huge loans to private companies from the 22trillion rupiah (S$3.1billion) fund that Indonesian pilgrims are required to pay into to get themselves registered.
What happens to the obviously healthy interest payments, considered usury and therefore forbidden under Islamic law, is unclear. But this is not the first time haj funds have been tampered with.
In 2002, the Supreme Audit Agency discovered losses of 354.7billion rupiah. Over the next two years, it uncovered over-spending and accounting shortfalls amounting to a further 40billion rupiah.
In 2006, former religious affairs minister Said Husin al-Munawar was jailed for five years for misusing up to onetrillion rupiah from the Religious Community Perpetual Fund, an account created to pool money saved from the efficient management of the haj fund.
The majority of the 1.1million Indonesian Muslims currently on the waiting list are part of a government-sponsored programme, which costs about half of the US$5,000 (S$6,400) better-heeled private pilgrims pay for airfares and accommodation.
Many are poor rural dwellers who use their life savings and possibly the sale of property to make the journey. More often than not, they have had to wait up to five years for the opportunity.
Corruption may be endemic in Indonesia, with disturbing signs over the past year that President Susilo Bambang Yudhoyono's anti-graft campaign is fast running out of steam. But the haj?
Mr Azyumardi Azra, head of the Islamic State University's graduate school, says corruption is 'emphatically haram (forbidden)'. Yet he cannot explain why so little is said about what surely must rank as one of the most heinous un-Islamic acts of all.
Mr Azyumardi puts it down to what he calls a 'split personality' among the Muslim rank-and-file. 'They appear to be pious Muslims in mosques and the public sphere,' he says, 'but at the same time they are performing gross sins that run against Islamic teachings.'
The word in Bahasa Indonesia is munafik. It means hypocrisy and it exists in large doses in a country where religious leaders pay far too much attention to how people run their lives and not enough to real issues like corruption that make their lives difficult. The Indonesian Ulemas Council (MUI), for example, has issued fatwas, admittedly non-binding, on everything from gossip shows, sex changes and sperm banks, to yoga, aerobic exercise, pluralism, religious liberalism and abstention from voting.
Radical Islamic groups seem to ignore corruption completely, focusing instead on the 'threat' of Christianity and on such things as the now-defunct Indonesian edition of Playboy whose centrefold models wore more clothes than a shop-window mannequin.
In one of the few times it has touched on the subject, the mostly urban-based mass Muslim organisation Muhammadiyah recently issued a fatwa-type pronouncement in the form of a book stating that korupsi adalah kafir, or 'corruption is infidel'.
But Mr Azyumardi says the larger Nahdlatul Ulama (NU), which draws most of its support from the rural populace of central and East Java, takes a more flexible stance, seeing graft in many cases as hadiyah, or a 'gift' that is actually valid in Islamic jurisprudence.
The former vice-presidential adviser recalls the case of then-President Abdurrahman Wahid, who in 2000 treated a US$2million donation from the Sultan of Brunei as hadiyah and got himself into serious political trouble as a result.
For Mr Wahid, it was a personal gift he could spend as he wished. For most lawmakers, it was a charitable offering, directed towards assisting the people of Aceh, that should have gone into the state coffers.
Obviously, the knives were out for Mr Wahid and the case was one of the factors that eventually forced him out of office. But it was a troubling indication of the way the influential cleric had trouble distinguishing between public and private money.
Even the fatwa-happy MUI, dominated as it is by conservative NU clerics, takes a seemingly relaxed attitude towards the corruption that invariably only adds to the burden of poor Indonesians.
For many Islamic scholars, the cold reality is that both organisations, with a combined membership of 50 million, are riddled with graft going all the way down to the grassroots level.
Patron-client relationships, they say, are the backbone of the pesantren-kyai (Islamic boarding school-Islamic cleric) system and one of the main reasons why local NU networks, in particular, wield so much influence and political power.
In that, it is probably no different than other segments of society where community leaders and political and business figures engage in widespread collusive practices to steal money from the public purse.
'Muslim organisations and figures should speak out against any kind of corruption in the strongest terms possible,' says Mr Azyumardi. 'But at the same time, our political leaders must also be more serious in combating corruption - not just for image making and to pay lip service.'

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