Corruption Could Be Good

I bet the topic distracted you. And, it’s perfectly normal because the corruption is often associated with misconduct in our society. However, could it be considered as a reasonable practice in a developing country like Nepal? Perhaps.

Chris Blattman, a well-known economist, argues that corruption greases the wheels of prosperity. He is indeed right to some extent. If we juxtapose an underdeveloped economy and the prevailing corruption, the best possible thing we can observe is the way corruption – bribery, deception, and duplicity – smoothens the operation of some firms, individual or groups. Corruption, particularly bribery, is one of the most efficient ways for firms to easily get through the pre-existing red tape and bureaucracy. Illustratively, an individual might pay a certain amount of bribe to a government official so that he/she gets the business permit promptly – far sooner than the governmental legal procedures would take. In this case, the corruption acts as the optimizer to reduce the opportunity costs of waiting. This cost-reduction strategy, under repeated practice, could have a cumulative effect on the growth of the economy. The business would be able to start and contribute to the gross domestic product earlier than anticipated. While this would lead to an increased prosperity among the individuals, an abuse of the business permit could be probable.

Mahatma Gandhi famously said – “If the law is just then it is my duty to obey; if it is unjust it is my duty to break it.” Perhaps, Gandhi referred to the British rule when he said this. But, it still applies today as well – in all sectors of our society. Pre-1990, India strategized to restrict toy production to cottage industries. As the time passed by, the same Indian markets got inundated with the cheap toy imports from China. This overlooked consequence destroyed the threshold sale of the domestic industries. Probably, if the Indian government wasn’t obsessed with this legislation, then the bigger companies could emerge in the market to give a tight competition to the Chinese giants. This exemplifies a policy failure. In contrast, would it have been a policy failure if the interested Indian firms had forced the government to legislate otherwise? Well, this would be a form of lobbying and corruption – an abuse of power – but a visionary decision for the economy. This instance shows that firms might use external forces to gain something which is unfairly illegalised or regulated. A car distributor might illegally import luxury cars from abroad without paying the taxes. Of course, it would be a tax evasion; the distributor would have to pay bribes to the cargo officials; at the same time, this would provide cheaper goods to the people. Here, I am not talking about evasion of every tax but the common practice among businesses to try to avoid those taxes, which inevitably puts pressure to raise prices.

Generally, corruption acts as a parasite which feeds upon the innocence of the citizens of the country. However, in the short term, it tends to act as a grease in the government system. In contrast, in the long term, the same grease turns into a rust in the machine.