Corruption undermines development in a number of ways. It reduces the efficacy of institutions by making outcomes unpredictable, and dependent on connections and payments. It reduces the power and effectiveness of established and acknowledged rights, and makes the exercising of those rights more expensive. And it makes the ‘playing field’ uneven for players. All of the above lead to more uncertainty, higher costs of transactions, abortion of certain transactions, and consequently poorer growth outcomes.
There are few who argue that corruption can be good for growth outcomes. Some make the argument that corruption acts as the much-needed grease in very distorted and inefficiently regulated environments. But these arguments do not really internalize the distortion within the system when addressing the effect of corruption. Places where institutions are not properly designed or embedded, opportunities for corruption are created endogenously by people in power so that they can gain at the expense of the people at large. So corruption, in these situations, does grease the wheels, but it is not going to be much help for overall and long term development since the distortions in the larger structure would always be too big to allow rapid and broad-based developmental changes to occur.
Corruption is probably present in all societies, and possibly at all levels. It is the scale, the depth and the frequency of corruption that vary across societies. Some societies have been able to minimize the impact of corruption to a level where it does not impact the life of the citizen in most circumstances. She can be sure that the judicial system, the police system, and most administrative systems will deliver reasonably even without her offering any bribes. She can be sure that any formal contracts that she goes into, with any private citizen or a government agency, will most likely be honoured, or she will be able to exact compensation from the defaulting party, and at reasonable cost.
But for many other societies the expectations mentioned above are too difficult to fulfill. Pakistan is definitely such a society. Here the level and extent of corruption is very high. Corruption has in fact become so institutionalized and systemic that it has now become a part of our perceptual framework. We do not even realize some forms of corruption for what they are, and even if they are pointed out to us, they do not irk us enough.
Some years ago one of my close relations was posted in one of the key administrative positions in the district administration of Lahore. Around Eid ul Fitr his household received some 200 odd cakes from various people. Most of them were passed on to other people, whom he wanted to oblige, but a lot did end up in the various refrigerators and freezers that the household had and were enjoyed for quite sometime. The same thing happened at Eid ul Azha but with meat. And it is not the fact that this relative had a lot of friends. The very next year, when he was not in that key position anymore, the number of cakes went down to almost single digits.
Why do people send such ‘gifts’ to public officials? And why do we not recognize it for what it is: corruption. It must be the case that the people who send these cakes must think that their interaction with the official is likely to be affected positively if they send the cake or at least negatively if they do not. Why should the citizens care? It must be the case that some benefits, whether legitimate (the grease argument) or not, are tied to the goodwill of the official. But this is exactly what corruption is.
A lot of people will think that this is too trivial an example to base a case on. But it is not. It has been chosen specifically to show how endemic, embedded and systemic the issue of corruption has become. And you can take as many examples of it as you like. A lot of government officials, especially from departments like the police, income tax and so on, who have higher frequency of interaction with the public, enjoy a multitude of benefits at the expense of the citizens because they can confer favours on these citizen in return or at least not become an obstacle in the legitimate affairs of the citizens.
The executive gym of one of the most expensive health clubs of Lahore has quite a few government officials, from grade 18-21, who are members. Some have family memberships. The market value of the membership must be twice the total salary of these officials. So how are they able to afford this? It must be the case that the club, a private organization, is subsidizing the membership of these officials. But why? Again, it must be that either the club is getting some benefits from these people or is afraid of these people and what they can do. Whatever the reason, this is corruption, but a form that is just taken for granted by everyone, and in fact some officials just think that it is their right to have such benefits.
What is even more disturbing is that in some places forms of corruption have been institutionalized and legalized so that they cannot be called corruption any more. There are clubs in Pakistan that offer subsidized membership rates to government officials. There are government departments in Pakistan who offer ‘benefits’ to their employees that are really payoffs. Prime land is distributed amongst employees of certain departments. These lands are usually acquired from the private owners at a pittance and then given to employees for relatively low prices as well. The price difference with the market gives the employees opportunities for making large gains at no risk at all. Similarly there is a bank in Pakistan that offers credit cards with very high ceilings to army officers. The high ceilings set for these cards are not, in any way, justified by the salaries that these people get. But this is a good way of extending credit to these important people.
One can come up with as many examples as one likes of these legalized forms of channeling benefits to specific groups of employees within the government structure of Pakistan. And they span almost all departments and sectors. One can gauge the importance of these benefits from the fact that though government emoluments are lower than comparable market ones, the demand for government jobs continues to be very high, and the premiums that people are willing to pay to get to some of these jobs are also very high. This is due to the private and sometimes institutionalized stream of benefits that are attached to these jobs and careers. This explains why people choose customs, income tax or police department if they do well in the CSS examination.
By supporting appropriate initiatives the society has expressed its desire to root out corruption, and the various governments that have been in power have also worked on the issue, but we have not really taken an in-depth look at what corruption really consists of. Our anti-corruption agencies, including NAB, focus on trying to arrest the big culprits. That too is needed, but what is more important is that we have a better understanding of how corruption has become entrenched in our system, institutions and even in our perceptual framework so that its most debilitating forms are just taken for granted. The more vicious forms of corruption lie in the small instances and not in the large. This is where all governments have failed so far. We can reduce the instances of frauds against banks by improving prudential regulations, lending practices, and by torturing people as NAB does, but this will not eliminate corrupt practices from the society. It will just make people more careful. To root out corruption we have to look at the networks of power and privilege which we have designed, institutionalized and legitimized over the years and see how we can make them more open, democratic, transparent and most importantly fair.
This is a much more difficult task then setting up NABs and putting generals, who themselves are amongst the largest beneficiaries of corrupt networks of privilege, in charge of the recovery processes. It is a task that requires wider participation of the citizenry at large, and it is a task that can only be taken up by more democratic and open institutions like the parliament, the provincial legislatures, and the various levels of the elected local governments. It is a task that will require wider participation, and especially the participation of the civil society and the non-governmental organizations (NGOs). And it will not be possible to embark on this task without active support from and participation of the popular media. Newspapers and private television channels have to take the lead in pointing out some of these corrupt practices, ensuring that people involved in the institutional design process take due notice, and following up on the issues to ensure that requisite changes have been made. Unless this more open, democratic and participatory process takes place, corruption in its more endemic, systemic, and institutionalized forms cannot be tackled.
Corruption is a curse. It hinders development, slows down the potential fast trackers, reduces incentives for hard work, and creates niches of riches and privilege for people who do not deserve it. In other words it undermines the social contract of a society, and the basic tenants of justice and fair play, which form the cement that holds modern societies together. Most Pakistani institutions are very corrupt, and to the extent that we have even legalized and legitimized some of its more subtle forms. This needs to change if we are going to survive as a polity and a society. But the change requires very broad-based effort and participation of a very large percentage of the citizenry if we are going to challenge and remove some of the more entrenched forms of corruption and interest groups that are benefiting from the existing setup. This is the main challenge for the current democratic government.
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