Tuesday, April 19, 2011

Rent-Seeking ..... The Relative Greed

Bureaucratic corruption, a colleague of mine educated me sometime ago, is also referred to as rent-seeking behaviour; apparently because the unproductive rentier class derives its income not from any value addition in the economic activity but from mere ownership and/or access to natural assets such as land.

The modern day governance deficit has extended this concept to include any control mechanism that has an economic use; e.g. permits, licenses, concessions, contracts, approvals etc. And in case you miss the babu-neta-contractor-fixer nexus, then there are other vested interest networks. Sand,oil,water,milk ... you name it and there is a mafia that makes money out of public resources. Graft can indeed be in a very wide spectrum (sic!) ranging from CWG to IPL; from land and sand to broadband.

The scarcity of resources cannot be wished away and rent is legal once private ownership is accepted.  However, the process of privitising can involve "rent seeking" behaviour by both the future owners through regulatory capture (lobbying for monopoly privileges) and the current dispensers (of such privileges) through fraud and misuse of official position.

Where are the roots of this corruption? Is this rooted in the economic development? Do rich countries have less of such graft? Possibly, at intermediate stages of development, societies tend to be feudal and despotic in orientation (even if they may have elected governments) and using public office for private gain is an accepted phenomenon. After a stage of development this seems to improve [check for example perceptions on corruption rankings]. 

Or is it the style of governance? The communist regimes of the East Europe that once rebelled against the feudal and capitalist exploitation seem to fare quite low in the above rankings. Communism seems to have created its own band of public serving rentiers. Let us spare a thought for Karl Marx, the great thinker.

Countries that have been high up in the rankings such as Denmark, New Zealand, Singapore etc., seem to have some common features. They are democratic, rich and have evolved as welfare states. Also important in my view, they have small, manageable populations. In addition...Minimal government interference; Transperancy in governance process; Decentralized decision making; Active and progressive media; High literacy levels; Strong ombudsmen are some of the theoritical balances to keep the gate keepers in check.  

At a different degree, if corruption is defined as exploitative greed, is it  not intrinsic to human nature? Let us recap: Feudal systems accept misuse of power as given. Communism created its own brand of graft. Socialism of our kind has perhaps the most widespread and systemic corrpution. The modern European welfare state has a background of bloody colonial imperialism and facism. The developed capitalist system recently engineered massive bail-outs that transferred wealth from productive to the unproductive and allowed private gains while nationalizing the losses.   

A great revolutionary Telugu poet, Sri Sri had once said "Ee desa charitra choosina emunnadi garva kaaranam, nara jati charitra samastham para peedana paraayanatvam".[free translation : Where is the greatness or pride in any country's history? Human history is full of greedy exploitation of others].

There is of course danger in extending corruption to exploitation as above since we would not know where to draw the line. Let us therefore stick to the legal definitions and let the last extension be a gentle reminder of fraility of human nature.  

Human frailities apart, there exist amazing persons like Anna Hazare. How many of us knew earlier, that it is because of Anna, RTI came into existence? And the fantastic things he did for Ralegan-Siddhi. Unfortunately, such inspiring Mahatma souls are one in a billion. The rest of us, even though may not like to corrupt or be corrupt, have perhaps not been tested enough or most likely have found our own justifications! As Kaushik Basu says, atleast the "giving bribe" part ought to be legalised. Then a lot of such justifications become reasonable if not acceptable!


AAR VEE said...


Nice to see ur post and views.

AAR VEE said...

give me a test mail.I will share some pdf on history of money and human greed.

KRG said...

Thanks AarVee

KRG said...

AarVee: Sent you test mail

manu said...
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Jatin said...
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KRG said...
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