Opinion

Chrystia Freeland

Corruption and India’s 1 percent

By Chrystia Freeland
November 18, 2011

The only important question in the West right now is how to restart stalled economic growth. So it is easy to be dazzled by India, where a 7 percent rise in gross domestic product is the nightmare scenario, and optimists are shooting for 9.

But Indians themselves are starting to worry about how that growth is being achieved — and who is benefiting. The headline complaint is corruption. That is nothing new here, of course. But the country now has a middle class self-confident enough to feel humiliated by paying quotidian bribes and resentful of the rise of baksheesh billionaires. Anna Hazare’s hunger strike became a national political event because it tapped into this anger of the urban bourgeoisie.

“India has been overwhelmed by corruption scams,” said Kiran Bedi, the first woman officer in India’s elite police service and one of Hazare’s chief lieutenants. “While it has been apparent that India is shining, India has also been declining in many ways in that there has been rampant exposure of corruption.”

Nor is it just the activists who say that alongside India’s remarkable economic surge the rot has been spreading, too.

“Corruption is endemic,” said Rajiv Lall, chief executive of the Infrastructure Development Finance Company, a partly state-owned financial institution. “I don’t think anybody here is pretending that there’s no corruption in the country. And corruption can take on a new dimension, especially in this time of great transformation.”

Graft is just part of the story. One of the reasons to celebrate India’s astonishing economic rise is that the subcontinent desperately needed to get richer. In 1991, when Manmohan Singh, then the finance minister and now the prime minister, began the liberalization program that underpins the country’s transformation, India’s 854 million citizens had an average annual per capita income of only $1,300. The problem, said Arun Maira, a former industrialist who is a member of the country’s influential planning commission, is that India’s economic rise has had the least impact on the people who need it most.

“My thesis is that most people are not feeling included in the growth,” Maira said. “This has become a very loud voice which is saying ‘Come on guys, the economy is growing very fast now. You’re celebrating this 8, 9, 10 percent growth, but what about us?”’

B.N. Kalyani, the chairman of Bharat Forge, India’s largest exporter of motor parts, sees the same inequitable growth.

“It saddened me a lot to see that even Bangladesh has a better social index, in terms of what it was in 1990 to what it is today, compared to India,” Kalyani said. “All this glitz and glamour and everything that we see about business, the high-rises in Mumbai and businesses moving ahead and the stock market and everything, don’t seem to travel too far beyond the urban setting of India.”

But even many of these critics of India’s lopsided development think it is inevitable — one of the growing pains of the country’s swift economic rise.

Maira pointed to a commonly used measure of income inequality, the Gini coefficient, saying “it always rises whenever growth takes off.”

“When you open more opportunity, like more free markets and the opportunity for people to do their own thing, those who already have some capital, or they have some education, or they have access to people in power so that they could help get access to the new opportunities more easily, they will first grow themselves, their own wealth,” he said. “So you will get the people with something becoming richer faster than those who don’t have access to education, to some capital and to the system.”

As Maira points out, one of the most powerful advantages of the wealthiest 1 percent is “access to people in power.” Corrupt business deals are the most extreme use — and abuse — of those relationships. But there is a more subtle reason the game is most effectively played by those who are already winning it. S. Gopalaskrishnan, the co-chairman of Infosys, the pioneering Indian technology company, said that “the tendency is that people who have access to power and access to governments, etc., tend to get a better deal.

“The policies, the roots, are framed because they are people who give inputs to those policies,” he said.

This is the Indian version of what Willem Buiter, the former London School of Economics professor who is now chief economist at Citigroup, calls “cognitive capture,” and which he blames in part for the regulatory and legislative lapses that helped create the 2008 financial crisis.

Just as that financial crisis and the more recent populist protests have shaken some of the certainties created by cognitive capture in the West, the unexpected success of the Anna Hazare movement has focused the Indian elite on the shortcomings of its own model.

But breaking out of what the economist Raghuram Rajan has warned risks becoming “oligarchic” capitalism will require more than correctly diagnosing the problem. Ashutosh Varshney, a professor of international studies at Brown University, likens India’s thriving and dirty capitalism to the United States’ Gilded Age. That apt comparison suggests that India watchers should be on the lookout for a Hindu version of the Roosevelts — a Teddy to break the grip of the robber barons and an F.D.R. to offer the 99 percent a New Deal.

There is, however, one important difference. India’s robber barons have emerged in the age of globalization and at a time when the United States, still the world’s dominant economy, is experiencing its own second Gilded Age. The wealthiest 1 percent is a global class, and cognitive capture is an international phenomenon. The world may need its own global Roosevelts, too.

Comments
15 comments so far | RSS Comments RSS

Why wouldn’t the corruption rise in India, and Bangladesh flourishes and grows multidimensional. Over past 2 decades or so illegal immigrants from Bangladesh had been entering into India by bribing the border security forces through Kolkata ->(gateway for hell to India)[about few 10xMillions Bangladesh illegal migrants to India]. They have almost spread out throughout the country and replacing native Indians in jobs,Legal positions, and every other field possible.
Wonder how is that possible? Its the the Corruption again ,just the currency here is different form of Money. Real Corrupted people are one who take whatever one can give.
That’s had been inbuilt by British Government into the Natural genes of Indian people, over a period of 250 Years of Slavery to India. Thanks to the British government who has gifted an uncultured society and inbuilt slavery to India.

No offense though.

Posted by proxy.64 | Report as abusive
 

well I cannot say about genes for sure. Its there in every Yankees or brits or chinese I have met in my life and they all agree that is only human to be greedy and corrupt.

So whats the bigger problem in INDIA as I see it is rampant raciism and proventialism. I can give examples but better not name names.

What will bring a better equal distribution of wealth – I think only a change of heart and understanding – not happaneing soon. Its Utopia and so stop the blame and get back to work and get your baksheesh- yahoo we are indians

Posted by bokababu | Report as abusive
 

Unfortunatley, The person who you interviewed Kiran Bedi and her sister here Anu peshawaria are corrupt.
You need to get in there and find out for yourself it will take time any money.
You can tape these crooks taking bribes if you go there.

Posted by purpletech | Report as abusive
 

this is what we indians have problems..we always blame each others…we talk too much we are very loud…we indians are the master of lip service. we know who is wright and who is wrong we know explaining things perfectly…but we don’t know get things done…the first comment is complaining about bangladesh..he may be wright but it has nothing to do with indian economy..most of them are poor

Posted by ra123 | Report as abusive
 

Chrystia,
I am surprised that you used the term ‘”Hindu version” of the Roosevelts…’. India is a secular country that has many religions. We, Indians, take particular pride at the fact that even though we are diverse it terms of religions, languages and cultures, we have successfully developed a progressive democratic free society where we respect others’ identities. I can understand the confusion among people when they talk of “the Indian language” or the “speaking in Hindu” and in your case, “a Hindu” version of something, for most hail from countries held together by one language or one culture or one religion. Well, India is different and we expect people to respect this. So please correct that sentence to read, “The Indian version…”. Many thanks.

Posted by DineshThogulua | Report as abusive
 

In reply of comment done by proxy.64 which is unsubstantiated with the topic here. I believe the origin of proxy.64 is also from Kolkata. Yes there are some illegal migration happened from Bangladesh to India, which is still happening since the division of 1947. But they are mostly oppressed Hindu minority of Bangladesh.
A significant number of people of Kolkata who now claim themselves native Indian, either they or their ancestors migrated(legally or illegally) from Bangladesh. But that is not the real issue here. If you watch to all the interviews taken by the author, here the 1% corrupted people are not from migrant from Bangladesh. They are in your language “native Indians”. Also throughout your comments I find nagging complain about Bangladesh and British. Better grow-up, talk to the point and try to fix your corruption rather than playing this baseless blame game.

Posted by maven71 | Report as abusive
 

Capital is a powerful force for growing the wealth of nations (but not necessarily the wealth and well being of the working class that is indispensable to the production of that wealth). Fortunately, hidden in the nature of Capital itself, are the seeds for the redistribution of wealth.

It is the nature of Capital to become more concentrated and centralized over time, greater wealth in the hands of fewer people; simultaneously, Capital creates the giant working class that it requires to fuel the enormous productive power that it has set in motion. One day the ‘Rich’ wake up to discover that they are vastly outnumbered by an angry mob of the oppressed working class that the Rich themselves have created and exploited. That is when serious social negotiation begins and, eventually, the People ensure that wealth is fairly distributed.

The Indian People have a saving grace – the ability to ban together quickly and in great numbers to cure social ills. The widening gap between the rich and the poor in India will not stand.

Posted by algernon3 | Report as abusive
 

To ‘ maven71 ‘ sorry, if you have taken something personally about Bangladesh migrants. My meaning was a reply to the comment from B.N. Kalyani “It saddened me a lot to see that even Bangladesh has a better social index,…”

1> India is facing a great problem with Population, and certainly a huge flux of population addition from Anywhere is a Big NO NO..for the country, It becomes infinitely impossible for the law-makers and administration to control the country.

2> Bangladesh however is in Win-Win situation as a feedback of lowered population load, which is sent back to India or elsewhere. A certain improvement of social index, administration and control is guaranteed for that country (here Bangladesh).

V.Imp > Corruption and Chaos in country is a direct feedback of lost control of the Administration over the country, citizens here are in a Race-Condition to survive and establish, so there comes the ‘Demand And Supply’ for Illegal Money taking, corruption, and prioritizing and what so ever comes after that.

I think more rational it cannot be.
If it can be then please share with us.

Posted by proxy.64 | Report as abusive
 

All the well written articles about corruption in India ignores one simple fact: that the greatest density of corruption per sq.metre is found in a circular designed colonnaded edifice in New Delhi.
And you expect such ‘honourable’ elected inhabitants of this edifice to pass anti-graft bills into law.
Quis custodiet ipsos custodes?

Posted by Crosswords | Report as abusive
 

Whatever you have mentioned is sadly true. In our country there is no true democracy as a the majority of people are divided by race, caste, languages etc and in that to a good number of them though educated either aren’t aware of the real issues of the country or cannot do anything as they are not united. The elected politicians are well aware of this perennial weakness and have therefore been able to exploit the masses thoroughly over the years.
Bribery is built into Indian culture thru centuries. We Indians have been offering the Gods lots of money and donate generously towards temple deeds anticipating multiples in return. Charity directed towards the poor is secondary or almost non- existent. We believe a lot in fate and in karma and therefore we are extremely tolerant and accept any nonsense without fighting back. Historically as the climate here has been temperate and not very harsh, one could easily survive practically only on fresh air and sunshine and this has contributed to the country’s huge population. People are therefore laid back but peace loving and this could be traced to the geographical / environmental factors as mentioned.
It is for the first time perhaps that country has come together by supporting Anna Hazare to voice their underlying common concern against corruption but sadly that too seems to be fizzling out.

Posted by prashanter | Report as abusive
 

So what’s the solution ?????????????????
“Cognitive Capture”, a fancy term for what is otherwise known long before!

@prashanter : Your views are your own. Don’t use ‘we’ to suggest that they are the opinions of all Indians. Bribery is built into Indian culture for centuries? What references do you have for that ???????
You are misinterpreting Indian religious practice of offerings to deities as corruption.Seriously! Coming to Fate and Karma. Please read more about Indian philosophy before your jump to conclusions with your limited knowledge.
India might be divided on many lines, yet, IMHO Indians try their best to be united in diversity and strive for a better future. It is one of the strongest democracies in the region.period.

For all i know, “greed and corruption, is randomly distributed around the world”.
In fact, i would argue the contrary. It is because Indian people are forgetting ancient Indian values, and instead espousing materialistic values , we have this rampant mess of corruption. People have become way too ambitious.

Some sections of western media try their best to demoralize India and other developing economies by blowing things out of proportion. There are many good things about India and how many times has Chrystia Freeland reported about them ? ZERO.

Posted by Arihanth | Report as abusive
 

@Arihant
Suggest you to re read my comments as there are a lot of thought process which has gone into it.
The solution is very simple; Indians get UNITED which as you would know is difficult because of our inherent differences. Secondly, we should change the system of elections. Coalition govt shouldn’t be allowed, there should only be a max of three parties and if a single party doesn’t get the majority, the country should go under President’s rule.
We are the strongest democracies in the world??? It’s only on paper; we have a very long way to go. I am surprised educated people don’t realize this! We are ruled by utmost corrupt people so much so that if you bribe them enough they wouldn’t even mind selling our country to Pakistan /China.
Coming to bribery, have you not seen your fellow brethren offering gold, silver, diamonds, money etc to Deities expecting something in return? If not open your eyes; look around, read the newspapers, introspect yourself, you too might have done this. Bribing the Gods in the garb of offerings is built into our culture! I am not criticising Indian culture but was trying to explain the root cause of bribery here and how it has spilled over. Indian values are the best and if there is any mechanism to check EQ /SQ of Indians I am sure it would be the highest in the world. Now again one would argue on what basis am I making such blatant statements?
Let me explain; before that can you answer why is it that our country is so densely overpopulated? Why is it that most of the sages came from India? Why do we have all kinds of people with different races, religion, color etc? Think, do you have an answer? Geographically, the climate in India is not very harsh as it is in the west, it has many rivers, and the original inhabitants here were humane and not warlike as they were self sufficient. All this has contributed to people migrating from elsewhere in search for better pastures to settle down in India and making it their home. Today the scenario is much different and there is no point in basking in old glory. Uniting a huge motley disorganized, uneducated population is not by any means an easy task and to divide and rule is what our politicians / rulers have done best to their advantage. Lastly,the west can learn a lot from Indian values and we can from their systems and processes.

Posted by prashanter | Report as abusive
 

@Prashanter

Tought processes? Dude i am working on my PhD and i do come across some really cool ideas. I can differentiate when one has really original ideas and when one is simply biased and subjective!

The solutions you propose are quite simplistic! Things are not so simple!

Tell me which of the advanced democracies are not corrupt ??

Take the example of United States! The Iraq War based on fabricated evidences of WMD, D.C. handling of the financial crisis and the debt situation etc. Do you think what they are doing is quite awesome????
I live in America and assume you are an NRI. Things are not hunky-dory here! :)

Think objectively! There is corruption every where! Power corrupts. At least we Indians are HONEST about it and are openly taking and trying to fight it! Look at the brighter side.There are lot of reasons why people take and pay bribes. Anna Hazare went on a fast unto death for India. All you are doing is senselessly bashing India in a public form as if you are some top intellectual! :)

The grass is always greener the other side! India is a strong democracy. period. It has dealt with challenges effectively. Stop getting emotional and think realistically!

When India and Pakistan were formed, many so called world powers predicted that Pakistan would be a more stable country while India would collapse becuase of its vast diversity.60 yrs later, you see the difference! Still India has been united in diversity despite challenges. It speaks of the resilience of this 5000 yr old ancient civilization. Just beacuse we have flaws, doesn’t mean you loose sight of the big picture! :)

Coming to the idea of “Bhakti” or devotion. Please read more about Indian philosophy. Nobel laureate, T.S. Eliot said “Their (Indian philosophers’) subtleties make most of the great European philosophers look like schoolboys”. I suggest you to read more before you jump to conclusions about your interpretation of offereings to deities with your new found “education”.

Stuff happened. 1000 yrs of foreign rule weakened India. That does not mean you go bashing India senselessly in public places. It will take time for things to get better. Have the patience! When India got independance the poverty rate was 85% while now it is around 35% after 60 yrs. Like wise literacy rates have improved quite well. Things take time and effort. The problem is people like you, who have no patience and while you do nothing for the betterment of india, you go about barking nonsense about India !

None of the westtern press does anything for India’s progress. All the western press does is report about our problems with a condescending attitude! Look at the the reuters article about FDI in Indian’s retail sector. It suggests as if foreign companies are doing India a great favour by setting shop in India! :)

The East, in general is rapidly progressing by adopting the pillars of western wisdom (democracy, education etc) coupled with it’s ancient wisdom. So have patience my dear friend! Stay composed and treat your country with respect. That is the least we “arm-chair critics” can do, when “real men” like Anna Hazare and team are fighting the system to bring about a positive change.

Posted by Arihanth | Report as abusive
 

I’m reading the article and as I neared the end I began thinking of the income inequality and all that relates to that. I was thinking of the ignorant comments heading Hazare’s way about being a socilaist; then I saw the Roosevelt comments confirming my fears. I agree; world globilization needs more Roosevelts or at the very least people who care for their fellow man.

Posted by Jonesy | Report as abusive
 

Is the corruption and greed in India really any different from that of the US, Russia, Western Europe, or anywhere else? I think, the answer is both yes and no.
In places where the rule of Law is strong, I think a collective sense of right and wrong pervades, and graft and corruption are quickly rooted out and dealt with. In places where the rule of Law is not so strong, graft and corruption can run rampant, simply because there are no consequences for doing it. If there are no laws against graft, or those laws are not uniformly enforced, then why shouldn’t everyone do it if they can get away with it. Thus I see differences between India and the US.

Next, people generally want to improve their lives. Who can fault them? Individually, and independent of what country one lives in, I think people tend to look at others they perceive as “successful” and emulate them. Many use “wealth” as a measure of success, regardless of whether this is a good metric or not. Who, then, can fault someone for trying to get as much money as they can? I cannot. However, I can fault someone for making as much money as they can illegally. Fortunately for me, corruption is much less tolerated in the US than India, apparently. Chyrstia labels this “cognitive capture” and that makes a lot of sense to me.
Next, I think changes in society only really come about when there is a crisis. I offer politicians continuing to “kick the can down the road” as my example. You can pick the politician. I think India will change with regard to corruption and graft only when there is a crisis requiring change. Who knows, maybe a Roosevelt will rise up in response to that crisis. However, it is the crisis, and not the person that heralds change.
And finally, we all hope that change enables India’s growth in wealth to be distributed more uniformly accross the population. Heck, I want that for America too.

Posted by Wyyll | Report as abusive
 

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