Legalizing bribe giving: Do you think it will work?

This week I came across an amazing working paper by India’s chief economic adviser Kaushik Basu. Mr. Basu argues that for a class of bribes called “harassment bribes” giving bribes should be made legal. Just giving bribes; taking bribes will still be illegal.

He says that people are forced to give bribes to get access to services that they are legally entitled to and for this class of bribes – the bribe giver should be given legal immunity while taking the bribe should still be illegal.

An example of this type of bribe from the paper:

Consider a case where to buy a regular train ticket you are told that you have to pay some money under the table. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe. Consider the case of an exporter who has fulfilled all formalities is asked to make an illegal payment before getting a customs clearance. These are all illustrations of harassment bribes.

How would this make a difference? Here’s how he describes it:

The main argument of this paper is that such a change in the law will cause a dramatic drop in the incidence of bribery. The reasoning is simple. Under the current law, discussed in some detail in the next section, once a bribe is given, the bribe giver and the bribe taker become partners in crime. It is in their joint interest to keep this fact hidden from the authorities and to be fugitives from the law, because, if caught, both expect to be punished. Under the kind of revised law that I am proposing here, once a bribe is given and the bribe giver collects whatever she is trying to acquire by giving the money, the interests of the bribe taker and bribe giver become completely orthogonal to each other. If caught, the bribe giver will go scot free and will be able to collect his bribe money back. The bribe taker, on the other hand, loses the booty of bribe and faces a hefty punishment.
Hence, in the post-bribe situation it is in the interest of the bribe giver to have the bribe taker caught. Since the bribe giver will cooperate with the law, the chances are much higher of the bribe taker getting caught. In fact, it will be in the interest of the bribe giver to have the taker get caught, since that way the bribe giver can get back the money she gave as bribe. Since the bribe taker knows this, he will be much less inclined to take the bribe in the first place. This establishes that there will be a drop in the incidence of bribery.


So, by protecting the bribe giver you are giving him an incentive to disclose that he gave a bribe and get the person who harassed him caught.

I think this is a very radical idea, and one that has a lot of merit to it. I think it will work, and we need these type of ideas and steps if we have to get rid of corruption.

A lot of people are happy with the way India is growing, but can India really ever become a developed nation without tackling the corruption problem?

I know there are a lot of people who say that bribes just grease the economy, and India can become developed even if we don’t tackle this problem but I don’t agree with that.

Let me tell you a little story – On New Year’s eve I went to a small dhaba (road side restaurant) and ordered a take-away. While waiting I was looking at the steady stream of visitors and was amazed at what kind of money this place must be making, and wondered what it would take to run such a place.

After a few minutes I saw a couple of cops coming there and asking for a place to sit. The owner told them that there is no space inside and he can put a couple of chairs outside and they can have the dinner there. One cop was okay, but the other one got upset and said I will go somewhere else and started walking away briskly.

The owner then ran after this cop and pleaded him to come back, and convinced him to come back and got a place for him inside somehow.

Why should the poor guy have to do that? How many other things like this does he have to do to run his business? How many people are just scared to start a business because of all this harassment?

What is the opportunity loss of this?

In my opinion – to get to the next level – India will need millions of entrepreneurs who create small businesses and massive employment.

A large majority of these people will never be able to take the plunge if they are not the type of people who can deal with the blatant corruption that scourges the country.

They are brilliant people but don’t have the ability to deal with all this nonsense. Why should they have to, and can  you build a top notch country without these brilliant people?

I don’t think so, and that’s why I love this idea. It is original , radical, and shows that someone is thinking about things that matter.

Here is the paper which is just 14 pages, and devoid of any fancy maths. Please read it – it’s worth your time.

19 thoughts on “Legalizing bribe giving: Do you think it will work?”

  1. Manshu,
    The idea as such is great and seemingly should work well..
    But when we come to think of it, how this idea will be implemented,because corruption is everywhere, so people who are already corrupt might not even give a damn to this law..or rather tweak it in some way so as to beefit them…

    As chatur says we might have to pay a hefty bribe to get this passed…;)

    But anyways nice thought and discussion here…

    1. The way I usually go about things is to think if this is better than what you have today and if it is then go for it. I don’t mean for corruption but in general.

      There are always just so many things that can go wrong with virtually everything that it’s easy to get paralyzed or demoralized if you start looking for the negative too much.

  2. This is a good and probably workable idea. Manmohan Singh should go all out and make this as law. Given his state now, an act like this will rub clean of all the blemishes, stains, and brickbats that he has had to take. History will judge him favourably if he gets this done.

  3. I think the idea is great and needs to be tried. unfortunately corrupt people will again invent ways and means.

    another idea which needs to be researched is.ways and means to reduce black money in real estate deals. Today property prices have skyrocketed and if you want to sell a 200 sq yds house in Delhi you get less than 1 crore out of 6 (market price) and rest is cash. and this gets multiplied each time you buy a property with this black money. and if you donot want to buy another property what you do with this scrap? so an honest person becomes dishonest! Just because no one is willing or has the capacity to pay more than 1 crore in white for a 6 crore property. is DTC doing something about it. increase in circle rates is still a minuscule of actual market rates.

    1. That’s a good point you bring up – the system is such that in certain situations there is no option but to fall back on black money.

  4. i see bribe is divided into 2 parts; A is the proceed our legal things & B is to do the things illegaly. Can we guess which ration is higher ? A or B

    this law is for A or B ?

    I think we ourselves has given birth to a bribe demon for making the illegaly things done by paying bribe. Ofoucrse once demon is born he will not see whom to eat & whom not to eat.

      1. A is the system which we bribe for our convinence, to make impossible (illegal) things possible.
        B is the system for which we has to bribe as per their demand to get our legal work done which is our right & infact for this we dont need to bribe but still we all take it as compulsory.

        so this law may decrease B system. What abt the A system, which has given birth to BRIBE DEMON

        by reading article i feel its for B system, what is the surity that if any person complaints of bribe taker, his work will be completed w/o any hassles to him/her for which he has paid bribe & moreover he has to again follow & follow for getting his/her bribe back.

        B system) for eg. while exporting we add 1~2% for bribe in our costing to get Export rebate .. so it means very well that system has accepted it

        for this bribe system India is not competitive in manufacturing & international trade.

        Even though a person has Knowledge, Land, Money & every infrastructure we would prefer to be employee or trader not mfgr; becoz he knows at every step he will be harrassed without bribe he cant do anything even he has all the legal things. so their production cost will go up & hence cannot compete globally.

        1. Yes, this is for B, and my point is exactly the same as yours that there is so much under hand payment and other things involved that a lot of honest people just don’t want to get into business.

  5. I think this view is right in many sense but we are putting all burden on government servants but actually this is not the case.

  6. Hi Manshu,

    I think the idea is good and it should be implemented if we want to curb this menace which is hindering our progress.
    Thanks for sharing the informatio!


  7. I dont think it will make much of a difference. Though the laws are what they are, how many times have you come across that a bribe is prosecuted? Hardly, if ever.
    People do not complain, more because of the slow, cumbersome nature of the legal process.

    1. So, if I understand you correctly you are not opposed to the idea but think it won’t work because of slow legal process. Is that right?

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