Legalizing bribe giving: Do you think it will work?

by Manshu on April 1, 2011

in Opinion

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.

Previous post:

Next post: