Santanu-da,
Your point is well made about corruption's role in different contexts but that analysis says nothing about the effect on Indian economy --if somehow corruption were to be removed - at the level where it affects funds allocated for development (ie where only 27cents for every dollar allocated reaches the poor as per BWeek).
Corruption in development funds-- I am not concerned about the corruption at top levels or where traffic police or toll tax authorities are involved -- but where it affects funds for the development of poor - in their education, in their health, in their roads, electricty, drought and floods relief. infact the bureaucrats are very happy whenever there is a calamity - of such nature as the Katrina cyclone in US these days -- so that this relief money can be usurped. They can easily say that it was spent in food and clothes for the poor - whereas it went in their pockets.
I have not read Amartya Sen's book - "Development is Freedom" -- but it has been very very frequently quoted in texts by ALL major educational development organizations - such as UNESCO, World Bank, UN etc. I mention the links below. The first page of his book is here:
"Development can be seen , it is argued here, as a process of expanding the real freedoms that people enjoy. Focusing on human freedoms contrasts with the narrower views of development such as identifying development with the growth in gross national product, or with technological advance, or with social mobilization. Growth of GNP or of individual incomes can, of course, be very important as means to expanding the freedom enjoyed by the members of the society. But freedoms depend also on other arrangements (for example, facilities for education and health care) as well as political and civil rights (fro example , the liberty to participate in public discussion and scrutiny). " (Sen, 1999, Page 1: Book Development as freedom)
Thus, as per Amartya Sen, economic development is NOT just as per GDP growth but the freedom each individual has in the economy to pursue his dream opportunity (legally). What this translates is - as per professors in international education -- is that education and health -- are critical to the expansion of that freedom. Thus, if the funds earmarked for education and health of the poor --are looted by bureaucrats and politicians -- development is retarded. It is immaterial how this black money is used by these crime lords. Unless the poor get access to these development funds how can they be healthy enough and intelligent enough (assuming that formal education makes people sharp) to be free to exploit the opportunities.
I think that the only difference between the people in India and USA is that in USA there are a much larger proportion of people who are healthy and sharp (thru education) --- so they are able to exploit the opportuntites better - and so US economy is strong. If tomorrow even half of the US citizens went on a long term exchange program with Indian citizens - who have the same level of SES - Socio economic status in their respective societies -- and then if those Indians had to work in place of their US counteparts -- you can see the US economy going down the drain. On the other hand if those 50% US citizens were to land in India and start working in place of the Indians with whom they had exchanged placess -- surely Indian economy can see miracles. For one -- the educated folks would ensure that Indian elections are smooth and right candidates are in place. Secondly they would be organized and healthy enough to thrash those goons who trouble the Indian poor
and usurp the funds earmarked for their development.
Thus, the human resources is one thing is can develop at an exponential rate - if the corruption is removed in development related funds -for poverty eradication. Hence, so would freedom - and thus the economy of India.
Umesh
"Roy, Santanu" <[EMAIL PROTECTED]> wrote:
Umesh:A brief reply to your question.Corruption is a complex social phenomenon and its effects are many. Not all of them go in the same direction - they can positive as well as negative - and that depends on the economic context.On the one hand, corruption leads to bad allocation of resources in the economy. For example, production licenses may go to a very inefficient producer because he pays the biggest bribe; or public roads may be constructed in a way as to benefit a few rich people rather than in a way that creates greatest economic opportunities for transport of goods and services; or it may lead to siphoning of a firm's profit towards payment of bribes rather than it being used for re-investment in productivity improvement and so on and so forth. It is clear that these effects on the economy are unambiguously negative.On the other hand, it may make it possible for people to overcome bureaucratic hurdles and red tape in a simple manner and thus allow firms to operate and expand. This effect is positive.Now, if you think about it, the positive effects of corruption arise only because the background is one of an economy or society which faces a lot of "distortions" (such as state regulation and red tape).If you look at yourself in a crooked mirror, then your face may look deformed. However, as Chekov wrote in one of his famous stories, if your face is actually deformed, then the crooked mirror might just adjust the image so that the person with the deformed face looks rather good. This is one of the most celebrated insight in economics - if an economy is already distorted, further distortions might sometimes have beneficial effects though such beneficial effects cannot arise when the economy is not distorted.So, the beneficial effects of corruption can only arise if the background economy is distorted in certain ways (and these beneficial effects co-exist with the negative effects).Now we can answer the question posed by you and your friend. The US economy does not have the kind of distortions that corruption can mend. Therefore, corruption can only have negative effects here. And yes, if practiced on a wide scale, it can seriously bring down the economy.Santanu._______________________________________________-----Original Message-----
From: umesh sharma [mailto:[EMAIL PROTECTED]
Sent: Monday, August 29, 2005 9:03 PM
To: Roy, Santanu; [EMAIL PROTECTED]; [email protected]
Subject: Re: [Assam] BWeek- 500% growth in India - if corruption gone; private limite...Santanu-da,Though I get your point about corruption's bad effects I'd like to put in a word which my room mate - Abhijeet Kikkkeri- a high school graduate put up about corruption. He said that if USA were to become as corrupt as India -- definitely, in the long run -- the country will go to the dogs and the income level will go down (GDP etc) . He gave the example of Saudi Arabia - he said that due to a corrupt and self serving govt - the country has gone down from being the richest to a mediocre nation.My hypothesis was that if the corruption - in development related funds were to stop -- then the GDP may or may not go up -- but the economy will definitel;y grow -- becos as per Amartya Sen -- income level is the only indicator of growth -- but also other factors -- such as rural eductaion, roads , health etc -- which would improve if entire development funds were to be available to the poor.If tomorrow in USA the development funds for community's benefit were to fall prey to corruption - for how long can you have this rosy economy?Umesh
"Roy, Santanu" <[EMAIL PROTECTED]> wrote:There are distinct economic benefits of corruption in an economy where the state exercises rigid control on economic activities. Corruption allows free enterprise to bypass senseless state controls and carry out productive activities that contribute to employment and growth. Most of the east Asian miracle economies have sustained high levels of corruption. Even the Japanese bureaucracy is highly corrupt. If bureaucrats in these states turned honest and actually implementing the myriads of control and regulation on industry and trade that the rules and laws in the books actually require them to, there would be a marked decline in individual incentive to set up and expand enterprises in industry and trade.This is not to suggest that corruption is desirable or to deny other negative effects of corruption. The reason why corruption confers benefits is because of rigid state control and regulation on the books. If the state formally disengages from the economy, the benefits of corruption disappear and in fact, so does the scope for corruption. A bureaucrat who has no discretion is, by definition, honest.As for the presumed negative effect of corruption on distribution of wealth and income, that is likely to be true though there are instances where the rich and powerful have had resources diverted for their use by influencing politicians at the upper level and the poor have actually been able to siphon some of that by bribing petty officials at the local level. If the petty officials where honest, the rural poor might have been worse off in such cases.Santanu.
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]On Behalf Of [EMAIL PROTECTED]
Sent: Monday, August 29, 2005 3:14 PM
To: [EMAIL PROTECTED]
Cc: [email protected]
Subject: Re: [Assam] BWeek- 500% growth in India - if corruption gone;private limite..._______________________________________________
As I said I am no economist and was mouthing what other economist had said about corruption and its overall affect on the national economy. Amartya Sen is a brilliant thinker and his finer point has possibly been overlooked by other economists. What I understand is that the corrupt person grabs the money from the underdog directly or indirectly but as the person spends the money, it circulates and is accounted for. The overall economy of the country is not affected. I plead those who know about these things to rescue me; perhaps they could even throw their gauntlets to the noble-laureate!
Bhuban
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