Can corruption ridden economies be competitive?
By Venkatesh Kannaiah
The recent World Economic Forum report on Global Competitiveness got the short shrift in India. Muzzafarpur riots and Ganesh Chaturthi hogged the limelight. There were the some media reports that India slipped a few notches below 'to become the 60th country in terms of competitiveness. It was nothing unusual, nor did it raise any eyebrows. Indians have become immune to bad news about the economy. It was also 31 slots below China, an emerging market competitor and that did rub some salt in the wound.
The key finding on India apart from the general loss of competitiveness is that the "Public trust in politicians has been eroding since 2009 and has now reached an all-time low at 115th, while bribery remains deeply rooted (110th). Indeed, India has lost almost 30 ranks on this indicator since 2010."
Now this is an alarming fall in the last three years, and it might have its political fallout. Though reports like the WEF are not exhaustive when it comes to individual countries, the fall in public perception of politicians should be alarming to the UPA government at the centre. However, the report also mentions that the business class is not so pessimistic. The Indian businessman repeatedly cite infrastructure as the single biggest hindrance to doing business, ahead of corruption and a cumbersome bureaucracy.
Now this brings us right into the the allegation of 'cronyism' or the rise of 'crony capitalists' in India. You might wonder why. Infrastructure projects and cronyism is directly related. It is because that all infrastructure projects are held close to the chest of the government of the day and partly because the funds required are so huge, the government has a big say in awarding these projects or in finalising them.
Secondly, the government through banks and financial institutions bankrolls these projects. Hence, it should not be surprising that the scams of the last few years have to do with the infra sector, let it be on telecom, coal, roads and airports.
Many of the key infrastructure projects are under a cloud as courts and civil society organisations are questioning the 'sweet-heart' deals between the government and the promoters. Promoters for their part claim that doing business in India is so risky that without very 'identifiable gains' in the project, no big infrastructure project will take off in India.
Surprisingly, the discourse from the business class is not of or about corruption. All they complain about is the inability of the government to deliver on its promises. This 'delivery' relates to the political will, the ability to gather a 'coalition of the willing' and finally finish the project and share the spoils of growth.
Today's crony is tommorrow's doyen of industry, and in due course if successful, will become a business visionary. It has happened in the cradle of capitalism like the United States where the robber barons of yesteryears led the building of universities and funded the museums and opera houses with their money.
For the whole system though extremely 'corrupt' to work, requires some trust in the politician from all stake-holders. The word trust may have nothing to do with whether he is corrupt or not, but on his capacity to deliver on promises in key infrastructure projects.
The report refers to the decline in the trust we have in the politician, whatever the trust might refer to, and if it falls, or goes missing, then economic growth will ultimately suffer.