A new solution to tackle bribery?

Kaushik Basu, the Chief Economic Adviser to the Ministry of Finance of the Government of India has come up with an idea to tackle India’s rampant bribery problem.

Basu argues that:

“…we should declare the act of giving a bribe…as legitimate activity. In other words the giver of a harassment bribe should have full immunity from any punitive action by the state.

It is argued that this will cause a sharp decline in the incidence of bribery. The reasoning is that once the law is altered in this manner, after the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence.

The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe”.

Basu is careful to distinguish the kinds of bribes where this policy might be effective, saying that:

“…this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these ―harassment bribes.”

He offers an example of the kind of lower-level bribe this approach might apply to:

“Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. 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…”

He acknowledges his idea is not a perfect one:

“…one problem that will open up is that public servants may be vulnerable to blackmail and false charges of bribe-taking.

We could try to plug this loophole by increasing the punishment for blackmail and false accusation.”

This acknowledged risk is potentially significant. But clearly India, as many other countries has a very serious bribery problem.

Another problem (and solution) Basu highlights with this approach is this:

“Once it is completely clear that a bribe giver has immunity from our bribery law, it is true that many more people will be willing to give bribes.

However, since, every time a person gives a bribe, after that it will be in the interest of the bribe giver to expose this act of corruption (since by that not only will she not be punished but she will be getting back the money that she gave as a bribe) the bribe taker will not want to take the bribe…”

The full paper is here.

We published an easy-to-read, ten page briefing on how corporate responsibility is evolving in India last summer.

Here’s a link to it.

And here’s a good blog post, where I first saw the link, by Seth Godin, entitled: “Why you might choose to be in favor of transparency

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