May 16th, 2011
11:03 AM ET

Fareed Zakaria: How to beat bribery

One out of every four people on this planet paid a bribe last year. Bribery has been said to cost the world $1 trillion a year. The United Nations says bribes accounted for one fourth of Afghanistan's annual GDP.

So I was intrigued to hear about an innovative idea to deal with corruption from one of the places most plagued by it - India.

India's Chief Economic Adviser, the economist Kaushik Basu, posted a paper on his personal website in which he made a case for legalizing certain types of bribes.

Corruption is a huge and growing problem in India. More than half of all Indians say they had to pay a bribe last year. Many of those are what Basu calls "harassment bribes" - illegal payments to get basic services, like an extra 100 rupees to get a driver's license or a routine permission.

These are the kinds of bribes Basu wants to change the law on. Under current Indian law, both the bribe giver and the bribe taker are guilty. If they're caught, both are fined an equal amount, say 100 rupees. So the state gets 200 rupees total.

Basu has a radical proposal. Fine the bribe taker, the government official, 200 rupees, he says. Let the bribe giver go scot-free. So the government collects the same amount in fines, but the person who had to pay the bribe is not fined. Instead, he gets his bribe money back.

So how does this reduce corruption? Well, Basu's game theory simulation suggests that bribery in general will decrease because people who are asked for bribes can pay the money and they can still go and complain without worrying that they will be prosecuted. And the corrupt official who takes the bribe will know that if they take the money they face twice the penalty.

It's a fascinating idea. It has come in for lots of criticism in India, but the critics are missing the point. India needs creative thinking to cure the cancer of corruption that is actually getting much worse, and not just in India.

Take a look at this map.

It's a corruption index, put together by Transparency International. The redder a country is, the more corrupt its bureaucrats. The yellow spots are less corrupt. You notice here in the U.S. we're not doing too badly.

So what's the least corrupt country in the world? Singapore.

About five decades ago, that tiny country was newly independent, and for all of the rapid growth, it had the usual third world baksheesh culture. That changed under Lee Kuan Yew. He decided to pay government officials at par with those in the private sector. That killed the incentive for officials to be corrupt.

The Singapore solution is expensive, especially for large countries with large bureaucracies, but it would probably still be a bargain considering how much corruption costs most economies.

Another innovative idea came out of Africa. The Sudanese-born billionaire Mo Ibrahim often wondered why his continent had the richest resources, the richest natural resources, and yet the poorest people.

Identifying corrupt leaders is the problem. Ibrahim tried to change those leaders' incentives. He instituted the annual Ibrahim Prize. It awards $5 million to an African leader who is not corrupt and leads office peacefully. The winner then goes on to get an additional $200,000 annually for life.

A great incentive, right? The problem is they couldn't find a winner for 2009 or 2010. The jury simply refused to make the award to someone who was not truly deserving.

But the point of this story isn't to despair. Corruption or bribery are not innate cultural qualities. Singapore shows that cultures can change. Studies show that these crimes are due to inertia. If everyone's doing it, then there's incentive to take and offer bribes as well. But how do you get to a critical mass where people stop doing it? Well, smart government policies and good leadership from the private and public sector help.

It is possible. This is the year of change, after all. And remember, much of the popular anger against governments in the Arab world this year was fueled by the sense that they were out of touch, repressive and corrupt. So let's try more ideas like the one from Mr. Basu in India.


soundoff (169 Responses)
  1. Transparency International

    Bribery is symptom of a larger problem of governance and the system not working. People pay money to keep the flow of services going, to keep commerce happening. As you say, this is where citizen engagement and transparency are key -for example, in Bangladesh Transparency International provides price lists of services outside of hospitals so people are not overcharged through bribery: http://wp.me/pxeWx-9Z

    May 17, 2011 at 5:47 am | Reply
  2. CC

    This proposal deals with the demand side for bribes. Shaffi Mather (TEDIndia Fellow) has some interesting things to say about the supply side and how to set up a for-profit bribe-busting group:
    http://www.ted.com/talks/lang/eng/shaffi_mather_a_new_way_to_fight_corruption.html

    May 17, 2011 at 2:53 pm | Reply
  3. PETER

    Just bring back the communist system where the state owns everything. Problem solved.

    May 17, 2011 at 3:57 pm | Reply
  4. Sean V. Bigay

    On reading this blog, my first reaction was: "This is like legalizing marijuana!" And in fact it is, but not in the way most people might think. Most right-thinking people would, in fact, reject both ideas out of hand as being just plain wrong. And who can blame them? After all, bribery and illegal drugs have wrought immense harm to uncounted people the world over.
    The thing is, bribery and illegal drug use are good examples of "Caveat emptor" ("Let the buyer beware"), because in both cases the "buyer" is over a barrel. If drug use ruins his health and sanity, or if paying bribes leaves him utterly destitute, he has no way to bring the "seller" to account because by dealing with that "seller" he commits a criminal act and thus deprives himself of any help the powers that be might give him. In such a predicament the "buyer" usually has only two choices: to dig the hole he's in a little deeper by returning to his "seller" and master like a fish on a line, or - more rarely than we'd like - to find the strength of spirit to break away and start clean.
    Naturally any "seller" in these circumstances will prefer to keep the transaction illegal, in order to keep his "buyers" as helplessly dependent on him as he can manage. And just as naturally, such a "seller" will resist with tooth and nail any attempt to make his pet transaction legal, and therefore subject to the sort of scrutiny and regulation that makes him answerable to anyone else, least of all his "buyers."
    This isn't just theoretical daydreaming; I've seen it happen. Here in the Philippines, I've seen long-time clerks at our local BIR (Bureau of Internal Revenue) explode with rage over the computerization of their office. This was because the computers' speed and convenience - and the ease with which their bosses could now monitor them - made it impossible for them to delay the poor taxpayers' tax returns forever, and then accept baksheesh to "help speed things along." Needless to say, the computerization of our BIR proceeded despite the clerks' protests, paying taxes is no longer as agonizing as it used to be, and the clerks who bitched the loudest about the BIR's new-fangled toys are now long gone.
    I suspect much the same thing will happen with regard to "legalizing" bribery (which, by the way, isn't quite what people like Mr. Basu had in mind; read Mr. Zakaria's blog again, carefully). It may even happen with the sale and use of marijuana. Stranger things have happened; after all, scarcely a month ago Osama bin Laden thought he would live forever.

    May 18, 2011 at 9:20 am | Reply
    • The Sad Truth

      What a lame example.

      A person shortcutting to pay for services ISN'T the same as nation-wide policies being influenced by bribery, the results which affects MILLIONS for generations to come.

      May 19, 2011 at 4:02 pm | Reply
  5. US Doing Well?

    The Indian approach is clever and could go a long way to cleaning up the petty bribery. The problem is that petty bribery is not the institutional cancer that kills. It is a few extra bucks to facilitate a transaction involving a typically underpaid civil servant.

    The broader issues are things like the "favors" that come with campaign contributions in the US and skimming by senior officials in places like Africa and the Middle East. This higher level corruption tends to reset the economic fabric and tilt the markets toward a particular out come. The result is far more drag on the ecomomy,

    May 18, 2011 at 9:43 am | Reply
  6. MannyHM

    Sting operation. Jail the one giving the bribe and the one receiving it.
    A clear definition has to be made between a gratuity and a bribe.
    Another to watch for is bribery wherein it's hidden in a bank account of somebody else in a foreign country.
    Follow the money.

    May 18, 2011 at 9:47 am | Reply
    • Jack

      "Jail the one giving the bribe..."
      Consider this scenario. You go to the DMV for a license. You pass all the tests at which point the official says hand over $100 or I ll fail you on the road test. You recoil in horror and approach the higher official who demands $200 for your audacity and promptly fails you on the road test.

      This would never happen in the US. But its the way of life in the 3rd world. Do you still want to jail the bribe giver?

      May 19, 2011 at 2:52 pm | Reply
  7. Superman

    Bribery has been so incredibly legal in the US for decades...it is called campaign contributions!

    May 19, 2011 at 12:40 am | Reply
  8. Knucklehead

    No reason not to trade with them. If you have money, we will trade, like any whore would.

    May 19, 2011 at 2:45 pm | Reply
  9. Jack

    Penalizing the bribe-giver is such a moronic idea. No common man wants to give bribes willingly. If some one is inclined to speed up/bypass a process and gives a bribe to do that, the govt official can simply refuse it. Such bribe givers are a very small percentage of the public. In most cases, the common man is fleeced and out right robbed of his money. Mr.Basu s idea seems a very practical approach and would encourage the public to file complaints without fear of criminal charges.

    May 19, 2011 at 2:46 pm | Reply
  10. The Sad Truth

    Don't kid yourself, USA is dark red from the effects of corporate bribes (it's just that those on both ends know how to cover it up better)

    May 19, 2011 at 4:00 pm | Reply
  11. Ross

    If game theory really backs this up then do it on a trial basis.

    May 19, 2011 at 4:09 pm | Reply
  12. THE TRUTH

    The U.S. govt is as corrupt as any country in Latin America or Africa, the U.S. just does a good job at not making it obvious.

    May 19, 2011 at 4:22 pm | Reply
  13. UD

    Please see follow up work on KB's proposal here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2166221

    December 7, 2012 at 10:57 am | Reply
  14. Raja Vudatala

    The problem of corruption is often viewed as the cause of many evils in a society. The problem with such an approach is that, devising methods and policies to curb corruption becomes tough. Looking at corruption as an effect and working towards the real root cause behind the menace would give us pointers of how to deal with this problem. I take the ranking of Transparency International and use that as a base for a study to understand policy measures that would help in curbing corruption in the Indian context. All are invited to view the details:

    http://randomvudatala.blogspot.in/2012/12/a-draft-for-anti-graft.html

    December 26, 2012 at 5:13 am | Reply
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