Saturday, Nov 26, 2022

Black money, red herring

Corruption can’t be solved by simply cleaning up poll funding. Problem lies elsewhere.

black money, corruption, demonetisation, black money corruption, demonetisation corruption, election politics, electoral politics, election funding, illegal election funding, election funding corruption, indian express column, india news Politics is funded because political power provides an abundance of opportunity for rapacious aggrandisement of wealth, in a way no regular business does.

With demonetisation apparently the “new normal”, breaking the nexus between corruption, “black money” and political funding is said to be the next big challenge. It is argued that unless this nexus is broken, corruption will corrode our body politic, leaving our democracy hollow.

Everyone seems to have a solution — from state funding of elections to making financial contributions to political parties transparent and their expenditures auditable. Typically, no one seems interested in subjecting one’s conclusions to critical questioning.

This “common sense” understanding of the problem, however, shows an astonishing degree of naivete. The logic runs thus — elections are an expensive affair, requiring huge financial investments; the honest are deterred from participating in electoral politics because of the costs involved; the huge investments made require to be recouped and that compels elected politicians to be corrupt, allowing the donor/investor to secure a handsome return on investments. Political parties serve the twin purposes of being generous receivers of black money and providing the donor legitimacy and exclusive access to influence for generating more black money. Thus, a vicious cycle gets established.

There are three fallacies here. The first is the notion that there exists a causal chain of linkages between political funding and corruption, as though corruption takes place because it is funded by unaccounted money — quite the reverse. Politics is funded because political power provides an abundance of opportunity for rapacious aggrandisement of wealth, in a way no regular business does. The cost for gaining this access is insignificant in relation to the potential spoils. As long as rent-seeking behaviour remains the dominant characteristic of the Indian state, the pursuit of political power will continue to attract large investments, dirty or clean.

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The second fallacy is that the colour of the money determines the behaviour of those who come into power, those elected on black money being more likely to be corrupt than those who are not. The fact is, there is no guarantee that a person or party which comes into power on the strength of more transparent funding will not indulge in corruption. It is power that corrupts, not corruption that gives one power. Corruption is directly related to opportunity — and these are available to everyone who gets elected, using black money or white.

The third fallacy is to think of “honest” and “dishonest” as different breeds: Some people are more tolerant of corruption, but opportunity universalises corruption. If the gains are sufficiently high, even those initially disinclined can be susceptible.

It is not one’s case that election funding makes no difference to cleaning up public life; it does, but it does not really attack the problem of black money generation through corruption. That has to be done where the problem is located: Within the state system in India. Opportunity breeds corruption. Opportunities arise because of the asymmetry of power between the state and its citizens. The bigger and more powerful the state, the larger the sphere of its activities, the greater the opportunities.


What makes the Indian state more corrupt than most others? This has to do with the state apparatus being “overdeveloped” in relation to the development of classes in society, making the state virtually a “class” by and for itself. When sociologist Hamza Alavi outlined his “overdevelopment” thesis, it was with reference to the state apparatus having developed in response to the needs of the imperial British state, rather than “classes” in Indian society which were underdeveloped at Independence. The state has since grown into a hormonally imbalanced Leviathan, which dominates almost every aspect of the social and economic life of its citizens, expanding corruption opportunities massively.

Which are the corruption opportunities within the state system that are the biggest draw for those pursuing political power? One, opportunities from monopoly of natural resources, (land, mines, forests, rivers, spectrum); two, from the use of the state’s coercive power (policing, taxation and anti-corruption); three, related to monopoly over energy sources, especially coal and hydrocarbons; four, related to infrastructure creation, railways, roads, ports, airports; five, the gigantic anti-poverty businesses — food procurement and distribution, employment guarantee schemes, rural development programmes, etc.

Each of these sectors offers limitless opportunities for rent-seeking by obtaining or granting discretionary allocations, concessions and contracts. These opportunities are embedded in the structure of the state: They have little to do with which regime is in power and how it came to be elected.


Much like demonetisation attacked the wrong end of the problem, trying to tackle election funding is similarly foolhardy. For black money generation to be checked, the big state has to retreat: We need to federalise and devolve more and more, sincerely and deeply. We need the distance between people and state power to reduce, so that democratic accountability operates at every level of decision-making. We need to make Parliament and parliamentary oversight of the executive stronger. We need communities to control the “commons” — and we need to rethink ways in which decisions are taken “by” us, not “for” us.

Yet, instead of rethinking governance, all we do is to mindlessly add more schemes, plans, programmes and subsidies in the name of security, poverty alleviation, job creation. Each poorly-designed intervention simply expands the opportunities for corruption. Election funding has nothing to do with this. If the problem of corruption is to be seriously addressed, the answer lies in the now-forgotten promise our prime minister once made: “Minimum government, maximum governance”.

First published on: 09-02-2017 at 12:02:17 am
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