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Legalize corruption! You must think that this idea is crazy, if not outright immoral, unethical, and socially harmful. However, look at the alternative—which is that corruption is not going to go away any time soon, no matter what we do. Hopes have been raised recently for winning the war on corruption in light of court convictions of two former ministers, who have been found guilty of accepting bribes and kickbacks.

However, this is a small win against the epidemic of corruption. The reality is that corruption in the country has assumed the shape of a mammoth iceberg; the recent convictions just scratch its tip! Or, just like finding cockroaches in a house or apartment, in which case, the argument goes, if you see one, there must be thousands that you do not! The same applies to corruption cases as well.

Unearthing corruption, and winning conviction, is rare, considering that graft is pervasive. Daily instances of corruption—big and small—may number in thousands and law enforcement agencies like The Commission for Investigation of Abuse of Authority (CIAA) seem to be fighting a losing battle. They do not get to try even a fraction of one percent of the reported corruption cases and, for those they do, punishment may not amount to more than a slap on the wrist.


We cannot win the battle against corruption because almost everyone dealing with public money or with access to it is suspected of dirty dealing. In fact, corruption has now reached a stage that it is socially accepted, even admired. It is rare to see public officials and politicians known for their corrupt ways being ostracized or boycotted by the society. Actually, this works the other way: the more you rake in—in public or private service—the more your clout. You stand high in society and politicians seek your favor, because you have played smart in amassing all that wealth, never mind how you did it.

If corruption is so pervasive, how do you control it? A novel idea has been floated by India’s Chief Economic Advisor and Cornell University Economics Professor Kausik Basu. He proposes partial legalization of what he calls ‘harassment bribes’, the most common form of bribe-taking. In a commentary on Basu’s proposal, Time Editor Fareed Zakaria notes that half of Indians paid or received bribes during 2010; globally, this figure was one out of four. No such data exist for Nepal but bribery incidents in the country ranks among the highest in the world.

Coming to Basu’s proposal, bribe-giving would be legalized while bribe-taking would remain illegal. In this case, if the bribe-giving person reports the case to authorities and the official is convicted, the bribe-taking official would be fined twice the amount of the bribe, half of which would be returned to the reporting person. Such decriminalization of bribe-giving would discourage government officials from soliciting bribe and also help improve their performance. Reduction in bribery cases would especially benefit the rural poor and those without connections who fall easy prey to petty officials.

While Basu’s proposal breaks new ground, one-sided legalization is prone to abuse, especially when the persecution of bribe-taking official depends just on verbal accusation of the bribe-giver. Unscrupulous persons may accuse someone of bribe-taking as an act of revenge or to earn some easy money.

Why not go all the way—to legalize receiving as well as giving of bribe? If nothing else, such openness and transparency would promote market solution to a serious problem, in a way that the free play of market forces would help determine the nature of bribe and price of the service, as mutually agreed between two parties. This is similar to the determination of price and quantity in the marketplace, which is not government-controlled. Price and quantity freely negotiated by buyers and sellers, according to economics, bring them the largest personal gain and provide maximum benefit to the society.

For example, while talking to a taxi driver in Kathmandu some months ago, I learned that while the annual license fee of taxi operation was just a few hundred rupees, he faced enormous hassles for the renewal of his license, including several days of waiting outside the licensing office, which in turn prevented him from earning his daily bread.

He found it more economical to pay gratuity to an official who then took less than a day to complete all formalities and home-deliver the license. The bribe cost him just a fraction of what he loses by not driving his taxi and it saves him from making daily trips to the licensing office and from abusive treatment of government officials.
Should bribe-taking and -giving be legalized, what changes would we expect? First, with open bidding for license renewal service, the taxi driver in our case will not have to depend on just one official, who may operate like a monopolist, charging a handsome price. Second, this official will have to compete with his counterparts who may offer similar or better service at a lower price. Third, the licensing officials would have the chance of trading their service at a reasonable price to attract customers!

There is no doubt that open deals—for taxi licensing and for many other government services, including land registration; acquisition of business and professional licenses and birth certificates and passports; expeditious settlement of small court cases—the country can save an enormous amount in lost earnings and turn the office environment from being oppressive and dreadful to one of cheerfulness and heart-warming experience!

Now, to be realistic, this market solution may help reduce incidents of harassment bribes but what about those occurring at the elite levels, which may run into millions of rupees? These involve cases of political corruption and those negotiated at top echelons of bureaucracy. Government contracts are routinely sold at enormous premiums; plum-government appointments and transfers carry a price-tag depending on the bribe-generating potential of the job; even low-level appointments are sold at multiple times the annual salary; and there are enormous kickbacks to be had in government procurements.

While the number of these mega-bribe generating activities may be a small fraction of the overall bribery cases, amounts involved are in hundreds of billions of rupees annually, rivaling the amount earmarked for development budget.

Can a market solution be devised for such large cases of corruption? Doing so will not be easy but we can still try, considering at the huge hurdles CIAA has had to encounter while investigating big bribery scandals. Assuming that all types and sizes of briberies are legalized, what is the best and the worst case scenarios, in comparison to what we have accepted as fait accompli? Government contractors can freely negotiate the amount of ‘fee’ they would pay for winning a contract. Industrialists and businesspeople can shop for the lowest price to obtain a license, an import permit, or a government procurement order.

Even the price of appointments and transfers for government jobs can be negotiated, at a more reasonable price compared to when only one or a handful of high officials have monopoly over decision-making.

There are instances in the world where social evils such as narcotic drugs, gambling, and prostitution have been legalized with decidedly less harmful effects on society and the economy. However, no such experiment has been carried out as yet to see what happens when corruption is legalized. Nepal may make history if it chooses to become the first country to do so. At worst, the outcome is unlikely to be more calamitous than what we are getting at present.

The writer teaches economics at various American universities
Published on 2012-02-14 01:00:23
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For a man who teaches in American University should know that the fields of narcotics, gambling and prostitution are not government service areas (here I am thinking of service and that too for the hard-pressed people of the developing world). There is no instance of corruption there unless people raise stakes for their personal pleasure. The three areas are already corrupted areas, to begin with, at least from the normative societal point of view. How can you compare corruption with these facto [more]
  - Devendra Lekhak
That shows the level of respect ´The Republica´ feels it owes to its readers ... doesn´t really bother to tell where exactly the guy teaches. And neither does the gentlemen feel it necessary to define his identity . Are people really ashamed of what and who they are ... ? Crazy country .. crazy intellectuals ? Do you think, for example, Paul Krugman would ever write a piece with such idenitification? [more]
  - devata
Sammer Jee, Thanks for comment. Please be sure that I am not against the market, but I am against that version of market that most American scholars prescribe to us. Please be sure command and control has not failed anywhere. It has been made to fail. [more]
  - Lok Nath Bhusal
What a shame profile without a name of the university, "The writer teaches economics at various American universities."

Are you sure? [more]
  - GyaRel
Shah ji,

You seem to base all your assertion on Indian economists. Come out of your comfort zone. You need to do some serious readings, I know it is hard given your age. Start with Harvard Professor Niall Ferguson´s "Civilization: The West and the Rest" and you will better understand why controlling corruption is a must for developing a nation, ensuring social mobility, and equity. [more]
  - Sunil Sharma
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