Addressing Corruption – An Informed Proposal

Respected Pakistani economist and author of several books, Shahid Javed Burki, addresses the return of corruption to the headlines, and makes some important points for consideration, as well as informed suggestions for which we might effectively work to eliminate corruption in the government and civil service.

The good news is that Pakistan has improved considerably over the years, and finds itself ranked better on Transparency International’s index. The bad news is, we still have a lot of work to do.

In a column for Dawn earlier this week, Shahid Javed Burki notes that PM Gilani’s task force headed by Finance Minister Shaukat Tarin will report back to the government in about one month. He offers his own insights into the issue for consideration.

Looking at the subject from the perspective of economics provides some useful insights into the practice. Corruption as a phenomenon can be easily explained in economic terms and economics also guides us towards some of the solutions. Corruption becomes endemic for a number of reasons. It may result when the cost of the services provided far outweigh the compensation given to those who are giving them away. This leads to a temptation on the part of those who have the authority to dispense these services to charge the receiver.

A policeman has the authority and the ability to maintain law and order. Security means a great deal to the people over whom the policeman has some authority. The people may be prepared to pay the officer for providing the services they need.

The same happens on the demand side of the equation. When the benefit of the services being received is much greater than the price being charged for them, those who want them would be prepared to pay additional amounts to receive them. This economic calculus can be changed by altering the cost benefit ratios for both the provider and receiver of services. There are some interesting examples of the reduction in the incidence in corruption when those with authority were given better compensation.

But proper compensation is not the only issue – there is also the very important issue of accountability. 

Pakistan has a long history of coming up with accountability systems that were put in place to curtail corruption. Both Gen Ayub Khan and Gen Yahya Khan fired scores of civil servants to pacify the citizenry when corruption became a serious issue. This was an ex post way of dealing with the problem; to take action once the crime was committed. The first Nawaz Sharif administration set up an elaborate system of accountability. This was the ex ante approach, to address the problem before it became one.

The Sharif system was massively tinkered with by his successors and was scrapped by Gen Pervez Musharraf. The military government then went on to institute a system of its own, setting up elaborate investigative procedures as well as accountability courts for trying the cases investigated by the National Accountability Bureau.

Eventually, as is well known, the NAB process itself was corrupted and used for political purposes. The lesson to be drawn from this experience is that continuity of approach is vital. A jerky response to the problem does not create enough confidence on the part of the citizens that the system works to their advantage.

The Shaukat Tarin task force does not have to cover any new ground in pointing the government towards adopting the right set of solutions. Instead, it needs to watch over the implementation of the proposals it would be putting out. The proposals should be directed towards achieving three objectives. The system of compensation has to be drastically revised as should the systems of hiring and firing of people in government service, including the corporate sector controlled by the state.

Sound proposals were made by the commissions headed by Ishrat Husain and Moeen Afzal in this context. These need to be implemented. Along with better compensation should come accountability and that should be embedded in the legal system. No changes should be allowed once the system is in place. This can only happen if there is a broad political consensus behind its creation. Finally, while compensation for providing services should be increased so should the cost of being corrupt. Only then will the calculus change in favour of cleaner governance.

Minister Shaukat Tarin would be well advised to take note of Shahid Javed Burki’s column and his insights into this issue. With the application of common-sense solutions, we can continue to root out corruption and improve our rankings in the TI profile.