Our corruption trap

The White Paper on the State of the Bangladesh Economy provides illustrations of various manifestations of corruption gleaned from a variety of quantitative and qualitative assessments, especially in banking, energy, physical infrastructure and Information and Communication Technology sectors.

It delineates corruption as the one-word answer to why Bangladesh's developmental momentum degenerated in the past decade.

A silent pandemic

The violation of rules by powerful actors – sections of bureaucrats and politicians in collusion with private actors – has been the overarching mechanics of corruption. Petty or grand, corruption is covert by design. There is no irrefutable way of quantifying the extensity and intensity of corruption. The Transparency International's Corruption Perception Index (CPI), a "poll of polls" drawing upon several distinct surveys of expert and general public views of the extent of corruption is commonly used along with a variety of surveys assessing political and economic governance such as the World Bank (WB)'s World Governance Indicators. The ability of these surveys to capture corruption is limited. Concern about corruption does not necessarily translate into being the most pressing issue firms and households report. These complicate the interpretation of differences in perception scores across countries and cultures.

Yet what they do report paints a sordid picture of a silent pandemic. Bangladesh's CPI score increased from 22.9 in 1995 to 24 in 2023, an increase with no real significance. During this period Bangladesh's ranking was mobile within the ten topping corruption. In 2011, Transparency International (TI) reported that two-thirds of Bangladeshis had paid a bribe during the preceding 12 months. The US-based business association TRACE ranked Bangladesh second on business bribery risk in South Asia in its 2023 Bribery Risk Matrix. 

International financial systems have made it possible for public officials to launder corrupt wealth in safe havens. The White Paper's ballpark estimate of $16 billion a year illicit annual outflow from Bangladesh in the past decade and a half is corroborated by anecdotal evidence on the stock of wealth owned by Bangladesh's political power related parties in the UK, US, Canada, Singapore, Malaysia, Thailand, Dubai and so on. 

The TI reported in 2017 that globally one in four people had paid bribes in the previous 12 months to access a public service. Around one-third of people considered their presidents, prime ministers, national and local government officials, business executives, elected representatives and police officers corrupt. The Panama Papers in 2014 and the Paradise Papers in 2017 showed many national leaders, their families and close associates from all over the world, including Bangladesh, were using offshore safe havens. 

Gandhi's world of "enough for everyone's need, but not enough for everyone's greed" is ubiquitous.

Not just a matter of level of development

There is no natural law governing the relation between corruption and the level of development. History is replete with a variety of experiences. South Korea crossed the WB's GNI per capita threshold for high-income economies in 1995. Korea's corruption score improved from 42.9 in 1995 to 63 in 2022. Corruption reduction followed economic development. Poland journeyed from an upper middle-income country in 1995 to a high-income country in 2014 with deterioration in its corruption score from 55.7 in 1995 to 34 in 2005 before recovering to 55 in 2022. Corruption got worse before getting better as Poland ascended into the high-income zone. Corruption reduction went hand in hand with rapid transformation in China's standards of living. China's score improved from 21.6 in 1995 to 45 in 2022 when their real income per capita increased by $6,000. 

The upshot is, country indices of the perception of corruption and the level of development have heterogeneous patterns with contemporaneous, lagged and reciprocal causality. Some have argued corruption can "grease" the wheels of the economy by inducing the administrative machinery to fast track policies and projects for those able and willing to pay for services. Corruption arguably could reduce deadweight losses – losses that do not show up as gains to anyone. Bangladesh experienced all of these cost reducing or benefit enhancing (to the briber), briber or bribee initiated, coercive or collusive, centralised or decentralised, predictable or arbitrary and last, but not the least, involving cash payments or otherwise types of corruption. 

What may be hypothetically beneficial is toxic in reality. Regulators reinvent regulations to maximise rents. Firms shy away from long term investments requiring frequent renewal of permission and certification. Not many individuals create new firms, imitate or invent new technologies and invest if they expect their profits to be either appropriated by the state, extracted as bribes by corrupt bureaucrats or extorted by the cadres of the dominant political party or members of state agencies. 

There is incontrovertible evidence that endemic corruption sands the economy's equation of motion, without taking all from all, all the time. Corruption punishes savings and investments, constrains competition, disfigures market coordination, and erodes confidence in public officials and institutions. It comes with its own deadweight losses over time. However, the corrosive effects of corruption are bound by its own reproductive compulsions. You cannot steal from an empty safe!

Herd like properties

Warren Buffet's aphorism that the five most dangerous words in business, "everyone else is doing it", says it all about the parasitic dynamic of corruption. Individuals engage in corruption because others do so in the same situation. The tendency to cooperate with cooperators and cheat cheaters, while bringing about positive individual as well as group outcomes, can be maladaptive. Everyone expects others not to deviate from the "norm" because it is not individually incentive compatible to do so. They play the norms to "keep up with the Joneses". The herd is hard to stop once it takes off.

Entropy reigns supreme in the marketplace of corruption, historically documented as the world's second-oldest profession. An interesting allegory is a case of corruption in a local market called Kiziguro in Burundi. A goat-keeper bribed a tax collector instead of paying market fees for the sale of a goat. A large part of the crowd applauded the goat keeper when he said publicly, "Theft in this country is not new and it is not in Kiziguro that we should start penalizing corrupt people". Ashoka Mody illustrates a similar sentiment (India Is Broken, 2023) quoting a nineteen-year-old call centre scammer: "Everyone was scamming around me. I thought I will also become a great scammer." 

Corruption corrupts stealthily and unintentionally from person to person like a virus. Social norms and ethics change in the process. It may not make sense to be Mr Clean among the few honest persons in a corrupt system where there are no "principled principals". Refusing to participate in the racket risks financial and social ostracisation from colleagues. Side payments are leveraged in different guises to shape specific policy outcomes in the wider political and economic environment. 

Corruption in Bangladesh manifested in low-level public servants accepting petty bribes to national leaders stealing outrageous amounts in taka and dollars. Bribery in the face of authority found acceptability as loyalty bended towards ruling party networks rather than public institutions. The spread of immoral and unethical choices in public and private conduct found its own epidemiological pathways to spread. Cooperation for seamless corruption became self-sustaining through exchange of favours needed to survive the chaos that came with corruption. Even the most powerful could not do it alone. However, it was by no means an equal opportunity game. Probusiness most often meant favouring some business and not others. A personalised and capricious policy environment was handy for getting ahead in the battle for a bigger share of the pie. 

A Catch-22 of "broken norms and deficient accountability" came to roost. As the number of corrupt people increased, the likelihood of being caught and punished diminished. The prosecutors themselves were tainted by corruption as well. Productive activity hibernated. Corruption turned into a quintessential privilege of the powerful, a tool for the intimidation and harassment of those outside the power structures. Put up and shut up was the unspoken and unwritten rule.

Moving the needle

History provides little guidance on flattening the corruption curve. Every country that has succeeded in taming corruption followed its own path. The common denominator in the variety of corruption reduction approaches is democratic accountability of the market and the state through internal and external checks and balances in each. Such a gamut of checks and balances hang on the balance of power between the state and the society. When deeply entrenched, as in Bangladesh currently, the lack of functional accountability systems is hard to reinvent through mere architectural reforms. 

Translating architectural resets into behavioural changes makes the difference between success and failure in combating corruption. Bangladesh has some experience in architectural reforms accompanied by perverse behavioural changes even before the upending of electoral accountability in 2014. Anti-corruption tools such as the Anti-Corruption Commission was used to witch hunt political opponents and persecute personal or family rivals through political capture and stripping the ACC of its legal power and administrative capacity. The fight against corruption is neither cheap nor independent from the reform of the state. Time will tell how the reform initiatives of the interim government will pan out, but they certainly are trekking slippery slopes!