Column

Students of economics should know Gresham’s law: bad money drives good money out of circulation. It’s the same with economics, politics and business. Exhibit A is India. Bad politicians have driven good ones to the fringes. Bad economics has pushed good economics from the corridors of power to the shaded groves of academe. Crooked businessmen have made bribery the norm, nudging those with a few honest genes in them to willy-nilly learn to comply with sleaze.

Look at some examples. Manmohan Singh, a decent man and good economist, has become a lousy politician and is forced to peddle voodoo economics. Ratan Tata, the businessman with one of the cleanest reputations, has been caught on tape speaking things that one would not expect from him.

As for politicians, the less said the better. There is almost no worthwhile neta who is not running a real estate scam somewhere or the other. The so-called ‘clean’ ones appear clean only because they have managed to hide their tracks well or protect themselves by letting lackeys deal with the dirt.

The good news is that things cannot go on as before. India has arrived at the cusp of change, thanks to the unearthing of humungous scams running into thousands of crores involving everyone from politicians to businessmen and the bureaucracy.

When the actions (or inaction) of a Manmohan Singh are the subject of Supreme Court scrutiny, when a Tata runs to court seeking to gag the press on the leaked Radia tapes, when the media gets into a feeding frenzy about itself rather than the real scamsters (ex-telecom minister A Raja is suddenly out of the news), the only conclusion we can draw is that the entire system has rotted.

There are only two ways out: to start the clean-up with decisive structural action, or try for another cover-up so that we can stave off a political crisis for now, and let it build to another crescendo a few months or years down the line.

Will we, as a country, take the right decision or the wrong one? There is a good chance we will do the latter, for too much is at stake for too many people. The Congress does not want a joint parliamentary committee (JPC) because it will give the opposition the upper hand in embarrassing the prime minister, the party and its allies over the spectrum allocation scam.

With businessmen from the Ambanis to the Tatas facing the harsh gaze of public scrutiny, the pressure from big money will be high. Sharad Pawar has already fired a warning shot asking the government to control things before it derails business and politics altogether.

The reform route is the harder one to take, but that is the only thing that will ensure that the India growth story endures. The first and foremost reform needed is in election funding. The root cause of political corruption is the need to generate funds for re-election. We need to allow state funding for all serious political contenders.

Private fund-raisers must also be given legitimate space for backing politicians with their money. Objections may be raised about whether this will put a big burden on the exchequer, but there is a burden already. Ministers raise funds by robbing the exchequer of current or future revenues. This is what Raja was doing on behalf of his political masters in Chennai.

It would have been cheaper to fund the DMK with state money than allowing Raja to administer a potential loss to the exchequer of Rs1,76,000 crore in underpriced spectrum sales. It would have been cheaper to give the BJP in Karnataka state funds for the next election instead of allowing BS Yeddyurappa to skim money from real estate deals.

To be sure, Yeddy isn’t the only villain of the piece. His predecessors have all had their share of land rackets.

The second reform needed is to separate policy-making from the running of public enterprises. Whether it is the Indian Railways (which should be corporatised and run by an independent board) or the oil companies or the airlines, ministers are putting them on the road to ruin. Ministers have to make policies and draft laws, not run companies.

While the railways are still solidly solvent, thanks to Lalu Prasad’s sensible commercial decisions, one cannot leave it to the whims and fancies of out-of-work CMs. As for Murli Deora and Praful Patel, they have presided over the emasculation of the oil and airline companies, leading to avoidable losses to the exchequer.

The third reform involves land — the scene of countless scams at the Centre and states. Land records need to be fully computerised, stamp duties reduced to a bare minimum, and building laws should be fully transparent to all.

Fourth, all our regulators — the RBI, Sebi, Trai, the environment ministry, and various industry watchdogs — must get statutory protection of tenure so that they can do their jobs fearlessly and impartially. Corruption results from giving ministers and bureaucrats discretionary powers. That has to end.