Thursday, December 23, 2010

New Age Corruption

In the last two years alone, we have seen ten or more major scams in India, each one outdoing the other.  The recent 2G scam is pegged at 176,000 Crores.  That’s 1,760,000,000,000 Rupees amounting to nearly 3% of our GDP.  Satyam scam was around 14,000 Crores while Common Wealth Games scam is at 70,000 Crores.   I was talking to some young people the other day and was telling them that in the early 1990s PV Narasimha Rao was embroiled in a 2 Crore scam.  They could not believe that a tiny amount of 2 Crore could actually result in a scam.    Even the much touted Bofors scam, because of which Rajiv Gandhi lost power in 1980s, was only 64 Crores.  So what happened to us as a nation in the last twenty years?  How did we go from mere 2 Crores to 176,000 Crores? 

I believe that we are witnessing a completely new set of rules being played out in the corrupt India (BTW, India proudly ranks 87th in the world on the corruption index).  And unlike what many people think, I believe it is the younger generation, not the older generation, which is setting these new rules.  It is New Age corruption, which is vastly different from the old school.  The old school’s appetite was small, and therefore was content with small money and stored it as cash stuffed in pillows or deposited it as gold in some foreign accounts.  The new age is rapacious, they want to become the world’s richest, get hold of all vital natural resources of the country, and they route the money through legal methods like IPOs, mergers and acquisitions, to convert their black money into white money.

I discuss this New Age corruption through the following three trends. 

1. India is creating more wealth

India is creating more wealth than ever before.  It is creating wealth beyond the means and mechanisms of how our administrators and politicians are used to handling funds.   India is making money on an unprecedented level because of the reforms that have set in early 1990 by Manmohan Singh under PV Narasimha Rao.  That has resulted in entrepreneurs, companies, industries, financial institutions, creating mega wealth for this nation.  The treasury’s coffers are filled with loads of money, but our rulers and bureaucrats are incapable of using those funds for better use.  They lack the vision and it is clearly showing. 

Some of the ministers, babus, administrators are not used to handling this kind of money.  Most states send back the funds they receive for various schemes unspent.  Most of the social schemes send back the money to center unspent.   Right now, India allocates so much money to various schemes that most leaders who are given the mandate to spend this are not in a position to spend it wisely. 

Old habits die hard.  The politicians and the bureaucrats continue to steal the money.  In the beginning they stole less, but each year, the bureaucrats are setting newer and higher targets for their politicians, ready to craft the necessary paper work, thereby increasing the amount of money appropriated at exponential rates.  The net is widening.  More number of people are getting the share of the pie. If previous minister took 5000 crores, they would like to take 15,000 Crores for the new minister. 

The old school reacts only one way, the old way, by filling their pockets, their kin’s pockets, their friend’s pockets.  But they do it so haphazardly that no matter what they do, it eventually shows.  You just cannot fill your pockets with new money which is quite huge.  It’s too much money to be filled into one’s pockets.  Shibu Soren of Jharkhand, Lalu Yadav of Bihar and few others are examples of this.

In this vacuum of visionaries and leaders, come new set of leaders, the smarter ones.  Smart because they know how to steal the money without having to fill one’s pockets.

2. Scamsters have become smarter

New Age corruption plays by different rules now.  New Age corrupt do not just take cash in suitcases, they take a stake in your company, a percentage in the new venture, they take investments into a dummy venture, and so on.  They use the new liberalization policies to take corruption to a mega level, a level that no old school politician could have imagined. 

For example, in addition to liberalizing the economy India has also liberalized laws to allow people to take raw ore out of India.  That alone has created a set of new industry where the politician’s sons set up companies, get the required permissions to mine, and sell the ore to foreign companies.  The Chinese take satellite pictures and tell our politicians’ sons, ‘Hey, we want this hill and this hill, don’t do any preprocessing, don’t create any industry, just send the hill as it is’.  Our New Age entrepreneur even gets the dynamites from the same Chinese, blasts the hills to loosen the soil, and then hires the local people to come and carry the soil onto the nearby trucks.  These trucks then go the nearest port where a Chinese ship is waiting to gobble up the hill.  These ships take the ore to China, create a mega industry, provide employment to its people, create the metal, and then they export the metal to other countries, including India.  

India is witnessing a funny phenomenon. It would have been hilarious if it was happening on a magic show.  There is a hill today, that hill is no more tomorrow.  Hills are just being gobbled up and sent to foreign countries.  And no sustainable industry is being created in India because of this.  When Nehru and Tata set up steel plants, they created townships, like Jamshedpur or Bhilai.  Nowadays, the natural resources do not create industry or the townships.  It only fattens up the politicians so much that they are capable of buying entire electorate and entire assembly of MLAs.  Indian politicians and their sons must have looted this country of its natural ore in the last ten years more than what British looted in two hundred years.  We are setting a different record altogether here.

The New Age politicians make their sons industrialists first before allowing them to enter politics.  As industrialists, these sons use their father’s connections to usurp resources, grab lands, get better schemes, and then go onto convert black money to white money through fake acquisitions, write-offs, etc.   By the time the son is ready for politics, he already knows how to use the government funds and schemes to make mega wealth for himself.   Real estate, construction, energy, mining, are some of the areas where the new age corrupt have come to dominate. 

3. Being corrupt has become a virtue

The old school looked at money with guilt.  The older generation was guilty when they made excess money.  This is where the new age differs starkly with the old school.  The new age corrupt wear it as a badge displaying it as an Olympic medal.   They are not squeamish about it.  In fact, they participate in ostentatious display of their ill-gotten wealth, squandering it, buying new toys, palaces, spending money on birthday bashes. 

The competition is not between the corrupt and the honest anymore, the competition is between the corrupt themselves, outdoing each other, outsmarting each other, excelling over each other, coming up with various tricks and methods to bypass the system.  The winner is the one who has smartly outmaneuvered every other contender who wanted to appropriate this money. 

The new age youth is completely OK with making money through schemes like Harshad Mehta, or Telgi.  They think there is nothing wrong making money that way.  Like how Akshay Kumar says in Hera Pheri, ‘main paise yu banaunga, short cut tarikey se’, the youth is ready to use short cuts to make money.     

In a country, which confuses habits to values, corruption is not a bad thing, as long as you continue to visit Tirupati every year, put your feet at Sai Baba, and shun meat and alcohol in the public.  You are considered virtuous based on your dietary habits.

The combination of these three trends, that India is making money on an unprecedented level, that the new age politicians and their sons are smarter and have found mechanisms to usurp wealth with mega appetite, that the new generation is completely OK with cheating to make money, are some of the reasons why we see such big scams today.   What we have seen is only the tip of the iceberg.  We are only seeing scams where scamsters were just inefficient and foolish.  There are so many other scams which are not exposed because the scamsters there are quite smart.   There is a good chance that those scams will never be exposed.


  1. Autonomy to FC/BC/SC/ST regions with a single Passport and Currency across these regions will solve casteism/corruption.

    West India == Forward Caste
    South India = Backward Caste
    North India == Scheduled Caste
    East India == Scheduled Tribe

    BC/SC/ST Parliament Members should move a Bill in Parliament seeking autonomy from India.

  2. Anonymous:

    Your comment reinforces my belief that blogspot must enforce a mandatory IQ test before people are allowed to post comments on blogs. That will probably spare us of having to read such nonsense.

  3. Anonymous is a moron. Nice analysis , btw. I would argue that the 2G scam wasnt as big as it is made out to be, because the benefits of cheap spectrum would eventually be passed off to consumers. Thats better than being utilized for ineffecient central govt populist schemes.

  4. @Sujai:
    "The old school looked at money with guilt. The older generation was guilty when they made excess money. This is where the new age differs starkly with the old school. The new age corrupt wear it as a badge displaying it as an Olympic medal. They are not squeamish about it. In fact, they participate in ostentatious display of their ill-gotten wealth, squandering it, buying new toys, palaces, spending money on birthday bashes. "

    This is incorrect interpretation. 'New School' did not emerge out of air or from the sky. It emerged out of old school. We should be careful not to romanticize the 'old school'. They set the systems up for new school to exploit and ravage the country with weak laws, weak or no regulation and compromised political system. Your understanding of 'old school' shows the naivete. Politicians and bureaucrats in old school never reformed the system as they could make enough money, in those times, with impunity. The people who made and kept the system corrupt are as responsible as those who exploit the system. What we need is more regulation and deterrence in preserving national resources. The govt has opened these industries for private and foreign participation without enough regulation, safeguards and enforcement.

  5. 2G scam is only the Tip of Iceberg. India's black economy is estimated to be 200 Billion US$ or 10 lakh crore RS each Year .
    We are becoming like Russia an "oligarchy" after collapse of USSR,
    all due to Unregulated transition from State economy to a free market economy.
    Some TV Anchors are arguing that we should accept scams like 2G for the "greater good" provided by Privatization of economy.
    Thats not true we may need "Capitalism" but it is not Synonymous with "Crony capitalism" we are witnessing in India.

    It is nauseating to see that Some so called "Intellectuals" are arguing for Legalization of Lobbying , even after seeing what it did to US economy and society.

  6. Sujai,

    I am not sure if we can peg the scam at that figure. It is like the Govt selling land at 10 L to Microsoft, Infosys etc. They build their offices in that land. Now land prices go to 10 Cr. So it is a 9.9 cr scam.

    Ofcourse there is no denying that the minister was not transparent. But I am not sure that if the process has been perfect the amount realized would have been anywhere close to the figure.

  7. >
    I would argue that the 2G scam wasnt as big as it is made out to be, because the benefits of cheap spectrum would eventually be passed off to consumers
    How do you define a big scam then?

  8. @Aravind,

    Your argument is not entirely correct.

    I know several honest people,whose children do not share the same ideas of life as their parents.

    Their value system is different from their parents.

    And vice-versa....

    People have always had the same set of emotions like greed,envy,joy is the level of these emotions that guide them today that has changed.

    It is about the willingness to corrupt and be corrupted,
    opportunity,exposure and the ability to escape punishment that defines the new age scamsters.

    By your definition,all Indians must be the most peaceful and pious souls on earth,since our earlier generations were mostly freedom fighters.....are we???

    We had more examples of good compared to bad,then how come we are one of the most corrupted countries in the world today????

  9. a compeny wins spectrum for 1500 crores but sells it for 7000 crores with in a week isn't it a scam? like some one believes cheap spectrum there is no cheap spectrum only govt sell it for cheap it became costly with in a week!

    (To recapitulate the spectrum swindle, the all India license and the spectrum for additional cellular operators (2G operators) was given away on a first-comefirst-
    served basis at 2001 prices. TRAI, experts within and outside the government, had all stated then that there was no justification for using 2001 prices when

    there were barely 4 million mobile subscribers as against 300 million subscribers in 2007. Soon after this sale, the parties who had secured the licenses sold it at about 6-7 times the price they had paid without doing any development at all. The difference between what the companies paid a total of Rs 9,000 crore and what the market price of these licenses were anything between Rs 60,000 to 100,000 crore is the scam, making it by far the biggest scam ever in this country)

  10. · New Financial Terminology in India:
    · 1 Lac = 1 Peti;
    · 1 Crore = 1 Khoka;
    · 500 Crore = 1 Koda;
    · 1,000 Crore = 1 Radia;
    · 10,000 Crore = 1 Kalmadi;
    · 1,00,000 Crore = 1 Raja;
    · 10 KALMADI + 1 RAJA = 1 PAWAR;
    · 10 PAWAR = 1 Madam..


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