The Price of Political Scandals in India

When business and politics collide, photo: Dinesh Cyanam/flickr

2010 was a year of scandals for India, from the corruption surrounding the Commonwealth Games and the Adarsh Housing Society, to the bribes-for-loan scam affecting the Indian banking industry.  These scandals involved billions of rupees, most of which was public money. One of the biggest scandals uncovered last year, however, was the 2G (second generation) telecom spectrum scam in which the former Telecommunications Minister A Raja is suspected of having sold 2G spectrum phone licenses to telecom companies for a fraction of their value. This is reported to have cost the government $37 billion in lost revenue, equivalent to 14 percent of India’s GDP.

Thousands of scandals take place in India every day, ranging from small to huge, from the local all the way up to the national level.  Such behavior is accepted as a normal part of life, so it mostly goes unreported in the media as it is nothing ‘new’.  Some schemes are just too big to be ignored, however. Scandals that have previously found their way into the national – and international − media because of their magnitude include:

•    Fodder Scam : involved the fabrication of “vast herds of fictitious livestock” for which fodder, medicines and animal husbandry equipment was supposedly procured.

•    Bofors Scandal : the then-Prime Minister Rajiv Gandhi and several others were accused of receiving kickbacks from Sweden’s Bofors AB for winning a bid to supply India with 155 mm field howitzers.

•    Bombay Stock Exchange Manipulation and Fraud :  exploiting several loopholes in the banking system, stockbroker Harshad Mehta and his associates siphoned funds from inter-bank transactions. They bought shares at a premium across many segments, triggering a rise in the Sensex, Mumbai’s Stock Exchange.

•    Cash-for-votes scandal : the United Progressive Alliance allegedly bribed Indian MPs with cash or currency-notes to the tune of millions of Rupees in order to survive its very first vote of confidence on 22 July 2008.

•    Madhu Koda: During his tenure as Chief Minister of Jharkahand, Madhu Koda was charged with laundering over Rs.40 billion ($880 million) through his assets. These included hotels and three companies in Mumbai, property in Kolkata, and a coal mine in Liberia.

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Business and Finance

Corruption in Russia: Business as Usual?

Anti-corruption poster in Saint Petersburg, photo: mutatdjellyfish/flickr

Transparency International’s latest Corruption Perceptions Index saw the ratings of many western countries drop. Scoring worst among the G20 countries, Russia’s ranking dropped to 154, its lowest ranking since the index began in 1995.

Naturally, there are limits to how useful measuring a population’s perception of how corrupt their government actually is. Transparency International’s Francois Valerian acknowledges that “a drop in ranking can often result from the exposure of corruption that had already existed for some time.”

And corruption in Russia has existed for a very long time. For millions of Russians corruption is often seen as the norm. Russian authors have explored the theme of corruption in Russia over centuries. Nikolai Gogol exposed corruption in tsarist Russia in Dead Souls and The Inspector General, while Mikhail Bulgakov satirized the greed and corruption of Stalin’s Soviet Union in Master and Margarita.

According to one Russian polling station, the Levada Center, “nearly 80 percent of Russians say that corruption is a major problem and that it is much worse than it was 10 years ago.” Recent years have seen a rise in coverage of corruption scandals in Russia. So have Russians become increasingly critical of the government’s failure to deal with the problem of lingering corruption?

Mexico – A Democracy for the Brave Few

In Ciudad Juarez, Federal Police were deployed in attempts to stop the drug-related violence, courtesy of Jesus Villaseca Perez/flickr

Mexico is at a crossroads. As last week’s gubernatorial elections demonstrated, the Mexican state can no longer provide basic security and ensure the rule of law in many urban environments, signaling that Mexico might soon join the ranks of international failed states like Somalia, Afghanistan, and Haiti.

The New York Times adopted an optimistic perspective, noting the strength of the Mexican democracy amidst all the violence perpetrated by the drug cartels, as evidenced by the surprisingly positive voter turnout in many areas. These elections, however, also witnessed “the most blatant evidence of traffickers interfering in politics since Calderon came to power in late 2006,” with voter turnout at historic lows. Coming close to a stand-still in areas where drug violence has been prominent—in Ciudad Juarez, voter turnout was only 20 percent, and in the state of Chihuahua  as whole, only one-third of voters showed up—turnout can be explained by the violence surrounding electoral campaigns. Leading up to the elections, candidates had been killed and threatened, campaign offices had been bombed and general fear of the power of Mexico’s infamous drug cartels had uncomfortably set into everyday life in the country.

When Dictators Have ‘Image Problems’

President Barack Obama and First Lady Michelle Obama with Teodoro Obiang Nguema Mbasogo and his wife, photo: Lawrence Jackson/wikicommons

You’re ranked the 14th worst dictator in the world; you preside over a country with a per capita GDP that is higher than that of Italy, but your people’s living standards are among the lowest in the world; your son is widely accused of spending his daddy’s (read: country’s) money on a USD 33 million private jet, a USD 35 million Malibu mansion, speedboats and a fleet of fast cars; and you win 96.7 percent of the vote in a presidential election, and then international observers publicly doubt the election’s credibility.

Well, if all that applies to you, you really have an image problem.

Luckily, there are professionals who can amend such glitches. We recently learned that former Clinton aide and DC lobbyist Lanny J Davis took on the noble task of recasting the image of Equatorial Guinea’s President Teodoro Obiang Nguema Mbasogo (described above). And all that for the modest sum of USD 1 million.

Davis says that he only agreed to the contract because of Mr. Obiang’s promise to introduce a series of reforms. These include a more effective use of the country’s vast oil resources for the benefit of the people, social sector development, institutional reform, improved relations with human rights organizations and environmental conservation initiatives.

For years, the US government has been accused of soft-pedaling the record of this unusually corrupt and unscrupulous dictator, whom Condoleeza Rice in 2006 called “a good friend.” Also the Obama administration has been accused of looking the other way when it comes to corruption and human rights abuses in Equatorial Guinea so as not to alienate this oil-rich African state. A significant amount of the country’s substantial oil resources is exported to the US, and the bulk of investment in the country’s oil industry comes from US-based oil companies.

True, you can hire DC lobbyists for almost anything these days. But the fact that Mr. Obiang hired Lanny Davis makes the story particularly controversial.

Davis is an old friend of both Hillary and Bill Clinton (they went to law school at Yale together), and he had worked on Hillary’s campaign. This naturally raises suspicions that the US State Department, and hence the Obama administration, doesn’t mind too much that Obiang’s image is getting a professional overhaul. After all, people may ask, couldn’t Hilary ask an old friend to perhaps find himself another client instead?

More disturbingly, Davis had been criticized in the past for touting himself as an ‘independent news analyst’ and devout Liberal; for speaking regularly on US television networks and writing op-eds in influential newspapers while his audience is often left in the dark about his clients.

Truly, Lanny Davis himself has an image problem. But unlike Obiang, he doesn’t seem to care.

Quiet Corruption: Not Just an African Problem

Corruption, quiet and invisible / Photo: xiaming, flickr

The World Bank is pouring old wine into new bottles in a publication on corruption in Africa. The insight that everyday corruption is detrimental to Africa’s development is old wine. The new bottle is “quiet corruption,” a term created “to indicate various types of malpractice of frontline providers (teachers, doctors, inspectors and other government representatives) that do not involve monetary exchange.”

To be fair, the World Bank’s communication strategy is to redirect the media focus from high-profile corruption involving politicians and business leaders to small corruption by civil servants. Such ‘quiet’ forms of corruption includes “absenteeism,” “lower level of effort than expected or the deliberate bending of rules.” However, the claim that “one of the main reasons Africa is lagging behind is the poor service delivery that is a consequence of quiet corruption” is hardly surprising.

Power and Moral Hypocrisy

When it comes to corruption, I find more insightful a recent research article entitled “Power Increases Hypocrisy.” Joris Lammers and Diedrik A Stapel (Tilburg University) along with Adam D Galinsky (Northwestern University) conducted a series of experiments in political psychology. They found that powerful people impose strict moral standards on others but practice less strict moral behavior themselves – a phenomena they call moral hypocrisy (note that the experiments were not conducted in Africa, but with students at a Dutch university).