Sunday, September 20, 2009

Corruptionomics - It's not all Black and White

The Nifty crossed the 5000 mark last week.... So right now talking about markets might look a little incongruous, hence it's time to talk about something offbeat..... 

"Corruption", the word sends some vivid imagery across the mind. Setting ethical issues aside its time to analyse this issue of corruption differently..... There are obvious disadvantages of corruption:

- It increases the cost of production
- If the money is channeled outside the country in Swiss accounts, Cayman Island hedge funds it's further loss to the country, though these days such money is finding it's way in the stock markets
- Investing in land in this country is still partly done in cash and an ideal investing source of Ic (corruption income)
- Corruption Multiplier, this is the most serious effect of corruption. Let's say an x amount is given as part of corruption for construction of a house, over a period of time this amount x becomes part of internal psyche then this amount increases from x to x+c
- The control of money supply (M3) is lost by the central banks

However corruption is not always bad and it's predominantly because of 2 reasons:

- The cash generated in the corruption economy is either invested in land, parked outside the country or used in consumption and this spend on consumption ultimately finds it's from black to white.....
- However the biggest advantage of corruption is that it can increase the pace of work..... All big projects take sometime because of the red tape and infinite number of clearances and rules, corruption can short-circuit all this and ends up actually reducing the cost of project (because of the short time in which a project is executed)

So the question that one must ask is that is "Corruption Good or Bad"..... and the answer unfortunately is that it's not all Black and White, while in day to day work corruption is undoubtedly bad as it ends up just increasing the cost of production as the money paid as part of this system doesn't actually quickens the work.

However if corruption is smart, tactful and artistic then it is of great value.... Greed forms the bedrock of human development and prosperity. It is the basis of Capitalism with corruption forming one of its important ingredient. It's just like a dope that if taken everyday would soon make economic framework look like a debilitated patient but on a rare basis can give an instant kick to the economy taking it to a new high..... The crux of issue is if corruption happens so much that it can improve the speed of the project so much that it can reduce it's cost it is indeed beneficial. However even in this case it has to be rare and done by very smart people else it would channel down to the bottom to average morons and when this happens the disadvantages of corruption would surface......

Moral of story: Corruption is one of the most effective weapon in Capitalism but only meant for smart people........

5 comments:

Puneet Jain said...

nicely describe and define Corruption ethics..

Stochastic Process said...

That's a nice word "Corruption Ethics".... :)

Himanshu Arora said...

I think corruption do not have ethics, it would be better to simplify the process and to create more checkpoints instead of bending the way someone want. Just my personal opinion and with no disregard with your blog.

Stochastic Process said...

Agreed, but there always comes a situation when you feel the rules don't quite stack up andm it's important that they be laxed and exception be madeit, and so that's when it is needed....

Kamal said...

Thats an interesting way to look at corruption.
People enjoying power enjoy a different form of corruption, use of influence and power to bypass laws meant for all. Whereas, ordinary people if they want the same benefits of bypassing laws, have to shell out money or gifts.
Corruption will appear to be ethical if it has same impact on all :)