An economic perspective of corruption

Barlev Nicodemus, Brussels

One of Indonesia's main problems since becoming a democracy has been corruption. Numerous seminars, workshops and public discussions on the topic have been held. Different approaches have been tried to tackle the problem, including the religious approach. Nahdlatul Ulama, the country's largest Muslim organization, once proposed allowing those involved in corruption to be buried without prayers. Still, Indonesia is among the most corrupt countries in the world, according to Transparency International.

Why is it so difficult to combat corruption?

An article in The Jakarta Post (Fighting corruption through civil service reform, March 24) discussed how to fight corruption. The writer nicely opened the article by asking what were the roots of corruption. Based on an interview with Vice President Jusuf Kalla, two main sources of corruption were identified as an unreformed bureaucracy and government procurement practices.

The article confirmed that Indonesia has a problem in its bureaucracy. The latest report from Transparency International Indonesia carried a similar message. Public officers across the country are inclined toward corruption. Therefore, reforming bureaucracy and improving government procurement practices are crucial. However, while these might be the main sources of corruption, the roots of corruption are still unclear.

This article wants to describe the roots of corruption based on an economic approach.

In daily life, people have to make choices. A particular choice will be taken based on inducement, incentives. In a practical perspective, the incentives can be a carrot (benefit such as a reward) or a stick (costs such as punishment). Consequently, as economic theory says, people compare the costs and benefits before making a choice or taking an action. If the benefits exceed the costs, he/she will take the action. If no, he/she will not take the action.

Corruption is one example of a particular action. But before taking the action, compare the costs and benefits. Consider the civil servants in the bureaucracy. It is known that civil servants would be unable to lead normal lives on their meager salaries. The benefit of corruption therefore is very clear. Corruption is an additional source of income. How about the costs? Since the rule of law does not exist, there is nothing to worry about.

It is not surprising to that corruption is so rampant under such circumstances. For low-level civil servants, corruption is a matter of survival. Their salaries cannot cover their living expenses. The only choice left is to take money from corruption. Since they don't have any physical goods to sell, their authority in public services is their business. As a result, people need to pay more to get an identity card, driver's license or birth certificate.

But corruption also occurs among high-level officers with relatively good salaries. How do we explain this? Again, economic theory says that people have unsatisfied wants. They need more goods, more products and therefore more money to satisfy their wants. If they have the chance to get more money, they will take it. This is another way of saying that a big salary does not stop corruption if, again, the stick (law enforcement) is not there.

This explains why it is so difficult to stamp out corruption in Indonesia. Low salaries and a lack of law enforcement are the roots of corruption. Civil servants at the lowest levels engage in corruption to survive, while their colleagues at the higher levels do so to get richer.

Under such conditions, protecting each other becomes necessary. There is no benefit to reporting a colleague involved in corruption or prosecuting them in the courts, because that would put everyone in danger. This explains why the so-called mailbox facility, where people can report corruption via anonymous letters, is not effective. Nobody wants to follow up on reports because it is like committing suicide.

What should be done then? Reforming the bureaucracy and improving government procurement practices are good but not enough. The counter-corruption policy should adopt a carrot-and- stick approach. From a practical standpoint, it is not effective to provide a stick if you do not also increase the salaries of the civil servants, particularly those earning the least. You have the right to give them the stick once a carrot has already been provided.

The level of the stick, or punishment, should go together with the salary levels of the officials in question. Civil servants with high salaries should receive more severe punishments for corruption. There should also be other disincentives for misconduct. Here, more sticks from the religious side can be employed, such as the one proposed by Nahdlatul Ulama. The cost of committing corruption should exceed the benefit. This will send a clear message to think twice before getting involved in corruption. There should be no incentive whatsoever for corruption.

Because corruption is already so pervasive around the country, the anti-corruption efforts must be taken in sequence. The authorities should start by implementing the strategy in a small region, a subdistrict for instance, before moving to a bigger region, such as a district then a province.

Bear in mind that fighting corruption is not the sort of job that will be finished overnight. It is an effort that requires patience, persistence and consistency. Only when this job is finished will there be any chance of turning around the current situation in Indonesia.

The writer is a postgraduate student in social sciences at Katholieke Universiteit Brussel. He can be reached at BarlevNicodemus.Marh@student.kubrussel.ac.be.