An economic perspective of corruption

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.