When Crime Pays

by Milan Vaishnav

  One researcher, Matthieu Chemin, has tried to quantify the welfare effects of India’s suspected criminal politicians. Chemin looks at extremely close contests from India’s 2004 general election, or those places where an allegedly criminal candidate narrowly won (or narrowly lost) by just a few percentage points. By looking at such close elections, Chemin takes advantage of an established statistical trick—in places where the margins of victory are razor thin, one can argue that the difference between a candidate winning or losing is essentially as random as a coin flip. Using this clever design, which focuses on this subset of extremely competitive races, Chemin finds that electing a candidate under criminal scrutiny severely reduces the everyday consumption of the most vulnerable groups in society. This means that the presence of a criminally suspect MP actually increases poverty for those segments of society that are worst off.

  These findings are interesting but hardly conclusive. For instance, if criminals themselves hail from lower segments of society (Chemin places SCs, STs, and OBCs into this category), it is not clear why individuals from these communities should necessarily end up worse off. The implicit assumption is that criminal candidates hail exclusively from upper-caste communities, a fact at odds with reality.

  Nevertheless, it at least seems plausible that politicians associated with crime have a mixed effect on the social welfare of constituents, depending on whether a given individual is in their electoral coalition or not. This ambiguous outcome reflects a more general uncertainty about the broader effect of criminally linked politicians on governance. In terms of the overall performance of the public sector machinery, these politicians do often bolster their standing by appearing to fill a vacuum of authority. Candidates with criminal records regularly campaign on pledges of delivering benefits of various sorts to their adherents (see Chapter 5). While these can be material in nature, they also involve things like physical protection or dispute resolution and justice.

  Yet while politicians suspected of wrongdoing appear to plug a governance vacuum, they also benefit from the persistence of broken public sector machinery. If the state were able to adequately dispense benefits and services, justice, or protection, these candidates would certainly lose much of their relevance. For instance, a reform commission set up by the government of India in 2005 wrote that criminals in politics thrive in a setting in which the state cannot adequately implement the rule of law. In such settings, according to the report, it is the “criminal who, paradoxically, is able to ensure speedy justice and in some cases becomes almost a ‘welcome character’!”25

  An analogy worth considering here is the role and functioning of mafia groups. In his landmark work on the Sicilian Mafia, sociologist Diego Gambetta argues that a lack of social trust in Italy first gave rise to the Mafia, which could offer citizens protection—especially over property rights—in an environment where ordinary people lacked trust in the sanctity of even basic interpersonal transactions. What the mafioso could offer—to all parties involved—was the credibility that a transaction would be honored, thus overcoming the social trust deficit. But, as Gambetta explains, the “Mafioso himself has an interest in making regulated injections of distrust into the market to increase the demand” for the very protection he offers.26 After all, if business agents were able to organically develop bonds of trust among themselves, the Mafia would be out of business. Similarly, politicians tied to crime may be able to solve various governance dilemmas, but the emphasis will be on short-term solutions rather than sustainable ones that might render them irrelevant in the long run.

  Finally, while one can debate the welfare or governance impacts of politicians with criminal records, government statements, numerous official documents, and various committees and commissions reveal that the government of India itself is very concerned by the interaction of crime and politics. Indeed, the government has repeatedly identified the need to rid politics of criminals as a key public policy objective. Perhaps most famously, the Vohra Committee sounded alarm bells in 1993 by noting that a politically connected mafia was “virtually running a parallel Government.”27 And a commission charged with reviewing the workings of India’s constitution stated in 2002: “The visible presence of many criminals is in fact a very large factor in the loss of legitimacy for politicians as a whole. This is also extremely dangerous for the country because apart from distorting the political culture of the country, criminal elements progressively get to influence leadership and governance. The spectacular success of some criminals in politics invites emulation.”28 Five years later, a government report stated that the “increasing criminalisation of politics and persistent interference in the due process of law” was a root cause of public disorder in various parts of the country.29

  Thus, even though the marketplace for criminal politics chugs along, there are many good reasons why democratic citizens should be uncomfortable. But if ridding politics of such elements is deemed to be an important objective of public policy, what is to be done?

  THE LOPSIDED INDIAN STATE

  Devising a reform agenda to mitigate the role criminality plays in everyday politics is a complex undertaking.30 For starters, and this is the harsh reality, it is difficult to get people excited about an intellectual debate on “how best to fix civil administration.” Second, “governance” is such an all-encompassing catchphrase that pleas for investing in “good governance” can often obscure more than they illuminate. Finally, building state capacity involves time horizons that extend far beyond the sorts of timelines that politicians, many of whom are looking only as far as the next election, are able to mentally grapple with. Most politicians in India—indeed, in most developing countries—do not perceive fixing basic services as a readymade path to electoral success. Furthermore, many politicians might also view systemic governance reform to be at odds with their short-term political objectives, especially if reforms loosen their party’s grip on power.

  As a result, governance has been allowed to stagnate. Popular disenchantment with this state of affairs, further fueled by repeated instances of large-scale government corruption, has made the Indian state an easy target. But despite a reflexive inclination to harp upon the failings of the Indian state and to devise ways of curbing its power in order to minimize the frequency and intensity of abuses, the Indian state is the problem as well as a principal element of the solution. This is not a popular stance, but it is an incredibly important one to grapple with.

  Smarter Regulation

  The overbureaucratization of the Indian state in procedural terms has had many pernicious effects. It has led to poor developmental performance, bred corruption and collusion, and created space for political entrepreneurs to circumvent or cut through regulations using dubious means. Despite the problems of hyper-regulation, wanton deregulation is also not the solution. Reformers must make efforts to reduce red tape and excessive discretionary powers belonging to the state, but the need for regulation will not disappear. What is needed is smarter regulation—and, fortunately, there are recent examples to draw from.

  In 2011, a group of scholars and experts were commissioned by the Ministry of Finance to reimagine the laws and regulations governing India’s financial system. This effort, known as the Financial Sector Legislative Reforms Commission (FSLRC), spent two years evaluating and modernizing the sector’s regulatory framework, identifying overlaps and inconsistencies, and drafting a lasting unified financial code. Divided into multidisciplinary groups, the commission developed objectives for each area of the financial market, identified the sources of market failures, critically assessed the role of government, and evaluated the costs and benefits of redrafting legislation.31 The work of the FSLRC has not been free of controversy; some critics have derided it for its purist adherence to economic first principles, and others have quibbled with specific institutional reforms it has proposed. Any ambitious reimagination of legal and regulatory frameworks will be faulted on such grounds, but—substance aside—there is no reason why the
commission’s methodology cannot be replicated across multiple sectors beyond finance. Similarly, in early 2016, the BJP government of Narendra Modi was hard at work consolidating and rationalizing India’s innumerable labor laws into a streamlined set of four labor codes. The legal patchwork governing labor has grown immensely since independence, providing huge rent-seeking opportunities for corrupt bureaucrats while simultaneously hampering business activities and, rather ironically, failing to protect workers’ rights.32

  Separating Fat from Muscle

  The underlying infirmities of the state frequently get lost in the clamor to ratchet back the most burdensome manifestations of the Indian bureaucracy. Nearly everyone realizes that state capacity is a crucial determinant of development outcomes, yet it remains a slippery, amorphous concept that is frustratingly difficult to pin down. At its core, state capacity refers to the ability of the state to effectively design and implement public policies.

  Disaggregated further, the concept can be broken down into two constituent parts: incentives and competence. In considering questions of state capacity, economists have traditionally prioritized incentives, arguing that public officials must face the right set of incentives if they are to behave in a manner that benefits the general public they are charged with serving. All too often, bureaucrats in India do not face such incentives, thereby opening the door to a slew of self-serving behavior ranging from brazen venality to simple absenteeism. For instance, the egregious level of absenteeism by public school teachers in India (estimated in 2014 to be around 25 percent) undoubtedly has grave consequences for the quality of education imparted to India’s youth, but it also has enormous financial costs. One study estimated that the fiscal cost of teacher absence in India is around $1.5 billion per year.33

  Another study, examining operations at over 1,400 public health centers across the country, found that nearly 40 percent of doctors and medical service providers were absent from work on a typical day.34 One experimental study from Delhi revealed that despite higher salaries, greater training and qualifications, and medical knowledge, public doctors provided worse care than their private sector peers.35 Researchers examining public health facilities in rural India found that in 63 percent of recorded doctor-patient interactions, the “doctor” who met with the patient was not a provider with recognized medical training, even though possessing such credentials is standard government policy.36 The uneven quality of public service delivery is certainly not unique to India. But even when compared to other low-income developing countries, India performs poorly in terms of ensuring that public sector employees show up to work during normal office hours.37

  Designing incentives for bureaucrats and public employees to perform their duties in a more efficient and less venal manner is a puzzle that has occupied the brains of some of the world’s best and brightest researchers, practitioners, and management gurus for years. There is still a lot to learn, but there is a growing body of evidence, much of it from India itself, on the effectiveness of a range of potential strategies—from the creative use of technology to incentive compensation and legal reform.38 In some cases, the solution rests with bypassing the bureaucracy entirely. For instance, India has enjoyed great success with “smart card” programs that allow citizens to access benefits via bank accounts rather than middlemen.39 Furthermore, the introduction of the potentially path-breaking Aadhaar scheme, which offers all Indians the possibility of obtaining a unique biometric identity, has the potential to shift a great many transfers, subsidies, and benefits to direct cash transfers, which can be accessed without delay or hassle. Interventions such as these, which transfer significant bargaining power into the hands of ordinary citizens while circumventing the often-dysfunctional local machinery, hold considerable promise.40 Of course, efforts to bypass the state must proceed hand in hand with, rather than substitute for, genuine efforts to fix the heart of the bureaucratic problem.

  In this regard, one popular remedy often pursued is to pass laws guaranteeing citizens a “right” to a specified set of basic services. If citizens are denied access to any of these services within a limited, preset time frame, bureaucrats would incur monetary penalties until the issue is resolved. This follows the model engrained in the RTI Act, which imposes fines on empowered government officials who do not promptly respond to freedom of information requests. Many states have already passed “Right to Services” laws, but the jury is out on how effectively they are working. One concern with this rights-based framework is that the public sector lacks the manpower to process inquiries in a timely fashion and the government is often reluctant to impose financial penalties on officers, citing lack of experience or systemic failures as the real reason for delay. A legislated “Right to Services” will engender favorable delivery outcomes only if the state is properly equipped to carry out its various provisions.41

  Clearly, generating the right incentives for public sector officials to faithfully execute their official duties is a major constraint when it comes to building a more efficacious state. But even if India’s political leaders are able to set the right incentives for government rank and file, there remains the question of competence, such as ensuring that officials possess the right skills and training. But before matters of skills and training, there is an even more basic challenge that needs to be overcome: across almost all dimensions, India’s public sector institutions are grossly undermanned. In many parts of the country, the state simply lacks presence.

  Heated debates over the size of government are not unique, especially among large democracies. In the United States, Republicans and Democrats regularly wage pitched battles over the size of the federal workforce. In much of southern Europe, in the wake of the financial crises of 2007–8 and the ongoing Eurozone debt crisis, governments and citizens similarly debated the merits of downsizing the state to reduce the state’s fiscal burden. While debates over the optimal size of the state are quite common, there is one key difference in the Indian context: the task is not simply about modifying the state but—in many corners of the country—building it from the ground up for the very first time.

  Therefore, investing in competence requires first and foremost staffing up government agencies, beginning by filling vacancies where posts have been officially sanctioned. There can no longer be any excuses made for the fact that huge chunks of the bureaucracy simply do not exist due to positions going unfilled, particularly in a country with a giant labor surplus. Unlike the aging societies of the West, India is poised to reap a “demographic dividend,” with 300 million working-age adults joining the labor force between now and 2040. The vast majority of these jobs will have to come from the private sector, but surely in such an environment, the public sector should not be perennially understaffed.

  In some cases, the government can rely on private contractors rather than hiring full-time government staff. Indeed, public sector reliance on contractors has grown substantially in recent years.42 Contractors have to be part of the solution, but there is a danger of excessively relying on contract labor in areas where the government ought to be a central actor, such as in the provision of public goods. For instance, while India’s police force has languished, hamstrung by personnel shortfalls, poor pay, low morale, and endemic political interference, there has been a massive growth in the private security industry. One of India’s leading business federations estimates that private security is roughly a 400 billion rupee ($6 billion) industry, estimated to grow at an impressive rate of 20 to 25 percent over the next several years and currently employing more than 6 million guards.43 This growth in private sector guards is natural given the swelling of the middle classes, the rise of gated communities, and the growth of commercial establishments, but it cannot substitute for the basic provisioning of law, which is inherently a government function.

  Beyond quantity, quality too is an important element in building up competence, and the fact of the matter is that India faces a skill shortage across the board. This is due, in no small
measure, to persistent shortcomings in higher education and vocational training.44 However, there are a significant number of talented people with specialized skills who have found work in the private sector and for whom public service remains an aspiration. When the UPA government wanted to create a unique biometric identification scheme for India’s citizenry, it successfully lured Nandan Nilekani, the founder of the tech giant Infosys, to lead the effort. Similarly, the government successfully recruited Subramanian Ramadorai, the former CEO of Tata Consulting Services, to serve as an adviser to the prime minister and to take charge of a national council on skill development. Facilitating the “lateral entry” of such talent is a no-brainer, although it remains politically sensitive given the influence many public sector unions continue to wield. This battle has to be waged politically, but it is one worth fighting.

  THE RULE OF LAW SUPPLY CHAIN

  Talk of “rightsizing” the state can get pretty abstract pretty quickly in the absence of concrete examples. The rule of law, a core function of any democratic sovereign, is as good an example as any to help place things in proper focus. This domain merits deeper exploration given its intimate connection to the nexus of crime and politics. Furthermore, it is another area where the state has exhibited legal and regulatory excesses as well as endemic weakness in human capital terms.45