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Thursday, July 21, 2005

According to news reports, two young men of Mumbai, both scions of political families, have purchased a 6-acre property of Kohinoor Mills in a competitive bidding process at an astronomical price of Rs 421crore. Given Mumbai’s skyrocketing real estate prices, this may well be a reasonable investment. And in a market economy, it is no sin to be wealthy. As Deng Hsiao Ping said, it is glorious to be rich.

But this transaction indicates two things. First, vast amount of money is getting concentrated in political families. While creative accounting may legitimize these resources, their origin is linked to exercise of power and rent-seeking. Second, politics has become big business. Most politicians no longer need contributions for political activity and election expenditure. Gone are the days when a party in power or a powerful politician would telephone entrepreneurs, traders and license seekers, and solicit funds for elections. Now, increasingly a class of political entrepreneurs has taken over the establishment. Vast amount of money is raised through political office and control over levers of power. A part of this is ‘invested’ in elections, and in a no-holds-barred competition to gain the marginal vote which ensures power, vast amounts of money are spent for buying the vote, bribing officials, browbeating opponents, bamboozling the public, and hiring musclemen and mercenaries. Once they regain power, multiple returns are assured. A vicious cycle of money power, electoral victory, abuse of political office, and massive financial clout is perpetuated.

There was a time when politics meant sacrifice and privation in India. Even now, many politicians continue to be upright, principled and public-spirited against heavy odds. But political plunder is the norm today.

That is how liquor business, transport, infrastructure projects, procurement contracts, real estate, large public works, educational enterprises – all of them are increasingly controlled by politicians in private capacity. Gone are the days of licence raj when wealth creators paid off politicians to obtain the right to do business. Now politician is the entrepreneur in public affairs as well as in private capacity.

With the dismantling of the LPQ raj, political corruption is increasingly driven to public procurement, transfers and postings of bureaucrats for a price, and interference in crime investigation. For long, there has been a well-developed market for public office in India. Now this market envelops the political process and elective office. With the failure of state in the core areas, even policing and justice administration are now ‘privatized’ and huge sums of money are made by settling disputes and dispensing rough and ready ‘justice’, using public office as a shield. Clearly, this process distorts markets, undermines public confidence in wealth creation, erodes rule of law, sets horrible example to our young people, and retards economic growth.

Can we stem this rot?  Yes, but not through palliatives. We need to transform our political culture and strengthen institutions of state. Creating a system which allows the best and most public-spirited to get elected and survive in power through honest means, and overcoming institutional rigidities to allow competent delivery are the two great challenges of today.  Will we wake up?


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