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Economics Economics The Indian Plague of Corruption by mohit mookim Despite India’s current success and tremendous potential for economic growth, India has yet to become a global economic superpower. Such a reality seems odd when coupled with the rich history and culture of this 4,000-year-old civilization. Let’s start from the beginning: geographically speaking, India is the seventh largest nation in the world, with a population of over 1.18 billion people. The Indian economy benefits from this large workforce, which has access to a wide variety of opportunities under capitalistic and free market policies. Although the nation has begun tapping into this economic capacity in recent decades, one issue continues to hinder its success. Corruption. The corruption embedded into India’s society has damaged its overall economic performance in the past and will continue to do so in the future. Political corruption in India is no secret. Everybody knows about it, everybody does it, and nobody cares enough to stop it. Whether it’s bribing the police to avoid paying a fine or paying off a government official to follow through with a corporate decision, Indian citizens resort to bribery and other practices of corruption far too regularly. Even when ignoring the moral implications of bribery, extortion, money laundering, and human trafficking, the economic consequences of corruption are mind-numbing. The Times of India recently concluded that “India has been drained of $462 billion between 1948 and 2008.” Corruption lowers economic growth in a few significant ways. Corruption necessitates bribery in the process of expanding, investing, or conducting business operations. Bribes are costs to businesses, and corruption lowers the incentive for businesses to invest and expand. Like most forms of corruption, this one relationship has a staggering effect on the economy. The issue of government-created inefficiencies poses another major problem. Peddling, extortion, and money laundering–all examples of political corruption–create distortions and inefficiencies in the economy. A common example of political corruption is when government officials redirect taxpayer money into their own personal accounts. Instead of using funds to maintain bridges or otherwise aid people, this money is often spent on the officials’ own capital investments. A recent story regarding a corruption scandal of immense magnitude sheds light on the consequences of India’s current corruption-driven economic state. Two years ago, Andimuthu Raja, the Indian telecommunications minister, auctioned off the 2G telecommunications spectrum. Both the Comptroller and the Auditor General declared that these auctions were done in “arbitrary, unfair and inequitable manner.” Analysts say that because of this rigged auction, India lost a potential $45 billion. Even the most conservative estimates reported that the government lost around $25 billion in possible gains. The size of this sum of money, especially when considered in proportion to the total size of the India government, is mind-boggling. Clearly, Indian corruption is a serious problem. Only if India rids itself of this enormous impediment will it succeed in becoming one of the world’s leading economic superpowers. However, I think that it is unlikely that India will be able to remove the impediment of corruption anytime soon, and its economic situation is dire in the face of global economic competition. India will fail. HMR 26 The Horace Mann Review | Vol. XX
If 8 or 190 Don’t Work, Should 20? Economics by kiwon lee Countries belonging to the G20 are in blue. Countries in the G8 are green. The G-20, also known as the Group of Twenty Finance Ministers and Central Bank Governors, held a summit in Seoul, South Korea on November 11th and 12th, 2010. Leaders, such as presidents and prime ministers, from 19 countries and the European Union represent their heads of state and government. Canadian Prime Minister, Paul Martin, proposed that the group cooperate in discussing affairs concerning the International Financial System. Usually, one or more organizations or countries are involved and accountable for these topics that are brought up to be studied and reviewed among the world’s leaders. Leaders addressed certain issues such as developing a long-term infrastructure to balance financial growth and ensuring global financial safety nets that protected emerging market economies. Other issues that were also raised in previous summits include maintaining the ongoing global recovery and focusing on the poorest nations to close international income and development gaps. However, the core topic among these leaders was the risk and prevention of a currency war between major countries like the U.S. and China. The G-20 had agreed to endorse the Seoul Development Consensus that basically sets a group of principles in cooperation with less-developed nations to help them reduce poverty and grow economically. The leaders have also consented to set limits for current accounts excesses and deficits, which is conducive to the stability of the global economy. Despite the discussion of these issues, leaders were not able to come up with definite solutions, as they were debating rather than compromising with each other. They failed to agree on key issues and lacked unity, leading to very little progress during this summit. Now, did the leaders have an insufficient amount of time to do so? Maybe, but was that the case with the previous summits held? In the past, four summits have been held in places such as our very own soil, Washington D.C. and Pittsburg, but the outcomes did not come out as well either. The questions, “Is the G-20 effective?” and “Should it be continued?” can be raised. In the bigger picture, it can be concluded that the main goal of the G-20 cannot be justified from the Seoul Summit. The basis of the G-8 has also failed to provide radical changes to world economics, even though the group consists of some of the world’s most powerful nations. The original purpose of the G-20 was for 20 powerful nations of the world to gather in order to discuss major issues and agree on progressive solutions, as leaders thought eight countries weren’t enough. However, substantial progress cannot be made, as evident from the past summits. The United Nations was able to agree on many solutions to global problems, including economic ones, but those agreements were insufficient when attempting to stabilize markets in light of the global financial crisis. Whether 20 countries come together to discuss issues, or 190 countries do the same, the outcome is not different, since both fail to rectify global economic conditions. The number of parties involved in such cooperation does not matter. To answer the previous raised questions, the G-20 should not be held again, as its inefficiency nullifies the need to. It is a possibility that the leaders may come up with solutions. But judging from the past, these claims of future progress are dubious at best. HMR The Horace Mann Review | Issue 4 27
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