A Social Theory of Corruption

Sudhir Chella Rajan

• Publisher: Harvard University Press
• Year: 2020
• ISBN:
  9780674250406
• Topic: History
• Subtopic: Indian & South Asian History
• Index: History

A social theory of grand corruption from antiquity to the twenty-first century. In contemporary policy discourse, the notion of corruption is highly constricted, understood just as the pursuit of private gain while fulfilling a public duty. Its paradigmatic manifestations are bribery and extortion, placing the onus on individuals, typically bureaucrats. Sudhir Chella Rajan argues that this understanding ignores the true depths of corruption, which is properly seen as a foundation of social structures. Not just bribes but also caste, gender relations, and the reproduction of class are forms of corruption.Using South Asia as a case study, Rajan argues that syndromes of corruption can be identified by paying attention to social orders and the elites they support. From the breakup of the Harappan civilization in the second millennium BCE to the anticolonial movement in the late nineteenth and early twentieth centuries, elites and their descendants made off with substantial material and symbolic gains for hundreds of years before their schemes unraveled.Rajan makes clear that this grander form of corruption is not limited to India or the annals of global history. Societal corruption is endemic, as tax cheats and complicit bankers squirrel away public money in offshore accounts, corporate titans buy political influence, and the rich ensure that their children live lavishly no matter how little they contribute. These elites use their privileged access to power to fix the rules of the game—legal structures and social norms—benefiting themselves, even while most ordinary people remain faithful to the rubrics of everyday life.

PART I

Positions

1

Introduction

In Indonesia today, there are only two real choices: to be a “critical partner” or to be an underground subversive … most people choose the former.

This Sounds like Corruption

The United Nations Office on Drugs and Crime (UNODC) estimates that more than US $2 trillion of international criminal proceeds are laundered each year, with much of the money circulating in so-called corporate vehicles involving businesses, foundations, and trusts. Significant amounts are buried in elaborate multiparty transactions and shell companies that conceal the names of the few thousands of individuals who actually control the funds. An equally spectacular sum—US $1 trillion—changes hands as bribes each year; these are best described as under-the-table payments that help “smooth” transactions by circumventing the law or by simply providing discretion. UNODC also estimates that tax evasion from offshore banking amounts to US $7.6 trillion annually.

Government officials are often key players in these murky activities, either by exchanging political favors with each other and with wealthy individuals and corporations or receiving bribes to facilitate some inappropriate activity. But as political campaigns, organized crime, sports franchises, media moguls, terrorist organizations, universities, the military, mining companies, banks, the health care industry, Big Tech, and other mega-corporations progressively expand their constellations to camouflage multiple transactions and linkages involving money and other forms of mutual support, a nested but tightly restricted set of networks and their associated politics around the world are implicated in the imposing phenomenon of grand or political corruption.¹

“Something is rotten in the state of Denmark,” says the character Marcellus in Hamlet, darkly portending its tragic story of medieval palace intrigues, deception, and murder. Across cultures, over time—and hardly ever lost in translation—this is the foul sense in which corruption is generally understood. According to the Oxford English Dictionary, the word “corruption” originates in the obsolete English “corrump,” to decompose or rot, and the Latin “corrumpere,” to adulterate, violate, falsify, or bribe. The Hindi and Sanskrit word is bhrashtaachar, which is a combination of bhrasht (degenerate, rotten) with aachar (custom, practice, code, or institution). It is the stink of decay in the putrid sense of fubai in Chinese and oozhal in Tamil, representing the slow attrition of basic human decency. It connotes venality, selling offices, being mercenary, or otherwise forsaking principles that, when held jointly, would denote solidarity and shared community life. It is disgraceful because it implicates a substantial number of people acting in collusion who betray such ideals. But it is additionally wretched because it causes people to lose trust in staple institutions and even their own ways of living, as familiar actions and entities come under suspicion.²

Something is indeed rotten in today’s world if racketeers of various sorts routinely skim off a good chunk of the world’s annual income. When combined with extreme levels of inequality across the world, that corruption is an indicator of great social injustice. Only rarely do the media find ways to dig into the murky warrens of the powerfully criminal, depths that even well-meaning law enforcement agencies may fail to probe. But in recent times, stunning exposés by the International Council for Investigative Journalists (ICIJ) have given us a glimpse of large-scale, everyday deception in clandestine global arrangements.

In 2016, a pair of German journalists, with the help of ICIJ, published their findings from the so-called Panama Papers, nearly twelve million documents that were leaked from a single law firm, Mossack Fonseca, located in Panama. The emails, contracts, and other materials in these leaks revealed the secret holdings of dozens of world leaders and other prominent personalities. Their networks with powerful European and Latin American banks were linked to several thousand offshore shell companies having complex arrangements that helped keep hidden drug money laundering, terrorist financing, and child trafficking. Further implicated were gigantic military contractors, purveyors of global finance, and highly respectable engineering companies. The following year, another similarly sized trove of leaked financial documents from an informal clique of firms having offshore practices yielded the Paradise Papers. These documents pointed to even more intricate patterns of suspicious financing mechanisms used for corporate tax avoidance, as well as criminal activity, political campaigns, the illegal trafficking of drugs, humans, and arms, and other clandestine undertakings involving political leaders and royals.³

In the Panama Papers’ case, Byzantine connections among dozens of reputable individuals and firms and their shadowy counterparts were discovered from documents obtained from just one organization. Even with the addition of the Paradise Papers, from which a broader assessment of offshore activity was conducted, experts have suggested that the revelations are still only the tip of the iceberg; there are possibly hundreds of other illegitimate transnational businesses and tens of thousands of allied shell companies having ties to the powerful that are yet to be discovered.⁴

These events suggest that the persistent nexus of criminals, politicians, and the wealthy is not accidental, after all. People in all sorts of ordinary jobs, the frenetic pace of deployment of natural resources, and the rising prominence of a small and interlinked group of individuals heading institutions are systematically tied to the growing wealth of a tiny segment of the population and a tide that does lift several boats, but only at the expense of the despair of the vast global majority. The extensive and yet deeply selective networks found in present-day secretive and extractive operations are themselves only the latest instance of similar large-scale maneuvers used in predatory forms of capitalism for at least 200 years and in other economic and political regimes for millennia earlier. The patterns of control and social transformation associated with grand corruption seem to get cemented through complicated arrangements that develop over extended periods. Many, in turn, coalesce into “customs” that are bred and maintained in bloodlines. Some become so familiar as to be incorporated into fairy tales about benevolent kings and queens or “social contracts” as cultural routines become traditions.⁵

This is not just a repetition of the familiar leftist refrain about class exploitation being structurally tied to social injustice and conflict. It points instead to a related chronic feature of human and ecological pasts that provides just as helpful a reading of history: the underhanded interests of bands of violent and strong-armed men have for long caused wealth and political power to remain closely held among their associates and relatives, sometimes across generations. They drew their power from the habits of larger populations forming specific patterns of daily life and social arrangements and places, otherwise known as the institutions making up a culture. These mass habits, in turn, drove the very machinery that maintained extraordinary wealth inequality. The disparity in wealth was closely connected with equally vast imbalances in people’s control over their own lifestyles.

What is characteristically tragic in this situation is that a politically passive majority of the people tend to misread and support the very regimes and social routines that continually harm them. As sordid as the dramatis personae are in these stories—crooked bankers, fraudulent dictators, and greedy celebrities—there is an even more disastrous tale—of how societies seem everywhere to sustain the criminally powerful for surprising lengths of time, aiding their own degeneration and corruption.⁶

In Indonesia, President Muhammad Suharto’s vast political and business operations flourished for thirty-two years during a reign made rich by a peculiar combination of repression, liberality, co-optation of different constituencies, and mineral resources. Until he resigned unexpectedly in 1998 under the pressure of the Asian financial crisis, Suharto enjoyed enormous popular support, despite the harsh and heavy hand of his military on dissidents. A small elite group of business magnates, military officers, professional bureaucrats, and former journalists around the president’s office controlled access to petroleum resources and windfall rents from it while they managed an elaborate network of political patronage that dispensed favors to businesses and local leaders in carefully calibrated ways.

The Indonesian nation itself had been forged in 1949, not even two decades before Suharto came to power, after a small but determined armed struggle against Dutch colonial rule. It was a remarkable transition for a profoundly multicultural population spread out across an enormous archipelago of tens of thousands of islands. The newly formed country was characterized by a strong army, a politicized Islam, and centralized political power. Its very identity was built around the motto, “unity in diversity,” which became the basis for a durable nationalist sentiment.

Suharto was an army officer under Sukarno, Indonesia’s first president. He came to prominence in 1965, when he led the military in a bloody purge of communist dissidents with the active support of the US government. After he formally took over the reins of government on March 11, 1966, he replaced military chiefs with loyalists, purged dissidents in the parliament, changed the educational system, positioned the military’s ruthless force to quell protests, invited foreign investors to extract the country’s rich oil and mineral resources, and built a team of mostly Berkeley-educated advisers to direct the regime’s economic policy. The government only gave limited voice for the opposition and was careful to distribute rewards widely to all those who participated in its formal structures, while threatening sanctions against those who opposed them.

In the course of three decades, Suharto stole as much as US $35 billion in public funds, but he also helped the economy grow sevenfold in real terms by creating enormous oil wealth that made many Indonesians rich, while carrying along a burgeoning middle class. Although there is little evidence to show that returns to the economy were spread extensively, there is enough to inform us that money, political favors, and sweet deals were carefully dispensed to sustain a complex but tight web of military officers, legislators, advisers, political officials, and a global network of company executives, bankers, and world leaders. Each of these elite groups supported each other through preferential deals and other forms of patronage, whose patterns were reproduced across scales all the way down to local gang leaders and thugs.

The flow of information was also carefully controlled. The Indonesian press, which had a glorious history of independent views dating back to the eighteenth century, was mobilized to serve as a partner of the government, with editors receiving periodic telephone calls from the authorities on how to handle the news. Those papers that resisted the official line, like the newspaper Indonesia Raya, the newsmagazine Detik, and a few others, were banned, with some of their editors facing incarceration by the state as well as vilification by more pliant members of the fourth estate, thereby breeding a culture of compliance and self-censorship.

By 1990, the Suharto family business was so big that any large project had to include one or the other of its many subgroups. It was even involved in the country’s poverty reduction efforts: the central government directly provided benefits to provinces and villages through the “Inpres” or “Presidential Instruction” programs, which were executed at the discretion of the president and constituted a major portion of the country’s development budget. The government’s semi-authoritarian style meant that opposition was always circumscribed and co-opted by the regime, whereas any open rebellion was immediately crushed. But Suharto did not need to use violence to keep revolt in check. He relied instead on the elite’s fears of religious extremism and social disorder to constrain opposition, even while he pitted various factions that were loyal to him against each other.⁷

As the chapter’s epigraph suggests, Indonesian society under Suharto had somehow become distorted into bipolar political stances that required radical adjustments be made to everyday life. Either one blithely ignored the brutal police violence of the government and its suppression of human rights, or one found oneself in the extremely dangerous position of being a covert dissident, “an underground subversive”: there was no middle ground. For ordinary Indonesians, Suharto brought prosperity; for elites and the military, much more. Only those concerned with human rights and democracy were appalled at what was going on, but they too mostly kept their silence.

Throughout history, publics have been critical or uncritical partners in most political regimes, often being misled into trusting their intentions and operations. This introduces another aspect of corruption that seems to be relevant: ordinary people are forced to learn everyday informal give-and-take practices that are necessary for them to stay prosperous or just make do. These routines may range from pulling strings for getting one’s children better opportunities in life to cooking the books for others or looking the other way to avoid reporting felonious acts, so as not to “rock the boat.” In Indonesia under Suharto, these practices ran the gamut from violence and loosely dispersed arrangements of patronage in local neighborhoods to extraordinary levels of privilege among the most powerful; elsewhere, the rule of law sometimes prevailed but simply kept invisible the actual dealmaking among the most powerful. Elsewhere these patterns may occur across larger geographical and temporal scales and result in even more dramatic social transformation.

What I term grand or political corruption (or mostly just corruption, for short) typically appears in the form of a set of powerful arrangements that perpetuate various types of injustice, while leading to long-term outcomes of rising symbolic and financial wealth and political dominance for a powerful few. It generally involves three concentric circles of actors: a closed coterie of rulers and members of propertied classes; a large group of administrators, scholars, and others who are overtly paid for services or otherwise persuaded to provide ideological or justificatory support for the regime through direct and indirect means; and an even bigger and somewhat politically enfranchised public. Elite networks are formed through interlocking connections between those in the inner circle and select members elsewhere. Those in the inner circle often use their rulemaking power to sustain themselves over generations by demanding certain actions of their networks, which successfully shape the actions of the larger society to conform to preferred patterns of ordered collective behavior.

Starting at least with the Middle Kingdom (c. 2000 BCE) in ancient Egypt, through the more recent Gilded Age and the 1920s in North America, astonishing inequalities in wealth and power have been rampant. It is not that access to exceptional wealth, whether self-made or inherited, is a criminal exercise in itself. It is not. Today, the ultra-rich are legally entitled to maintain their legacies and grow their wealth and routinely store it offshore and find other ways to bypass the laws that ap...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Contents
• Preface
• Epigraphs
• Part I: Positions
• Part II: Tales
• Notes
• Acknowledgments
• Index