Corruption and Forbearance under Neoliberalism

“Onnay je kore ar onnay je shohe tobo ghrina jeno tare trinoshomo dohe”

(Those who commit injustice and those who forbear it, Let them blaze like hay in the fire of your indignation)

- Rabindranath Tagore, Nyayadanda, 1901

The spate of corruption scandals embroiling the Congress led government at the Centre has naturally evoked widespread public revulsion. The scam in 2G spectrum allocation has hogged the maximum limelight so far, given the gargantuan loss caused to the public exchequer as estimated by the Comptroller and Auditor General (CAG). Following its outbreak alongside successive exposés of gross wrongdoings at the highest levels of the governments, both at the Centre as well as several States, corruption is once again back to the centrestage of political debate in India. The Common Wealth Games (CWG) scam, the scam in allotment of apartments in Adarsh Housing Society in Mumbai involving former Chief Ministers of Maharashtra from the Congress, the land allotment scam involving the Chief Minister of Karnataka from the BJP and the incipient disclosure of large sums of black money stashed by Indians in offshore tax havens and the latest scam involving the shady deal between ISRO’s Antrix Corporation and Devas Multimedia for allocation of S-band spectrum – have all tumbled out of the closet over the past few months. By all indications, more revelations are in the offing.

But who is basically responsible for this malignant growth of corruption in our polity? Where lies the root of the problem? This crucial question is by and large evaded, not only by those in the ruling circles whose direct interest lies in covering up their misdeeds, but also the teeming crusaders in the mainstream media, who are busy expressing empty oppositional rage or ruing over the generic venality of politicians. The reason behind evading fundamental questions on corruption is simple. There is a wide-ranging consensus today cutting across the political establishment as well as the mainstream corporate media, that corruption is an inescapable facet of India’s growth process – a fait accompli, which we have to learn to live with. This implicit forbearance towards corruption is ingrained in the ethics of a neoliberal bourgeois order, where selfish moneymaking is not only considered respectable, but also essential for ushering economic prosperity. Nobody embodies this chalta hai attitude better than the Prime Minister on whose table the buck must stop; institutionally, ethically and politically.

I

The scam in the allocation of 2G spectrum is in a sense a watershed in India’s political life. The fact that a nexus of big business, politicians and bureaucrats have developed and matured in India over the two decades of neoliberal reforms has always been suspected on the basis of circumstantial evidence. However, no other corruption case so far has brought this nexus out in its full bloom like the 2G scam. Corporate lobbyists and certain media persons have also played a murky role in the affair.

As per the CAG report, the beneficiaries of the under priced spectrum allocated in 2008 includes all the major corporates in the telecom sector, from Tata Teleservices and Reliance Telecom to Bharti, Vodafone, Idea etc. besides real estate players like the Unitech and DB Realty (Swan) – who were quick to make windfall gains by private auctioning of the spectrum through sale of their equity to foreign companies. The CAG has calculated the loss of government revenue on account of the allocation of under priced spectrum to be in the range of Rs. 57666 crore (on the basis of the value of equity sold by Swan to Etisalat) to Rs. 176645 (on the basis of the spectrum price discovered through 3G auction). On the process of allocation of 2G licenses and spectrum the CAG report noted:

The entire process of allocation of UAS licenses lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner. The Hon’ble Prime Minister had stressed on the need for a fair and transparent allocation of spectrum, and the Ministry of Finance had sought for the decision regarding spectrum pricing to be considered by an EGoM. Brushing aside their concerns and advices, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for 2G spectrum at 2001 prices, by flouting every canon of financial propriety, rules and procedures. The DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut off date for receipt of applications post facto and altered the conditions of the FCFS procedure at crucial junctures without valid or cogent reasons, which gave unfair advantage to certain companies over others.

(Para 6.2, p.57, CAG Report on the Issue of Licenses and Allocation of 2G Spectrum)

It was only after this damning indictment by the CAG, the consequent stalling of parliament by the entire opposition and the public outrage expressed by the Supreme Court that the Telecom Minister resigned from the Cabinet in November 2010. The recent arrests of the former Telecom Minister, his personal secretary, the former Telecom secretary and the MD of DB Realty (promoter of Swan Telecom) by the CBI have clearly occurred under pressure from the Supreme Court, which decided to directly monitor the probe in December 2010 and issued detailed directives on how to proceed in the investigations. Going by media reports, the money trail linking the former Minister with some of the beneficiaries of the scam has been uncovered. It is to be hoped that under Supreme Court monitoring, the CBI and ED will be able to unearth the scam in its entirety, fix responsibility and bring all the culprits to book.

But does the buck stop with the former Telecom Minister in the 2G scam? Till a few days back the mandarins of the Congress led government were working overtime to suggest that if at all there has been a scam in 2G spectrum allocation, it lies only in the procedural violations. The new Telecom Minister from the Congress, alongwith the Deputy Chairman of the Planning Commission, have publicly rubbished the CAG estimates regarding losses to the state exchequer. They have defended the decision to adopt the First Come First Served (FCFS) route to allocate spectrum rather than auctioning it, even in the face of scarcity of this natural resource and the fact that the mobile subscriber base in India increased from around 40 lakh in 2001 to nearly 30 crore in 2008. They have argued that auctioning of spectrum would have led to the increase in service charges for the consumers. It is noteworthy that this argument for not auctioning 2G spectrum in order to safeguard the mobile subscribers’ interest was the main defence of the former Telecom Minister, till the day he was forced to resign under multi-dimensional pressure.

This argument is actually bogus. The fact of the matter is that the 2G license and spectrum allocated to companies like Swan, Unitech and Tata Teleservices were actually auctioned through the sale of their equity to foreign companies. The revenue, which should have duly accrued to the government, was cornered by the corporates through a private auction. Despite Telenor and Docomo paying substantial sums to buy equity in Unitech and Tata Teleservices respectively, based on the market valuation of the 2G license and spectrum allocated to the latter, the tariffs charged by these companies have not risen; in fact Uninor and Tata Docomo continue to offer tariff plans at very competitive rates of 60 paise per minute. This is simply because of the large and fast growing mobile subscriber base in India, which is the fastest growing wireless telecom market in the world today. Telecom companies in India are making very high profits at tariffs that are the lowest in the world.

The hollowness of this argument stands further exposed by the recent recommendations of the TRAI, which has now suggested a price of start-up 2G license and spectrum at over Rs. 10970 crore, which is six and a half times higher than the Rs. 1650 crore charged in 2008 in the tainted spectrum allocation process. Going by this valuation, the loss to the exchequer on account of 2G spectrum allocation comes to over Rs. 60000 crore, which is well within the range of the CAG estimates. The TRAI has further recommended that every Mhz of spectrum beyond the start-up bandwidth of 6.2 Mhz would now cost over Rs. 4500 crore. If the licenses issued fraudulently in 2008 are cancelled and reissued at the newly stipulated price and a fresh auction of 2G spectrum held, the losses to the public exchequer can be recouped to an extent. But it is here that the government’s intent continues to remain suspect. The former Telecom Minister may have gone but the corporate beneficiaries of the scam and their vested interests have remained largely intact. And the fact that the present Telecom Minister has continued with the same line of reasoning as his predecessor shows sinister designs at work.

The role of the Prime Minister becomes central in this backdrop. So far, much of the energies of Congressmen and their sympathisers in the media have been expended in propagating that the Prime Minister is personally clean, that he was always in favour of auctioning 2G spectrum and that he had to reckon with coalition compulsions while dealing with the former Telecom Minister. This hare-brained defence of the Prime Minister has actually compromised his position further. The revelation of his preference towards auctioning 2G spectrum at one stage, which has been documented by the CAG, begs the question why it was not insisted upon? Why was the issue of spectrum pricing not referred to a GoM? Why was the Cabinet bypassed despite the Finance and Law Ministries having differences with the Telecom Ministry on the matter? The Prime Minister is yet to provide any meaningful explanation for his own role in the entire affair. Moreover, despite complaints filed from several quarters following the 2G spectrum allocation process in 2008, why did he reinduct the same tainted person as the Telecom Minister in May 2009? Why did he insist on appointing a former Telecom Secretary as the CVC, despite a previous corruption case pending against him?

The short point is that the charge against the Prime Minister has not been for direct involvement in corruption but for his forbearance and attempted cover-up. And his prolonged silence on the matter, implicitly seeking refuge under the humbug of coalition compulsions – which, when it came to cementing the strategic alliance with President Bush, was the last thing on his mind – has only strengthened doubts. Can the Prime Minister redeem for the mess? Can he finally stand up to the gluttonous telecom lobbies, crack the whip and recover the lost government revenues from the corporates? It seems unlikely, given the way he equated the largesse to the corporates in the 2G spectrum allocation to food subsidy for the poor, in his recent press conference.

II

When the neoliberal reforms were ushered in 1991 under the aegis of a Congress government, two important claims were made by their proponents, including the present Prime Minister. It was argued that freeing private capital from the encumbrances of state regulations vis-à-vis its mobility, size and nature of activity – the infamous ‘license, quota, permit raj’ – would unleash entrepreneurial energies and create economic prosperity. It was also argued that market based reforms would lessen the discretionary powers of public policymaking over time, removing the scope for corruption and paving the way for increased efficiency, transparency and goodness of governance.

Two decades down the line, the speciousness of these claims stands thoroughly exposed. Greater freedom for big capital has surely led to a manifold aggrandizement of private wealth and power of the rich. But the overwhelming majority of Indians have remained mired in poverty, hunger, lack of decent jobs and absence of social goods. And as far as governance is concerned, the state under the neoliberal regime has increasingly become a vehicle for capital accumulation and also a site for primitive accumulation, by the established corporate players as well as new entrants to the big business club.

Not so long ago, the Prime Minister was publicly reflecting on the dangers of ‘crony capitalism’. He will be hard put to explain though, where in the world neoliberal capitalism has been able to remain free from cronyism. The American ideologues had been quick to explain the South East Asian crisis of the late 1990s as a result of ‘crony capitalism’. Such moralizing, however, proved to be short-lived with the outbreak of financial scandals involving Enron and WorldCom in 2001-2002, baring the slack accounting and corporate governance standard in the United States. The Iraq war further exposed the pervasive and predatory cronyism within the US, with American corporations like Exxon-Mobil, Bechtel and Dick Cheney’s Halliburton prodding the administration into the military invasion and subsequently making a killing out of it. The state funded bailout packages for the failed financial giants like the AIG and Citigroup after the 2008 financial meltdown was the icing on the cake. The Wall Street honchos who caused the crisis by gambling with other people’s money have continued to receive fat bonuses, even as ordinary Americans have lost their homes and jobs and sunk into poverty. Thus ‘crony capitalism’ is hardly a different mode of production; cronyism is embedded within the very structure of capital accumulation under the neoliberal regime as seen in the original abode of free market democracy.

The beginning of the liberalization process in India in the 1980s was also accompanied by the Bofors scandal, which irreparably tainted the Prime Minister’s office for the first time in the post-independence period. Since the full-fledged implementation of neoliberal reforms in 1991, we have seen a secular rise in the magnitude and sophistication of corruption and financial crimes; from the stock market, hawala and telecom scams of the Narasimha Rao era, to the murky defence deals, the UTI scam and the fire sale of underpriced public assets under AB Vajpayee’s term, to the spectrum allocation, CWG and other scams unfolding under the present Prime Minister’s tenure. At the State level too, scams have proliferated, including accumulation of disproportionate assets by Chief Ministers across non-Left political parties. This exponential growth of corruption and the process of neoliberal reforms are not merely coincidental; the former has been a direct outcome of the enmeshing of big money, vested interests and politics, brought about by the latter.

The causality has worked through four different channels. First, even though the state is supposed to maintain an arms length with private capital under the Constitutional scheme, that length got gradually shortened and has eventually disappeared in the zest for ‘facilitating’ private investment and providing a ‘business friendly environment’. The executive, the legislature and the judiciary have all been affected to various extents by the blurring of the distinction between public good and private interests, under the ideological hegemony of neoliberalism. Secondly, emboldened by the shift in the orientation of the state, big capital in India has unleashed a predatory accumulation process, throwing to winds all extant laws and regulations vis-à-vis labour, environment and taxation. Appropriation of public assets, reckless speculation on financial assets and grabbing of common resources like land, minerals and airwaves have all become rampant, fuelling the appetite for more.

Thirdly, the social consequence of this accumulation regime – concentration of wealth, rapidly increasing inequalities and credit driven hyper-consumerism of the elite – has also been accompanied by a tectonic shift in the moral landscape. In a setting where getting rich fast becomes the dominant ethos, bending of the rules to get rich does not invite much repugnance or opprobrium. Naturally, the moral disincentive for the abuse of public office for personal gratification also gets weakened over time. Finally, all this has combined to toxify the political process, with money power ruling the roost, democracy transmogrifying into a bazaar of brokers and fixers, and the resultant alienation of the people from the republic pushing it towards a point of rupture.

III

Strangely, the person who has provided the best theoretical defence of the Prime Minister is the BJP President. During a recent trip to China, he observed that while there was nothing ‘illegal’ in the Karnataka Chief Minister’s action in denotifying land to benefit his son, he personally thought it was ‘immoral’ of him to do so. This inadvertently profound articulation of contemporary moral sentiments sums up Indian democracy’s predicament under neoliberalism; a widening hiatus between the legal and the moral. Time will tell whether this hiatus leads to the eighteenth brumaire moment for the Indian republic or a democratic revolution by the people.

(This article first appeared in The Centre for Policy Analysis Journal)

കടപ്പാട് : Prasenjit Bose പ്രഗതി