Tugging At Your Purse Strings

Recently, a friend recounted an experience he had. On a recent visit to Tamil Nadu, their travelling group was mulcted by policemen for carrying liquor in their car. I am not sure if it is illegal to carry a sealed bottle of liquor in one’s vehicle for one’s private consumption.

A random search on the internet later revealed it was a routine scenario many traveller's faced. Accosted by policemen, they could either have their alcohol seized or pay a ‘fine’. In most cases they decided to part with some cash rather give up something potentially more valuable. It is apparently against the rule book to ferry liquor across borders. So is consuming it on the road or carrying an open bottle which may be accessed by the occupants.

My friend says that they broke none of those rules as their bottle had been procured from Madurai, bound for the chilly climes of Kodaikanal. It was safely stashed in the boot of the car, its contents yet unopened. The policemen directed them to empty the bottle. The only practiced answer they received to their protestations was that “it was not allowed”. They were adamant and would not let them leave. Needless to say there was a second, unspoken and easier option on the table: cough up some money and all will be forgotten. Shamefully, they gave in to the policemen’s innuendoes.

 So, which is worse? Paying a bribe or asking for one? It’s safe to say that neither is good. While both may be equally bad, there are differing rationales behind both of these actions. At that point, they had three options

1.    -  Letting go of their merchandise

2.      - Standing their ground and wrangling with the policemen 

3.      - Loosening their purse strings a bit and getting it over with

The group considered option 1 but the policemen refused to take the good as they feared being hauled up if found with it. They were even careful to avoid the CCTV's installed at the outpost lest their malfeasance was caught on tape.

Option 2 was the least preferable as they were in the dark about the rules. Once the men had smelt easy money, it was going to be difficult to wriggle out of that situation. Plus, it was getting late and they had a long hilly drive ahead of them. The opportunity costs of staying outweighed those of leaving.

The party ended up choosing the 3^rd option. Essentially what they did was save at least an hour of their time by parting with a 100 rupee note. Alternatively they could have stayed put. So, they valued an hour’s time then at a minimum of Rs 100. Assuming a similar situation, if one’s hourly income is significantly over Rs 100, it may make sense to pay extra to get out of a sticky situation and utilize that time more efficiently. That may explain why many people prefer this option rather than wasting their time. Of course the figure that was settled at was arrived at after the customary haggling. The initial figure of Rs 500 had immediately put it beyond their reach.

Another way of looking at it can be to ask themselves if they would have argued there, had someone paid them a 100 rupees. If the answer were yes, then they would probably have stayed. If no, then leaving would have been the right choice. Assuming an hourly rate of Rs 100, excluding overtime, a person’s monthly income over 26 working days at 8 hours a day comes out to be about Rs 21000. The average traveller in India, travelling in his or her own car or a rented car at least will, in all probability, belong to the 3.5% of the country’s population constituting the upper middle class. These people have sufficient disposable income even if they are not earning at the moment. The Marginal Utility of paying off a police constable outweighs the marginal cost of the action. However, diminishing marginal utility would have made paying successive bribes for the same good unattractive.

The policeman who takes a bribe of say Rs 100, will spend it somewhere, say buying chocolates for his children. In doing so, he is depriving me (say, the bribe giver) of the money which even I was planning to spend on chocolates. So, the constable is not paying taxes on his ill-gotten wealth which should, essentially, have gone to the government. Now that I have been swindled out of my disposable cash of Rs 100, I have no more money to spare. So, instead of 2 possible transactions now there is only one. In the process, the sales tax (@ 14.5% of sales value) reduces as well.

Ideally, most of the time money changes hands, there should be some value added. The cascading effect of the value added is eventually factored in the GDP. In this case there is none.

But my friend was only one of the flies caught in the spider’s web. There may well be dozens of others who have met with a similar fate. The total collection from all these people can be quite substantial. Taken together, such unctuous dealings depress consumer confidence and make them loathe to spend. This in turn, affects consumption and the economy as a whole. But it is obvious that the individual is the sore loser in this case.

So, why did the policeman in question and many of his co-workers (not to mention other public servants) indulge in corruption? The reasons are myriad. The lure of easy money can be irresistible. They have the power and they can misuse it.  A case of Quis custodiet ipsos custodies? (Who will guard the guards themselves?). The stress on the country’s law enforcement agencies is well documented. The average constable probably is the sole earning member of his family with 4-5 dependents. It may be difficult for him to make ends meet or aspire to a better quality of life with the remuneration he receives. Given poor working conditions and no fixed timings, he may feel hard done. Studies show that policemen on duty have to bear several out-of-pocket expenses which are difficult to claim. For example - filing a charge sheet in the mandatory 90 days with the necessary forensic work, or enlisting the help of a passerby in return for some money. Allowances are rarely satisfactory. For example travelling allowance in Delhi is Rs 375 a month. Tough work conditions and a paucity of proper infrastructure makes them an unhappy lot. This can spur them to resort to criminal activity such as corruption.

The quantum of the transaction in the anecdote above is miniscule compared to the avalanche of such transactions occurring daily all over the country. It is a mere drop in a black ocean. An ocean that threatens to overrun our shores. The black economy is estimated at $1 tn, nearly half as big as India’s white economy.

It is needless to say that both bribe giver and taker are complicit in exacerbating the situation. More concrete and above board alternatives to tendencies of duplicity from people ranging from the corner constable to the powerful neta to the person who finds it more convenient to pay a bribe, are needed. One such is Kaushik Basu’s radical suggestion to make bribe giving legal. Till that time, however, there is a good chance things will remain the same.

References:-

1.      http://scroll.in/article/740011

2.      http://profit.ndtv.com/news/economy

3.      http://www.sacw.net/article3456.html

4.      http://blogs.wsj.com/indiarealtime/2011/03/30/kaushik-basu-says-make-bribe-giving-legal/

5.      http://qz.com/723271/an-economists-guide-to-the-unfortunate-logic-of-tipping/

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       About the Author:

    Saikat Gupta, is a student of NITIE, Mumbai, PGDIM batch 22, and a Media Relations Cell coordinator.