Don’t raise salaries to eliminate corruption

Don’t raise salaries to eliminate corruption, just cut the size of government instead, argues Sukrit Sabhlok.

The political class in India is largely populated by criminals. If the reader doubts me, they need only look at Transparency International’s rating of India, which ranks the country as even more corrupt than China.

Elections, they come and go. But corruption – that is a constant: it never seems to go anywhere. Some have suggested, however, that the way to eliminate corruption is to boost public sector salaries. Supposedly, making government officials richer will make them less tempted to take bribes. But there really is no logical limit as to how far we could push this argument. At what point do we draw the line? $100,000? $200,000?

In Singapore, for instance, ministers receive about $1 million a year. Sure, Singapore is a low-corruption society, but wealthy politicians are not the reason why.

There is really nothing stopping government employees from taking money regardless of how wealthy they are. The one thing we can be confident of is that individuals will pursue their self-interest as they perceive it, and if the probability of detection is low, political corruption will continue.

Consider what happened in Indonesia when judicial salaries were raised. Although the Supreme Court’s budget went from 79.5 billion rupiah in 2002 to 153 billion in 2004, 1.2 trillion in 2005, 2.2 trillion in 2006 and finally 3 trillion in 2007, academics Simon Butt and Tim Lindsey observe that “increased salaries, even combined with strong new corruption laws, have apparently failed to reduce corruption”. The judiciary remains the most corrupt institution in Indonesia.

Increasing salaries just ends up rewarding bad behaviour. Even if some take bribes because their low salaries ‘force’ them to do so, relying on them to stop taking bribes because their salaries have been increased is hardly a foolproof policy. Rather than looting taxpayers to arbitrarily enrich government agents in the mere hope of reducing corruption, what we need is a policy that is guaranteed to get the job done.

And that policy can be summed up in one word: freedom. This means moving towards the free-market, rather than socialism and corporatism. It means eliminating reams of paperwork and unnecessary complexity in the legal system. The ultimate aim is to do away with the need for citizens to supplicate in front of government agents just to set up a business or perform other routine day-to-day tasks.

An example will help illustrate the point. Suppose you wanted to start a business, but came up against a babu who demanded 1000 extra rupees as the price for granting you a license. “Alright”, you think, “I’ll pay him because I really need the income from my business”.

The problem here wasn’t the bribe per se, it was the onerous licensing system that allowed the bureaucrat to exercise power over the small businessman. As David Henderson explains, “A necessary condition for corruption is that someone has power to make decisions for others, decisions that those others can’t perfectly monitor. The reason so much corruption occurs in government is that government officials hand out so much in the form of subsidies, tax breaks, permits and regulatory exceptions”. Therefore, the way to reduce corruption is to start removing discretionary powers that facilitate extraction of bribes.

Now we are in a position to understand why countries such as Hong Kong, Singapore and Australia have achieved such success in stamping out corruption: they invariably tend to prioritize the market economy, at least in comparison to India.

The other argument often used in favour of raising salaries goes as follows: we should pay public sector employees more, because this will attract the best and brightest into politics. This is an equally nonsensical argument. Why would we want to encourage India’s smartest men and women to enter politics? Far better to have them go into private sector jobs where they actually create something of value. Bill Gates has done more to improve the standard of living for the common man through his work in Microsoft than all the prime ministers of India combined.

It should be remembered that politicians in a democracy are inevitably thinking about their short-term careers, rather than what is best for the country in the long-term. As Hans-Hermann Hoppe argues in his book Democracy: The God that Failed, politicians are essentially caretakers who think from one electoral cycle to the next. Thus, it is in their interests to extract the maximum benefits they can from taxpayers before they are voted out at the next election. It is emphatically not in their interests to put in place long-term reforms that will improve the overall health of the nation.

The great philosopher Cicero reminds us that “The more laws, the less justice”. We should heed his words.

Sukrit is an Arts/Law student at the University of Melbourne and a director of Liberty Australia. This article was originally published in Indian Link newspaper.

10 thoughts on “Don’t raise salaries to eliminate corruption

  1. Augustus believed that raising the salaries of officials would lower corruption. I suppose it gives them less excuse. My own belief is that only on public properties can officials worry about licences (driver’s licence, etc.)

  2. Dear Sukrit,
    You incorrectly identified me as being with the Mises Center. The Mises Center reprinted my piece from Barron’s but I am not affiliated with that Center.

  3. Apologies, I’ve fixed the error online. Unfortunately the print version in Indian Link newspaper will run with the error. By the way, big fan of your work on!

  4. Pingback: Daily SG: 3 Jun 2010 « The Singapore Daily

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  6. Quote

    I never fell off from my chair. How do you know? Do you consider this case as corruption: Do all the tricks to ensure one is in power and then after elected immediately raise one’s salary despite objection from many people.
    If not, what is it?

  7. Please lah, “Now we are in a position to understand why countries such as … Singapore … have achieved such success in stamping out corruption…”. It shows the author does not really the Singapore situation and rely on what reported the perception from outsiders. Do not be fooled by those reports and branding/marketing. You must be there to experience.

    The ultimate solution is a fully transparent and accountable democratic political system that the society is ruled by laws and only laws. Any deviation from this will likely be corrupted so long as there are human beings.

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  9. Good post… and I broadly agree. I also think it applies more generally – not just to straight-out corruption, but to politicians selling their influence (think rent seekers and crony-capitalism)

    I think it was someone here (can’t remember) who had a simple way of putting it: If you want to stop politician’s selling their influence – reduce the influence they have to sell.

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