Dr. Susmit Kumar
Out of 163 countries, the U.S. ranks high, at 20th, with 7.3 points in the 2006 Berlin-based Transparency International Corruption Perceptions Index (CPI). Countries like India, China, Mexico, and Brazil rank low, at 70th, with 3.3 points. The higher the points, the less is the corruption. The index defines corruption as abuse of public office for private gain and measures the degree to which corruption is perceived to exist among a country's public officials and politicians.
The U.S. ranks high in the CPI because the number of cases of individual corruption is low and because the probability that a corrupt person will be caught is high. In Third World countries like India, China, Mexico, and Brazil, to compare, the chance that a corrupt person will be convicted—even after his misdeeds get national headlines—is remote. We can study two cases here. In May 2003, the U.S. Air Force announced that it would lease 100 KC-767 tankers for air refueling purposes from Boeing after Boeing won the selection process. The cost of the entire project was $23.5 billion. Senator John McCain, however, questioned the high price of the leasing program. Then, in November 2003, the Air Force modified the agreement and agreed to purchase 80 of the aircraft and lease 20 more. But the next month, the Pentagon announced that they had frozen the program and started investigating allegations of corruption against one of their former procurement staffers, Darleen Druyun, who had joined Boeing as a deputy general manager of its missile defense systems with a $250,000 salary and a $50,000 signing bonus. Druyun had previously been the Air Force official who for 10 years decided how much the Air Force should pay for bombers, fighters, and missiles. Senator McCain, who uncovered incriminating e-mails in an investigation of the tanker deal, had this to say: “Her job was to get the best possible price of the product for the American taxpayer. Instead, obviously she drove the price up to get the best possible deal for Boeing Corporation.” An audit by the Congressional Budget Office found the tanker deal would have overcharged taxpayers nearly $6 billion. Druyun pled guilty to inflating the price of the contract to favor her future employer. She was sentenced to nine months in jail for corruption in October 2004. Boeing CEO Phil Condit and CFO Michael M. Sears both had to resign. [1]
A similar episode took place in India. When the Indian government had a foreign exchange reserve problem in 1991 and had to go to the IMF for a loan, it was required to open its oil industry up to the private sector. In 1994, it awarded 60 percent equity of the multi-million-dollar Mukta-Panna oil fields to a consortium of Enron and Reliance Industries, Ltd. (RIL), which is India’s largest private sector company. Enron and Reliance obtained a 25-year production-sharing contract for the oil fields, which had already been discovered and developed by the Oil and Natural Gas Corporation (ONGC), an Indian government firm.
This deal was later challenged in a writ petition filed in high court alleging irregularities in the contract. The petitioners cited a report of the comptroller and auditor general of India that pointed out several contract irregularities. In particular, it stated that the oil fields had been handed over to the consortium at a throwaway price. They contained about 200 million barrels of oil at that time worth $20 a barrel, or $4 billion total, but were sold for just $3.44 million—0.086 percent of their value. The sale price failed to cover even the costs of past investments made by the ONGC for exploration and development, which came to $694.44 million.[2] It was also alleged that the estimate of the size of the reserves had been downgraded to one-fourth (from 55 million tonnes to 14 million tonnes) by an officer of the ONGC, who like Darleen Druyun, joined the corporation benefitting from his malfeasance, in his case RIL, immediately after the contract was awarded.[3]
The government’s oil bills multiplied dramatically in size in consequence. Prior to the contract, the ONGC, being a national oil company, had been selling oil to the government at $8 per barrel, an administered price. The government is one of the largest consumers of oil in the nation. Immediately after the consortium took charge, the price skyrocketed to $24 a barrel, $4 above the international price.[4] It was alleged that the petrolem minister, Satish Sharma, had been paid about $926,000 in bribes for awarding this contract to these companies. Although Y.P. Singh, superindentent of police of the anti-corruption unit of the Central Bureau of Investigation conducted the inquiry into this deal and recommended filing a case against the contract, no case was ever filed. Further, when the high court and later on Supreme Court of India asked the CBI about one of Singh’s important files, the CBI was unable to locate it. The Court indicted the agency for this “neglect,” but upheld the contract. The CBI was also criticized for the manner it investigated allegations of irregularities in the award of the contract. [5] RIL’s chairman, Mukesh Ambani, is now the richest man in India and is worth about $50 billion; his brother, Mukesh Ambani, is worth $29.4 billion.[6]
In countries like India, investigative agencies like the CBI can easily be manipulated by the ruling party, making the likelihood that corruption cases involving politicians, millionaires, and billionaires will go to court minimal. Prime Minister Rajiv Gandhi lost the 1989 general elections because of allegations of kickbacks in the purchase of a field howitzer from Bofors, a Swedish company, but even after two decades indictments have failed to materialize. Political pressure has been applied on the CBI to remain inactive in the case, though the scandal is still in national headlines and haunts the Gandhi family.
In the U.S., the FBI and the Department of Justice are generally impartial, and corrupt politicians do receive prison terms. Randy Duke Cunningham, for example, a Republican member of the House of Representatives from 1991 to 2005, is serving a sentence of eight years and four months after he pled guilty to federal charges of conspiracy to commit bribery, mail fraud, wire fraud, and tax evasion. But when the Republican Party was controlling both the House of Representatives and the Senate from 2001 to 2006, the Bush administration tried to politicize the Department of Justice. It was alleged that the administration fired attornies when they refused to investigate Democrats on the eve of elections. It was also alleged that one important critierion for hiring in the department was how well applicants passed conservative litmus tests. Investigations by the Democrats when they gained control of Congress brought these charges to light and led to the resignations of Alberto Gonzales, the attorney general, and several other senior officials in the Department of Justice.
Although individual corruption is low in the U.S., as the probablity a person committing an illegal act will be caught is high, a corrupt political-business nexus does exist, but of a different type. Because a politician needs a lot of money to run for an elected post, s/he has to accept donations from multinationals and the ultra-wealthy. Once elected, s/he works more for these multinationals and the ultra-wealthy, and less for the benefit for the average citizen. Though politicians receive only peanuts—a few thousands of dollars—in donations, their benefactors get millions, if not billions, of dollars from them in budgets and other government provisions. This type of corruption is similar to that described in India (the award of the oil fields), except that in the U.S. politicians legally give government funds to multinationals and the ultra-wealthy via legislative procedures. Nevertheless, in spite of this superficial legality, this is money that should go the development of the country, decreasing the budget deficit, or paying down the national debt, instead of to those who are already well-off. Although Republicans are at the forefront of this type of corruption, most Democrats also have to engage in it as they need money to get elected. This is one of the main reasons why large coorporations have been successful in sending millions of jobs overseas irrespective of whether the presidency and Congress are controlled by Republicans or Democrats: They have purchased the collusion of political office-holders even before they take office.
In the 2004 presidential elections, George W. Bush and John Kerry raised $367 million and $328 million, respectively, whereas for the 2000 elections these numbers for Bush and Al Gore were $191 million and $132 million, respectively. The amounts required will surpass half a billion dollars in the 2008 campaign. To obtain a governorship or senator’s seat, a candidate needs to raise anywhere from 10 to 20 million dollars. These amounts increase exponentially yearly, and hence an honest person is unable to contest and win an election.
Previously we noted the 2003 Medicare reform bill and how a corrupt bond between politicians and insurance lobbyists defrauded the U.S. government and ordinary citizens of $134 billion. Republican Party tax breaks to the ultra-wealthy and big corporations and Bush appointments of people like Edwin Foulke and Philip Cooney fall in the same category. Other legislation, as well as as government contracts, have been corrupt as well. In addition, according to the nonpartisan Congressional Budget Office, Republican Party negotiators from both the House of Representatives and the Senate, meeting behind closed doors in December 2005, agreed on a change to Senate-passed Medicare legislation that will save the health insurance industry $22 billion over the next decade. Initially, the Senate version would have targeted private HMOs participating in the Medicare program by changing the formula that governs their reimbursement, lowering government payments to them by $26 billion over the next decade and saving the government—and thus taxpayers—a significant sum of money. But after lobbying by the health insurance industry, the final version included a critical change that eliminated all but $4 billion of the projected savings.[7] Halliburton, Vice President Cheney’s former company, for example, has made tens of billions of dollars at taxpayer expense by being awarded no-bid contracts in Iraq. These examples are just the tip of the iceberg.
It is an irony that for-sale politicians get only peanuts for their betrayal of the democratic trust compared to the millions and billions of dollars wealthy tycoons and multinationals get in return; for the latter, investing in the political process might be better than investing on Wall Street. They are parasites lodged firmly in the body politic, however, looting government funds, the nation’s resources, and the pockets of ordinary Americans with the help of their political cronies. The 1776 American Revolution, the 1789 French Revolution, the 1917 Bolshevik Revolution in Russia, and the 1949 Communist Revolution in China exploded when people faced similar situations in the past. At those times, kingdoms instead of democracies were the object of revolt. The days of violent revolution are gone, however. We are in the digital age, and the time has come for an intellectual revolution that will unburden us of the drawbacks of democracy. Its present form is a disfigured caricature of what it could be, be it in the U.S., the world’s wealthiest nation, in India, the world’s most populous democracy, or anywhere in between.
1 “Cashing In For Profit?” 60 Minutes II, cbsnews.com, January 5, 2005.
2 Padmanabhan, R., “A deal questioned,” Frontline, Vol. 15, No. 5, March 7-20, 1998.
3 “SC upholds award of oilfields contract,” The Hindu (India), October 20, 2000.
4 “Medha puts onus of oil pool deficit on ONGC,” Express News Service (India), June 4, 1997.
5 “SC upholds award of oilfields contract,” op. cit.
6 “Mukesh Ambani become first person with Rs. 2 trillion net worth,” The Hindu (India), September 25, 2007.
7 Weisman, Jonathan, “Closed-Door Deal Makes $22 Billion Difference,” The Washington Post, January 24, 2006.
