Several countries now face much publicized corruption and
governance scandals. Brazil and Malaysia are two prominent examples –
What explains the prevalence of ‘crony capitalism’ and poor governance?
RBI Governor Raghuram Rajan made a thought-provoking
speech in 2014 titled ‘Finance and Opportunity in India’. In his speech, Rajan provided key insights regarding ‘crony
capitalism’:
“The poor and the
under-privileged need the politician to help them get jobs and public services.
The crooked politician needs the businessman to provide the funds that allow
him to supply patronage to the poor and fight elections. The corrupt
businessman needs the crooked politician to get public resources and contracts
cheaply. And the politician needs the votes of the poor and the
underprivileged. Every constituency is tied to the other in a cycle of
dependence, which ensures that the status quo prevails. Well-meaning political
leaders and governments have tried, and are trying, to break this vicious
cycle. How do we get more politicians to move from “fixing” the system to
reforming the system? The obvious answer is to either improve the quality of
public services or reduce the public’s dependence on them. Both approaches are
necessary.”
Related:
http://vivekjayakumar.blogspot.com/2015/08/charting-indias-economic-fortunes.html