Feature Article of Friday, 4 January 2013
Columnist: Sakyi, Kwesi Atta
Overcoming Corruption in Ghana – A New Dimension- Part 3
By Kwesi Atta Sakyi December, 2012
When Adam Smith in 1776 produced his economics treatise on the moral philosophy of The Wealth of Nations, he pontificated that when individuals pursue self interest, indeed, they are indirectly and unconsciously promoting the public good, as they create wealth, employment and business opportunities in the value addition chain of production and distribution. Did he therefore imply that individual welfare was or is coterminous with the public interest or welfare or it is paramount over it? John Stuart Mill and Jeremy Bentham, in the 19th century, followed it up with their principle of utilitarianism or the greater good or happiness for the greater number.
It also connoted efficiency and thrift. Vilfredo Pareto chipped in his idea of Pareto optimality, whereby the optimum situation or scenario should be whereby a change in the economic equation should make some people better off and none worse off. Morally, J.J. Rousseau and others professed the Social Contract as the idea of trust, whereby those mandated to govern should justify their management and distribution of the national wealth in an efficient manner, or else if the electorate smelt a rat, they had the moral right to cause those abusing the mandate to relinquish it and hand it over to a new set of erect and popularly elected leaders.
Thus, morally upright ethical behavior underpinned all these concepts. We should here ask if individual ethics is equal to the public or national or universal ethics. This is my bone of contention with Adam Smith, whose proposal was that of a free market reign, whereby individuals should pursue their businesses by maximizing profit in order to benefit the larger public. Does it mean that so far as individuals pursued the profit motive and maximized wealth, it was all fair and square, even if they crooked people and in the end, they benefitted society? Should we not question their means to the end? Or we should uphold Machiavelli here that the end justifies the means?
What if they engaged in cutting corners, or in corrupt practices in order to make more money to pay taxes to the state coffers? Is it not like an armed robber or a highwayman like Robin Hood, robbing the rich and then redistributing the proceeds to the poor, or giving it as tithes to the church? This is why we have a lot of problems now in many countries, including Greece, Italy, Spain, USA and others. Capitalism is at the crossroads as the USA currently is precariously on a cliff hanger or fiscal cliff.
At the root of corruption in every country is political or official corruption and dissipation of taxpayers’ money by the powers that be. I think the Puritan and Protestant ethic of thrift, profit maximization and hard work, has been over-pampered so much so that we now live with a cliff hanger monster, brewed by the free market system. It must be realized that in a free market, where competition is the order of the day, cutting costs may lead to many underhand tactics of evading taxes, exploiting workers, cheating suppliers and creating oligarchies of executive fat cats, who sit at the apex of the MNCs and continue the third wave of slavery. In the pursuit of happiness and profit maximization, many low level workers have been literarily enslaved at the workplace, whereby they have become time robots, who work endlessly without social hours, and they are tricked into consumerism by the credit and debit cards. Is this the pursuit of happiness and freedom? Is this system not corruption and human robotisation?
Philosophers such as Socrates and Plato would not vouch for the much-vaunted profit motive, because according to Plato, this world we live in is actually unreal, as the real world is the abstract world of Platonic absolutes, perfection and ideals. Profit maximization is therefore not a necessary and sufficient condition for the attainment of happiness. We might settle for breaking even. It may be a partial equilibrium means, but not a summative and holistic means. Most philosophers believe that happiness is a state of being which is intrinsic rather than extrinsic, because it is intangible, eternal and non-quantifiable.
Therefore, maximization of profit may be a means to an end but not an end in itself. Profit is the mark-up over and above the unit cost of production. For ages, the practice of usury or lending money at high interest rate has been condemned as immoral, and Shakespeare captured the thinking of his age by his drama, ‘The Merchant of Venice’, in which the villain, Shylock the Jew, is cast in a dark mode as a greedy, lusty, glint-eyed and merciless old miser. Today, many banks pay peanut interest to depositors and at the end of the day, they post huge profits, which are appropriated by the owners, fat cat executives, and taxes to government. Proudhon at one time averred that taxation is robbery, especially where tax revenue is misapplied.
90% of the employees of private enterprises are exploited through practices such as outsourcing services at extremely low prices, and casualisation of labour. Depositors are cheated out of their money by numerous bank charges. Is this not corruption and commercial cannibalism, or mercantile elephantiasis? In industry or manufacturing, there could be many obstacles in the value and supply chain. In order to reduce delays or hold-ups, and overcome bottlenecks and frustrations, entrepreneurs may resort to greasing the wheels of the administrative machinery in the governmental bureaucratic institutions. Is this not corruption on a grander scale?
Political corruption is the genesis of corruption because power or authority emanates from the seat of governance. Today, when foreign investors enter a country, they have to apply for work and resident permits or visas for themselves, their dependants and the foreign workers they engage. There is humongous corruption in the immigration offices. Also at the internal revenue services, where companies have to file their VAT, PAYE and other returns, there is abject and cancerous corruption. No wonder, immigration, customs, internal revenue and vehicle licensing offices in the developing countries are reeking with abominable corruption.
The officials in these outfits have become obese, and they own mansions and expensive cars. How can we develop Ghana or overcome poverty if a few workers at vantage positions of the economy are holding 99% of the population to ransom? In the unbanked and informal sector, corruption is much prevalent, as operators in the hidden or shadow /black market evade the radar of transparency, accountability and probity. The duality of the market or economy is inevitable in a free market system. However, efforts should be made to broaden the tax net to bring more revenue into the government coffers.
Failure to capture revenue from the informal sector is also a form of corruption. It is tantamount to system failure by the city and municipal councils. This is where we need the central government to support and strengthen local governments by promulgating acts to empower them. Karl Marx and Frederick Engels in 1848 wrote their famous treatise, Das Kapital, advocating for the formation of the command or centrally-planned or state owned and state monopoly of the means of production. Their watershed treatise called for a rethink of the way society was organized. They questioned the existing methods of production, distribution and reward to the factors of production.
They called for the overthrow of capitalism and the ruling oligarchies or petty bourgeoisie. Their analysis of society led them to conclude that there was a lot of injustice, oppression, exploitation and dialectical materialism. They, therefore, advocated for the purge of the capitalistic arrangements. However, experience has shown us that no system is perfect or permanent. Socialism and its extreme variant, communism, led to totalitarianism, mass killings or purges, negation, alienation and sequestration of property rights, and gross abuse of human rights.
The absolutism of socialism and communism bore seeds of their own destruction, as they were not sustainable. The absolute state control of the means of production would lead to massive misallocation of scarce resources, market and price distortions, overproduction in some sectors and underproduction in other sectors, among other inefficiencies. There was total market failure. The lesser of the two evils of capitalism and socialism happened to survive, namely capitalism.
Even today, in our unipolar world, some inhuman face of capitalism stares us in the face. What with the massification of youth unemployment, retrenchment of many workers in the mines and MNCs, casualisation of labour, shooting down of trade unions, corporate failures, transfer pricing, capital flight, and withdrawal and withering of many workers’ benefits, among others. Is this not grand corruption at the corporate level? Today, investors outsource their operations to cheap labour locations in China, India and other low cost areas in order to cut costs and maximize profits. Are the workers in labour-cheap countries less human than those in the MEDCs? Why cannot they be paid or remunerated like their counterparts in the MEDCs? To me, that is some form of pathological corruption.
What of the unethical motive of denying nationals of jobs, or exploiting cheap foreign labour? Is that not corporate corruption? In the big corporate world, many rules and regulations abound, such as the guidelines on corporate governance given by the OECD, EU, Combined Code of the LSE in the UK, Singapore Code, Australian Code, South African King’s Code, and Sarbanes-Oxley Act 2002 of the USA, among others. Despite these rules and regulations, we have had some of the sleaziest corruption scandals ever in history such as collapsed businesses like Northern Rock Bank, Enron, WorldCom, Lehman Brothers, BCCI, Meridian BIAO, among others.
Corruption therefore is found in every facet of life, both in the formal and informal sectors, the corridors of power, and even in prestigious international organizations such as the UN and its affiliates. Here, we recall the oil-for-food scandal during the Iraqi Crisis of the late 90s. This is why international organizations such as the OECD, EU, Transparency International, WEF and the UN, are very particular about the issues of good public governance, entrenchment of democratic principles, pluralism and giving political space to NGOs to exercise voice, capture and exit. This is why governments are being encouraged to hold periodic elections, which are free and fair.
Despite many public sector reforms in Ghana and other developing countries, the incidence of corruption is still high. Good governance tenets require proper accountability, transparency and probity in the administration of public funds. Office-holders in government have to study public administration in order to familiarize themselves with principles of good governance, and to have insight into comparative public administration.
The author is a holder of BA (Econs) Ghana, MPA (summa cum laude, UNISA) Reference: www. oecd.org/daf/corporateaffairs/soe/guidelines Contact: [email protected] Cell: +260 973790152 Follow me on Facebook, and Twitter, @KwesiSakyi