Does Capitalism lead to increased Corruption in society?

[Sajit]

In light of the various scams and scandals in India, some people blame the 'capitalistic' system for increased corruption in society. But the data with Transparency International and Heritage Foundation show that countries with more economic freedom have less corrupt societies. Here is a chart. The red dot is India.

Comments?

[Ajita Kamal]

(13-Apr-2011, 08:01 AM)Sajit Wrote: In light of the various scams and scandals in India, some people blame the 'capitalistic' system for increased corruption in society. But the data with Transparency International and Heritage Foundation show that countries with more economic freedom have less corrupt societies. Here is a chart. The red dot is India.

Comments?

Im not buying either hypothesis.

Firstly, I'm definitely not buying the idea that the problem we are facing is because capitalism inherently leads to corruption. The default is that countries that have highly state-controlled governments are prone to just as much corruption as capitalist states, and I'd have to see data otherwise to be convinced this is not so.

But on the other hand, ideas such as economic freedom and capitalism are very often conveniently redefined and quantified in a biased way by organizations with an agenda. And the Heritage Foundation has an agenda. I've been following American politics for the past 7 years. Trust me, the Heritage foundation has an agenda. This is the same foundation that pushes the republican agenda, and works to elect republican presidents in the US. They are not for economic freedom the way Adam Smith envisioned the free market. They are for economic freedom the way it benefits them. For example, just ask them what their position is on outsourcing. You'll see how steadfast they are on economic freedom.

Before making up my mind on your question I would have to see the original study, and know how they determined the variables. But on its face I can say that they probably ignored inconvenient facts. For example, such organizations always fail to mention that Western Europe (and the west in general) has the highest amount of government programs and social security nets in the world- not very capitalist of them! The Scandinavian countries are practically socialist. The US has the largest federal budget in the world, with hundreds of billions of tax-payer dollars going into government control (through everything from subsidies to tax incentives and publics works contracts) of the economy. All of these are easy to bury under free-market language. The Heritage foundation will always make unregulated market models look good, because they are a conservative (American fiscal conservative) think tank. But let's not be completely cynical. Let's see the actual data, and lets find out how they defined economic freedom and other such concepts in the study. There was a study, right?

Here's a quote that is good to keep in mind when analyzing statistics from biased sources.

Quote:“An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts — for support rather than illumination.”
~Andrew Lang.

[Sajit]

Thanks for the heads up on the Heritage Foundation. Coming back to the issue of corruption in society, do you think it could also be a cultural issue? Do some cultures see corruption as something normal?

[madhav]

Sajit Wrote:In light of the various scams and scandals in India, some people blame the 'capitalistic' system for increased corruption in society. But the data with Transparency International and Heritage Foundation show that countries with more economic freedom have less corrupt societies. Here is a chart. The red dot is India.

I don't see why only 'free marketism' needs to be considered as capitalism? Anyone with a basic knowledge of history would know that state control has been a traditional feature of capitalism since the time of the Jacobins and the French Revolution onwards.

[Raghav]

I think capitalism by its very nature tends to accumulate wealth in the hands of a few but that alone cannot be blamed for the scams. We've been having scams right from independence (Jeep Purchase Scam 1948) when capitalism in India was not very strong. The primary reason in my opinion is that we as electorate do not demand more from our representatives. We don't haul up our MLA & MP and hold them accountable. It is our failing as a people to demand a fair and honest government. As long as we hope for a Messiah to be elected to power to come and give us a clean government, things will never improve.

To me the failing or the weakness of capitalism is its emphasis maximizing profit rather than social well being. And when few individuals or corporations hold the majority of wealth in the society, one cannot say with certainty that they will not use the money to move things in their favour. This is so clearly seen in the US when the people who advice the president on policy go on to become board of directors/CEOs of major corporations. However in a democratic system the people ultimately have the power, but we must use it. we as a people must hold our representatives accountable.