Saturday, July 20, 2013

The lack of indignation with "in-kind" bribes

Reuters reports that Chinese authorities have found evidence of GlaxoSmithKline channeling bribes to doctors and officials through travel agencies to boost sales illegally as well as raise the price of its medicines sold in China. Apparently, GSK created fake "conference services" as expenditure and funneled the bribes through travel agencies to officials and doctors.

This should not come as any surprise since I would imagine that such in-kind "bribes" are widespread across the world, in politics and corporate and public bureacuracies, especially at higher levels. What should be a matter of indignation is why such rent-seeking is treated with great indulgence. In fact, at the higher levels of the establishment, especially in many developing countries, the typical crude way of bribing directly by cash payments is increasingly giving way to more polished forms of "in-kind" bribes.

Staying with travel, there have been numerous exposures from across the world of public officials (both politicians and bureaucrats) rewarded with expensive foreign holiday expeditions in return for official favors. Other common place forms of compensating illegal favors include financing children's education abroad, gifting with expensive jewelries and paintings, or furnishing a house. A more sophisticated form, prevalent in many developed countries, is the practice of rewarding public officials with gold-plated speaking or consulting assignments when they leave office. This is just an illustration of the fact that such compensation can come in many forms.

In-kind bribes may also be less personally and socially stigmatizing, both for the bribe-giver and the bribe-taker. We all know that gifting a public official with a pen or a diary, however expensive, is considered acceptable, whereas paying him an equivalent amount in cheque is a social taboo. Much the same personal attitudes prevail in both cases. But this is a slippery slope. If pens today, why not paintings tomorrow, or even a holiday? And then, an expensive piece of real estate or a revolving-door appointment? And finally money itself? Once the psychological Chinese walls have fallen apart, there is nothing that comes in the way of slipping down the slope.  

It should be a matter of concern that even as rent-seeking activities take more sophisticated forms, we are stuck with fighting traditional cash bribery, leaving such corruption to proceed unrestrained, both at a social and personal level.

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