A pandemic of cheating appears to be upon us.
The last few months have been depressing even for the optimists among us. Cases of cheating and dishonesty are everywhere you turn. I define cheating as acts by otherwise normal individuals or institutions that cut corners or break rules to get ahead. The most infamous of these is the one related to the Indian Premier League (IPL). The multifaceted nature of the allegations boggles the mind—betting, spot fixing, match fixing, insider trading—juvenile Srees and greedy Appans are popping up everywhere. Not to be outdone, occupants of Main Street are contributing their own stories. A whistle-blower at Ranbaxy revealed a long-term fraud that resulted in a $500 million fine the company paid to the US Food and Drug Administration (FDA). That sordid story is laid out in a Fortune article, appropriately titled “Dirty Medicine”. I am willing to bet (figuratively, of course) that your disgust for the cheating will be accompanied by a grudging admiration for the audacity and ingenuity of the methods employed. In one instance, the article talks about how company officials aged an operations manual to cheat inspectors by keeping it in a steam room overnight.
To be fair, the virus appears to have afflicted many other countries as well. Previously revered companies such as Apple in the US have been charged with shifting revenues to tax havens. Senator Carl Levin, a Michigan democrat, summed it up thus: “Apple sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.” Apple has not been accused of breaking any laws. European authorities have similarly charged other companies such Google, Starbucks and Amazon. Apple Operations International, its primary offshore holding company registered in Ireland, has paid no taxes on $30 billion of net income over the last three years. That’s a dream device called i-no tax.
The problems at IPL began with a birth defect. The constitution of the Board of Control for Cricket in India (BCCI) was amended to permit an honorary member to bid for commercial interest. So-called independent members sat quietly while changes to the constitution consolidated power in the president of BCCI. Like the nowhere tax jurisdiction of Apple International, BCCI is governed by no one—not the government, not by shareholders, and not by the public. The only authority it accepts, its own constitution, was hijacked by its president because of the passivity of its members. For any president of BCCI to be removed, a two-third majority in a secret ballot is required. The late Hugo Chavez of Venezuela must be doffing a hat in his grave at the masterful use of a constitutional mechanism to protect authoritarian rule.
Is there really a problem? If so, what can be done? Is the cheating pandemic merely coming to light because we are seeing more cases being reported? Or, is there more cheating than ever before? Is it because of the large magnitudes that we are taking note now?
While it is difficult to know precisely, there is probably some truth in each of these observations. In the IPL case, terrorism-related wiretaps, security cameras, and mobile phone records played a role in the original investigation and continue to play a role in the prosecution strategy. There is qualitative evidence to believe that cheating has indeed increased.
The gains from getting to the top of your profession, of boosting your net income with tax evasion and of betting with loaded dice are enormous relative to the dangers of getting caught. In a winner-take-almost-everything society, there is a powerful incentive to cross a few lines to get ahead.
Beyond the talking and the writing and the screaming on TV, can anything at all be done? In a paper entitled Escaping Capability Traps Through Problem-Driven Iterative Adaptation (PDIA), professors Matt Andrews, Lant Pritchett and Michael Woolcock of Harvard University talk about a systematic, local, iterative and adaptive method to address complex problems and bring about sustainable change. If the problem is endemic, then, according to Andrews et al, the solution has to come from local discussion, engagement and iterative improvements. No force fitting of external solutions is likely to solve it, they say. The problem itself has to be decomposed into its constituent parts—too much power in one office, non-independence of members, for instance—and then adaptive solutions tried for each part. Easier said than done, for sure, but no substitute for the hard work and the trial and error nature of it all.
Let me end on an encouraging note. Sociologists who work on the behaviour of aggregate (free) society believe that issues such as cheating are cyclical and ebb and flow with time. Societies that go through periods of material excess, often correct through a backlash. Like other historical pandemics, the hyper-materialism and uber-greed of our time will pass.
PS: “Lying is done with words, and also with silence,” said Adrienne Rich.
Narayan Ramachandran is chairman, InKlude Labs. Comments are welcome at firstname.lastname@example.org To read Narayan Ramachandran’s previous columns, go to www.livemint.com/avisiblehand-