I am delighted to host another student guest post, this time by Mehul Gaur. This is the 11th student guest post of this semester. You can see all the student guest posts from my “Monetary and Financial Theory” class at this link. This is the second student guest post by Mehul. His first was “Bernie Sanders’s Financial Transactions Tax is a Bad Idea.”

One of my parents’ favorite pastimes is to sit around and discuss how to fix the widespread (to say the least) corruption problem in India. They begin by discussing some recent corruption-related news story and invariably conclude that is impossible to solve because of how much corruption is integrated with daily life. The problem is so endemic in India that a study in 2013 by Transparency International found that 62% of Indian households reported paying a bribe to the police and 36% reported paying a bribe to the judiciary in the last 12 months. How can one expect a country to clean up its corruption, if the primary means of enforcement can be bought? Some might say that the change can be initiated by the top government officials, but political parties are considered the most corrupt organizations in India with 86% of respondents to the 2013 Transparency International study saying that political parties are corrupt/extremely corrupt. It’s a real issue and one that has recently come into the spotlight because of the slowing Indian economy. Much like my parents, I always thought that there was no solution, with the exception of total revolution.

This all changed when I read a recent Wall Street Journal article regarding Guatemala’s efforts against corruption. 8 years ago, the government of Guatemala gave a UN-sponsored organization powers to launch criminal investigations, few believed it would be successful. Now, this organization has provided key evidence to put the president of the country, Otto Perez Molina, behind bars.

I believe India can follow Guatemala’s lead and implement a similar system to help cleanse itself of corruption. By introducing a third-party, India will be able to circumvent its corrupt police force and its corrupt judiciary system. Obviously, there are some major issues with this idea. First and foremost, if the government is actually as corrupt as it is believed to be, then they will not support the creation of this agency. That being said, I believe that there is enough public outcry against corruption that it would be political suicide to oppose such an agency. Next, there is the issue of how to prevent the agency from becoming corrupt. This is where the real genius behind Guatemala’s agency lies. Guatemala’s agency has experience staff that comes from different countries around the world. This makes influencing/corrupting them very difficult, as they have no ties to the country they are fighting corruption. Without this very important trait, the agency essentially is no different from the existing police or judiciary. Another potential issue that needs to be addressed is to not grant this third-party agency too much power. Although it should hold enough power to prosecute members of the government, it should not begin to replace the government. I believe the solution is to continuously evaluate the state of corruption in the country and increase/reduce the agency’s power accordingly. By having an agency that has no ties and is truly intent on solving the corruption issue, India can remove the massive capital outflows that occur as a result and develop with a much stronger economy.