Protecting the poor's income from corruption is vital to ending poverty. Photo: Miguel Samper for Mercy Corps

A counter-intuitive anti-corruption law out of India may be key to helping the world's poor -- by partially legalizing many bribes.

The grand thefts of rulers may be more infamous, says the New York Times, but the bitter experience of petty corruption is an everyday trial for millions of poor people. So-called “harassment bribes” present a major obstacle to ending poverty by depriving the poor of crucial income and services. Families in some developing countries must bribe nurses to get their own babies, mortuaries for their dead, and various public officials for garbage collection, clean water, medicines, police protection, and admission to public schools.

Professor Kaushik Basu, chief economic adviser to India’s finance ministry, has proposed an innovative solution -- paying a “harassment bribe” should be made legal, while receiving one remains illegal.

Imagine a situation in which corrupt hospital staff demand a bribe in exchange for a newborn. Often, turning in the hospital staff risks prosecution for the parent (if the parent pays the bribe, and reports the incident to the police), or endangers the child (if the bribe goes unpaid).

But under Basu's system, a parent could pay the bribe, recover the child to safety, report the corrupt hospital staff, and walk free.

For the “game theory” enthusiasts amongst you, the following matrix explains how turning in the corrupt hospital staff changes from a bad option to the ideal choice under Basu’s anti-harassment law:

Possible Outcomes Matrix. Credit: Mark Ethen

Basu's anti-harassment law provides a boost to anti-corruption advocates. After all, who would not want to save their money by turning in a crooked official? Still, the model depends on a functional and reachable prosecution to deter corruption.

When lower level corruption diminishes, the biggest winners are the poor. They keep more of their earnings, and have increased access to government services. Furthermore, economies with less corruption often have superior social safety nets due to more efficient tax collection, and more stable job growth thanks to higher investor confidence.

Combining Basu’s proposal with other anti-corruption tactics, such as moving transactions online to reduce personal contact with public officials, will help alleviate poverty by protecting the world’s poorest from predatory officials.