The nexus between the State and business establishments has been around for a long time, existing across time and space, and instances of it are well documented. Be it the rail-road ‘robber barons’ in the US, the zaibatsu in Japan, the Russian oligarchs, or the Korean chaebols, they all exemplify smoky backroom dealings and patronage politics. While the setting might change, the script remains the same: the flow of favouritism from government to certain (usually large) business corporations in exchange for funds to important politicians and key bureaucrats. Yet, whenever such a nexus is unearthed, a huge public outcry follows – as if such things have never been heard of before. India found itself in the center of such protests in 2010-2011 over the scam in 2G spectrum allocation to telecom companies. By magnitude of loss to exchequer – over US$ 40 billion – this scam was reported to be the biggest in democratic India. The scam blurred the ethical lines between corporate houses, corporate lobbyists, journalists, bureaucrats, and politicians. In a nutshell, it showed up one of the worst sides of contemporary capitalism. The 2G scam went a long way to show how the Indian economy, one of the fastest growing in the world, is dominated by a small set of tightly connected power players. Industry observers felt that if not checked soon, the deep-rooted problem of crony capitalism in the country could adversely affect India’s growth and development. They wondered how the accountability could be fixed and the unholy nexus broken.
This case is designed to enable students to:
1) Analyze and understand the 2G scam that broke out in one of the fastest growing economies of the world;
2) Discuss and debate the role played by corporate houses, politicians, etc. in the scam;
3) Understand the genesis of crony capitalism, even as capitalism professes free markets;
4) Discuss and debate whether corruption is a normal part of business or an economic malaise that needs to be urgently curbed;
5) Discuss and debate whether some countries are more corrupt than others;
6) Explore ways in which corruption can be discouraged.