In this paper the political climate in regards to political corruption in Russia following the collapse of the Soviet Union is examined. Corruption being when a government official uses the power granted by their office for personal gain, such as through bribery, embezzlement and extortion (Transparency International, 2011). Corruption in governments can have an adverse effect on the government’s relationships with its populace, other governments and businesses that seek to, or are sought to, invest in that country. This paper will attempt to prove that following the fall of the USSR, corruption, which had become a common activity, did not lessen, but may have increased. This paper will also attempt to prove that, if corruption has increased, the blame rests with the nature of the reforms, in that because the Russian economy was reformed into a free market while the actual structure of Government was not reformed in a way that kept corruption in check. The final hypothesis that will be tested is that the Russian economy is not growing at as high a rate as it would be were the levels of corruption lower, that if it were not for the high levels of corruption prevalent in Russia, then the nation would already have achieved its form position as a Superpower of the world.
To properly grasp the depth of corruption embedded in Russia the origins of those levels of corruption must be established. To do this the Soviet years must be examined. Jeffery Klugman claims that because of the child raising methods primarily used in Russia, that children are taught to always be a part of the family and are punished by the withdrawal of affection, they come to desire a connection to something bigger all of their lives. In the Soviet era that something bigger was the State. The people were supposed to live with little to no private lives, they were supposed to be unnecessary. Yet some people would still form personal connections with others. These connections are what caused the corruption to become possible. Because of the intensity and importance of these personal relationships the people would be far more willing to engage in behavior that would enrich themselves and their friends or family, even at a cost to the state. Compounded on this were certain Soviet policies, specifically near guaranteed employment and lifetime positions, which caused the people to be less fearful of the possibility of losing their jobs, allowing for new avenues of corruption. This also plays a role in the Russian unease at the thought of reform. Most people see it as a desire for the elite to maintain their positions, wealth and influence. However, in Russia, because of the need to be a part of something bigger the people are fearful of how they would function in a workplace without the high level of oversight.(Klugman, 1986)
Further compounding this was the reforms Russia implemented following the collapse of the Soviet Government. Following the collapse of the Soviet Union the government experienced a massive loss of power. This led to the government being unable to implement anti-corruption institutions, compounded with a division between the branches of government that caused any investigative activity on the part of the overseeing branch to be unachievable. Furthermore, because of the structure of the Soviet economy there was virtually no back-up to the main state planned economy, there was nothing to step in to close the gap. In China local economies were allowed to function independently from the state economy with oversight from the local authority. When China allowed these economies to enter the main economy they quickly flourished and became an integral part of the Chinese economy and reform. Russia did not have any of these local economies; they were all strictly regulated and controlled by the state. This meant that there were very few institutions that could continue to function after the collapse. This created an immense opportunity for corrupt individuals and organizations, specifically the Mafia. After the collapse Russian capitol, factories, buildings and machinery, was auctioned off for prices in the pennies, which allowed for those individuals and organizations to gain massive amounts of wealth and business capitol for cheap, with the resources that the Mafia had on hand it was easy for them to gain control of these properties and capitol. The Mafia stepped in and gained vast control over capitol, goods/services and voters, once the Mafia had gained such control they turned their attention to political corruption: bribery, extortion and the like. They did this in order to gain a more complete grasp over officials and law enforcement, so that they could have free reign over their emerging economy. (Sun, 1999)
As said before, when the Soviet system collapsed the capitol was obtained by Russian businessman, usually former members of the Communist party, at ridiculously low prices through auction or through corrupt practices. Because of the high levels of corruption, threats, bribery, extortion, in Russia many Western firms refused to invest in Russia at all while others gave up after negotiations with the Government failed to proceed. This allowed for these new Russian entrepreneurs to quickly grow and amass wealth. However as the years move forward it became more apparent that reform is essential. When Vladimir Putin was elected he immediately went to work trying to remove the corruption and open up Russia to Western investment. The Russian elite are also hoping to enter the Western economy, and as such they are also attempting to curb corrupt practices wherever they can, despite the fact that in some cases corruption was what got them the wealth in the first place. (Olcott, 2002)
After the fall of communism in Russia reformists took power, seeking to Westernize Russia as soon as possible, but because of inadequate or tardy support they were unable to retain the power of office long enough to actually implement the reforms. This was because the vast majority of Russian business tycoons were actively seeking to maintain the economy in the same partially reformed state due to the immense amount of money that it was possible to make at the time. Also not helping was the Russian government’s tendency to promise more than it could deliver on: higher standards of living and functioning democracy almost immediately. (McFaul, 2000)
Despite the dubious nature of the acquisition of capitol by those tycoons, however, it has not really had an effect on the actual privatization process. Privatization succeeded in its primary goal: to generate wealth. However this does not mean that privatization has eliminated or even greatly reduced corruption, it has just shifted to other aspects of Russian government, such as taxes, law enforcement and state intervention. The levels of privatization are necessary to both curb corruption in the production, distribution and services sectors and to generate an amount of money that can be used to help strengthen Russia further. (Aslund, 2001)
In order to test the hypotheses presented earlier a number of sources of data will be used. A comparison of current to past corruption perception indexes, provided by Transparency International, will be used to show the change in perception of corruption in the population of Russia. According to the Corruption Perception Index (CPI) of 1998 Russia was ranked at 76 out of 85 nations with a CPI score of 2.4, meaning that the Russia is seen as highly corrupt. In the most recent CPI, 2010, Russia is now ranked 154 out of 178 nations with a CPI score of 2.1. This shows an increase in corruption in the past thirteen years. The ranking is less noteworthy, however, because while Russia is located lower down the list, more countries have been added to the index.
To examine the influence of corruption in Russian economy an article from the Reuters can be used. The article features an interview with Alexandra Wrage, who is a part of TRACE International. TRACE is a non-profit organization that companies can receive advice on which countries are more likely to take part in corrupt activity. According to Wrage a number of Western firms have been considering halting expansion in Russia or removing themselves altogether. She explains that Russian corruption is unique, telling a story of her first workshop in Moscow when someone said that if they did not pay the bribes their offices would be burnt down. This is because in most nations, corruption is used to secure business, but in Russia the bribes go to top-ranking officials to keep them from abusing office. (Wrage, 2010) To further expand upon this the TRACE Global enforcement Report can be used. In this report a number of different aspects of corruption are tracked and mapped, in Figure VI of this report ‘Where is the Misconduct Occurring?’ Russia is ranked eighth with a total of 2.2%. This means that 2.2% of the international enforcement actions involving payments are sent to government officials in Russia. (Trace International, 2011)
To help examine in more detail why Russian corruption is so prevalent an article in Forbes can be turned to. In this Forbes article the CEO of an international firm discusses the reasons behind the prevalence of corruption in Russia as well as discussing why the corruption is hurting the Russian economy. The CEO, Shan Nair of Nair &Co, claims that a large part of the corruption results from a feeling of anti-west animosity that is a holdover from the former Soviet Union. Other reasons are also given for the large amount of corruption, from a high level of alcoholism to accepted atheism (Rapoza, 2011). While this is merely an opinion piece by a non-Russian, it gives insight into some of the problems that Russia is forced to deal with. The perceptions and opinions of the people Russia needs investing in them are important because if they believe there is a high level of corruption, whether true or not, they will not invest in Russia.
Following the collapse of the Soviet Union the amount of Corruption present in Russia did increase because of the lack of strong central government, regulations and poor reform practices. However, after Boris Yeltsin left office in 1999 and Vladimir Putin assumed control the levels of corruption leveled off. This is evident from the Transparency International Corruption Perception Index. The rating has floated around within a few decimal points of the same ranking for the past decade.
Also assisting in the leveling off of corruption is the current generation of Russian millionaires. While corruption may be good for the purpose of enriching yourself, it is not necessarily good for business. And these Russian business leaders are starting to comprehend that. They realize the need to clean up corruption in order to attract Western investment and greatly increase the amount of capital and the rate of growth.
However that is not to say that the corruption is gone. Far from it. The CPI scores in Russia indicate a high level of corruption, even if that high level has more or less been steady for the last decade. When Russia initially began to enter the reform process Western Firms greatly desired to invest in Russia, but because of said reform process they were excluded, passed over or became frustrated or uninterested because of the poor procedural methods to get them invested and because of the levels of corruption.
Unfortunately, were it not for the corruption present in Russia the economy could be significantly larger. If Western firms had been able to invest more heavily in Russia during the transition period the economic growth would have increased exponentially and, in my own opinion, Russia could be on the verge of entering fully into a return to superpower status on par with the United States and China. But this possibility did not come to pass due to Western Firms aversion to the corruption in Russia.
The current Russian government, the duo Medvedev and Putin, are working hard to reform Russia and to bring her to the forefront of the Global Economy. But this is a slow and arduous task because of everything from the remains of a Soviet mindset to poor perceptions from corporations abroad. While the corruption in Russia may have leveled off, as opposed to increasing, it is still a significantly difficult task to lower that level.
Compounded on this is the fact that because of the levels of corruption there is a lower level of interest from outside firms for investment. Not until the corruption is severely reduced, if not removed, will the Russian economy be able to attain its full potential for growth.
In conclusion, while the levels of corruption in Russia did not increase as hypothesized it was in fact the nature of the reforms that prevented Russia from realizing the true potential for its economy. The last hypothesis is significantly more difficult to prove, while it is impossible to determine how the Russian economy would be doing today if things had happened differently, it is clear to see that in the last decade, as Russia has opened up and invested in the Western world more, the economic growth has been significant. So it is not hard to determine that if Western firms had immediately gained a foothold in Russia they would have greatly boosted the economy.
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Rapoza, K. (2011). Russia Plagued by Corruption Perception. New York: Forbes.
Sun, Y. (1999). Reform, State and Corruption: Is Corruption less destructive in China than in Russia? Comparative Politics, 1-20.
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