Corruption and institutions in Russia

doi:10.1016/S0176-2680(99)00050-6

European Journal of Political Economy

Volume 16, Issue 1, March 2000, Pages 113-132

https://doi.org/10.1016/S0176-2680(99)00050-6 Get rights and content

Abstract

This paper describes the institutions and social norms that have accommodated corruption in the Russian Federation in the post-transition years. We show how corruption is sustained by ill-defined boundaries between political and private business activity, and how the role of the state facilitates rather than hinders corruption. The paper draws upon a longer document prepared by the authors, the IDEM Report on Corruption on Russia [IDEM Foundation, 1998. Russia versus Corruption: Who Will Win?, Council of Foreign and Defense Policy, Moscow. (in Russian)].

Introduction

The economy of Russia has not performed well in the years of transition. The failures were predictable given the underlying institutions and rules of behavior of the Russia political and economic system. The idea of a market in Russia is combined with the persistence of old institutions and methods of doing business that use the weakness of the state for private profit. The competition that exists is principally that of competition for rents. Corruption is an integral part of economic activity, with ill-defined boundaries between politics and private business. In this paper which draws on our broader exposition on corruption in Russia [published in Russian as the IDEM Report, (IDEM Foundation, 1998)], we describe how institutions and norms of political behavior have provided the accommodating framework for a society where corruption is a principal means of acquiring wealth at all levels.

Section snippets

Corruption in transitional Russia

Corruption has become a commonplace theme in discussions of the Russian economy.¹ For example, in 1995–1996 national and regional

Corruption as a phenomenon of the transition

Corruption, its scale, dynamics, and specific features, is a consequence of the general political and socioeconomic problems of the transition from socialism. Historically, corruption has begun when a country enters in a period of modernization and change. The stories of the robber barons of US are well known. It is understandable in a historical context that negative features of radical change should be present in Russia. Russia in the transition underwent a radical renovation of its public,

The state

Grassroots corruption in Russia penetrates into all spheres where a citizen has contact with the state. Below we set out the main aspects of the problem.

Polls show that people consider the housing and communal system to be the most corrupt part of the government administration. The emergence of the housing market might have been hoped to suppress corruption in this domain. However, corruption proved to be strongly entrenched.

The law enforcement bodies and, first of all, the police, occupy a

Measures taken against corruption

In Russian legislation, the following articles of the criminal code relate to corruption: No. 174 — legalization of financial means and other property acquired illegally; No. 285 — misuse of official authority; No. 290 — acceptance of a bribe; No. 291 — offer of a bribe; and No. 292 — forgery of documents.

At the same time a number of actions closely related to corruption are not included in the new criminal code. These are:

•
participation of an official figure in a commercial activity for

A basis for change

There are nonetheless measures that can make corruption more difficult. A realistic and realizable budget would limit the budget deficit, and reduce the scope of “personal factor” in decision making by officials. Ensuring the rights of property owners and shareholders and making the activities of business enterprises “transparent” for shareholders would also limit corruption by reducing the scope of the need for bribes as a means of protecting private commercial interests. Reform of the tax

Conclusions

The failures of the transition have attracted considerable attention. See for example Gelb et al. (1998), Stiglitz (1999), and Hillman (2000). Our purpose in this paper was to make clear the prominence of corruption as a primary cause of the Russian transition failure. We have provided a systematic account of corruption in transitional Russia, explaining the sources of corruption and how corruption affects and is affected by economic activity. Our study leads us to the conclusion that

Acknowledgements

This paper is based on the IDEM Report on corruption in Russia. We thank the Office of the President of the Russian Federation under whose auspices the IDEM Report was prepared. An earlier version of the paper was presented in February 1999 at Erasmus University at the conference on Economic Performance, Economic Policy, and Political Culture. We thank the participants at the conference for their helpful comments. We particularly thank Arye Hillman for his assistance.

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Corruption and institutions in Russia

Abstract

Introduction

Section snippets

Corruption in transitional Russia

Corruption as a phenomenon of the transition

The state

Measures taken against corruption

A basis for change

Conclusions

Acknowledgements

European Journal of Political Economy

International Review of Law and Economics

European Journal of Political Economy

Seeking rents by setting rents: the political economy of rent seeking

Economic Journal

Rents as distractions: why the exit from transition is prolonged

Predators, moral decay, and moral revivals

European Journal of Political Economy