Corruption

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CORRUPTION IN RUSSIA by James Roaf, European II Department, IMF* Conference on Post-Election Strategy Moscow, April 5-7, 2000 A. Introduction Corruption is often cited as a key factor behind Russia’s economic problems. However, while it is generally agreed that Russia does suffer from a particularly high incidence of corruption, economists are far from clear as to the actual economic implications of the problem. This note discusses Russia’s experience of corruption from the perspective of the substantial literature that has developed on the links between corruption and economic development, and suggests some strategies for tackling corruption in Russia. Finally the note briefly discusses the issue of transparency, which may be seen as a key means of combating corruption, and promoting good governance in general. 1 B. Scale of corruption Russia consistently ranks poorly in international comparisons of corruption. For example, probably the most widely quoted source, the Transparency International (TI) survey, placed Russia 82nd out of 99 countries in 1999, with a score of 2.4 on a scale of 0 (highly corrupt) to 10 (highly clean). An aggregate indicator of graft compiled from numerous sources by Kaufmann et al. (1999a) places Russia 113th out of 155 countries. In a 1997 survey conducted by the Economist Intelligence Unit, the CIS emerged as markedly more corrupt than any other region of the world, with Russia (along with the other four CIS countries included in the survey) receiving the maximum rating for corruption among public officials. These surveys suffer from a number of serious technical problems – in particular, they tend to rely heavily on the subjective impressions of businessmen, especially foreign investors – and therefore should not be regarded as hard evidence of the extent of corruption within a country. Nevertheless, the general impression that corruption is very widespread in Russia is widely accepted both inside and outside the country. The survey evidence tells us little about the type of corruption encountered. Two broad categories may be identified: “petty” corruption, whereby low-ranking officials supplement * The views expressed in this paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. 1

This paper follows the conventional definition of corruption: “the exercise of public power for private gain” – although it can be argued that the concept of corruption applies also to many purely private-sector situations.

© 2000 International Monetary Fund

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inadequate salaries with bribes, and “high-level” corruption, involving large-scale appropriation of state resources by the political and business elite. For what it is worth, anecdotal evidence of both types is common, ranging from reports of bribes required for many small-scale interactions with the state, to rumors of large kickbacks associated with privatizations and other deals with “big business.” As to the scale of corruption in absolute monetary terms, this is very difficult to gauge. The 1999 EBRD/World Bank survey reported that Russian firms paid an average of 4.1 percent of annual revenues in bribes, somewhat less than the CIS average of 5.7 percent. In addition there are sums associated with high-level corruption which are essentially impossible to estimate. Of course, any estimates of the “transaction volume” of corruption do not translate directly to economic losses associated with corruption, since their primary effect is the redistribution of resources. C. Causes of corruption The prevalence of corruption in Russia is often blamed on behavioral norms inherited from the Soviet period. It is easy to find reasons why this might be so: as far as we can tell corruption was widespread – certainly the broad reach of the state provided myriad opportunities – and cynical attitudes to the government and the law were fostered by inconsistencies and arbitrariness in the law, and the failure of the...
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