2008 July 14 Monday
Russians Pay Big Price For Corruption And Bribery

The new Russian President Dmitry Medvedev proclaims that bribery in Russia should be rare. But Russian leaders have vowed to crack down on bribery in the past with seemingly little effect. The cost of corruption in Russia is very high.

Bribery enriches Russian bureaucrats and other officials to the tune of $120 billion annually, a senior Russian investigator said. "The revenues of our bureaucrats from corrupt activity, according to experts, account for one-third of our national budget," Vasily Piskaryov, a senior official at the Investigative Committee of the Prosecutor General's Office, said last month.

Other groups believe the scale is even bigger. The Indem Foundation, a Russian grass-roots organization, estimates that Russians pay $319 billion annually in bribes.

Without sufficient virtue in the people the society carries a big burden and pays for the effects of bribery through injustices and less competency.

"There is a very easy and light-hearted attitude to corruption in our country," said Panfilova of Transparency International. "But I keep trying to stress that corruption kills. Do you really want to take your children to see the doctor who bought his diploma? What about the drunk driver who pays, and then kills someone down the street?"

Another small-businessman, a glass company owner who wouldn't allow even his first name to be used, said he pays about $900 a month to various inspectors and police. If he refused, he said, they would paralyze his business with alleged fire, health, labor, tax or sanitary violations.

Maybe some of his regulatory violations are real and create safety dangers for his workers. When the regulators are corrupt not only do do businesses with high safety standards have to pay extortion but also unsafe businesses can pay bribery to avoid obeying beneficial rules.

Russia's $2 trillion economy is growing at 7% a year due to high oil and other commodities prices. If the estimates above are correct then bribery comes in at over 5% and perhaps as much as 15% of GDP. But some of that bribery is for services that the government funds (e.g. medical care). So the bribery would go down if the government privatized more services and the bribery is partially compensating for the government's underfunding of medical and other services.

More troubling is the corruption that forces businesses to pay protection money. Taxes collecting the same amount of money would cause far less damage because of the transparency and predictability of taxes versus extortion payments.

Share |      By Randall Parker at 2008 July 14 09:49 PM  Russia


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