Business Magazine

20 Years of Corruption

Posted on the 15 December 2011 by Center For International Private Enterprise @CIPEglobal
Traffic policeman stops driver

A traffic policeman stops a driver in Moscow. (RIA-Novosti)

As we reflect on the 20th anniversary of the collapse of the Soviet Union and the subsequent development of former Soviet republics as independent countries, the story of corruption is a difficult one to avoid.

Corruption, in many ways, became synonymous with the early years of transition. Over the years it has grown to be the defining feature of many of the today’s political and economic systems in the region. All this despite the increasing rhetoric about the need to fight it.

After the Fall: 20 Years of Post-Soviet Reform
Successful efforts to combat corruption are few, and even success stories sometimes have a dark side. It seems to cement its hold on economies despite many efforts to rid them of it. Yet, as I am constantly reminded by those in the region who continue to mount anti-corruption programs, it is important to stay optimistic.

There are several corruption lessons that can be learned from its evolution in the post-Soviet space.

First, it is that petty corruption is not OK. As transition in many of the countries got underway, the general public’s attitude towards petty corruption was somewhat accepting. It wasn’t seen as an issue if you had to pay a bribe to get your grades in school or to pay off a traffic police officer.

Yet experience has shown that it is difficult to separate such “petty” corruption from high-level corruption. As corruption permeates  the institutional fabric of society, it affects countries at all levels. From the practical standpoint, it is difficult to wave off corruption at some levels as acceptable and expect that it wouldn’t take place at other levels. And even small bribes can have really high costs.

Second, business can and should play an active role in fighting corruption. The business community is often seen as a facilitator of corruption, rather than a solution to it. Yet, while some companies bribe to get a competitive advantage, small and medium-sized companies are often victims of what is essentially extortion.

Small businesses and entrepreneurs don’t bribe to get a competitive advantage, they have to pay off to survive. This was true whether you were trying to run a business in Kyrgyzstan or in Ukraine. The challenge is capitalizing on the frustrations of business with corruption and mobilizing them for action.

Third, it is impossible to fight corruption in highly corrupt countries by simply punishing people for participating in it. While punishment as a means of deterrence is important, it is also important to focus on institutional dimensions of corruption: figuring out what allows corruption to occur in the first place and then reforming legal, regulatory, or political structures to change the incentives. Those who abuse public office can be removed, but when the whole system is built around corruption, there are no guarantees that the  next person won’t do the same .

And perhaps the most important lesson that unites all countries in the former Soviet space in regards to corruption is lack of protection for whistleblowers: those who decide to take up the fight against corruption and sound the alarm on illicit and unethical transactions. Global Integrity does a great job measuring this lack of protection. While the Magnitsky case has become perhaps the most famous one, there is no lack of stories from the region where accusers become the accused, or, in most cases, never report corruption at all due to threats to their personal safety.

The positive side of the growth of corruption in the region – if one can say so – is the increasing public frustration. Whereas ten or twenty years ago the public was willing to accept corruption as part of life, the new generation is increasingly vocal against it, even if not yet en masse. The growth of independent media, along with the growing costs of corruption, have played their part. Perhaps, over the next 20 years, civil society will be able to capitalize on changing attitudes and turn the tide.

This post is part of a series on the fall of the Soviet Union, the 20 years of reforms that followed, and the challenges that lie ahead.

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