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    Opinion: The anatomy of Russian corruption

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    MOSCOW, (RIA Novosti political commentator Peter Lavelle). INDEM, the independent and highly respected think-tank, released its annual report on corruption in Russia this week.

    Its findings are hardly encouraging, but not unexpected either. Corruption in Russia has grown ten-fold over the last 4 years. Instead of making a commitment to deal with this grave social malady, the authorities have accepted the institutionalization of corruption as part of Russian economic expansion.

    INDEM's "Corruption in Russia: Dynamics and Perspectives" report claims the average bribe in 2001 was $10,200 and has increased to $135,000 in 2005. The report claims bribes increased 10-fold since 2001 and equal to two and a half times the current federal budget.

    The authorities have recognized the damage corruption inflicts upon the economy. To counter the temptation to accept bribes for political favors, 35,000 state officials in the federal bureaucracy, representing 10% of all state employees, were given a five-fold pay increase roughly a year ago. These employees are now paid $500 a month, instead of $100. Most observers applauded the government's move as a good first step to fight corruption, but paying some state employees more has not stemmed Russia's oldest social malady called "rent-seeking."

    Corruption has always been part of Russia's political life, be it under the Tsars, Communist Commissars, former president Boris Yeltsin, or today under President Vladimir Putin. Holding a high state office has always been a means to serve the state and grease one's palm -- there is a long tradition of officials using the state to extract "rents" for themselves. As long as the state's interests were served, more often than not, the state turned a blind eye to corruption. Rent seeking has always damaged Russia's economic potential.

    The Yeltsin years are indistinguishable from the concept of corruption gone berserk. Apologists for this phenomenon remain notorious to this day. Liberal politicians such as Anatoly Chubais and Boris Nemtsov still claim that corruption then was an unfortunate part of the process of transforming Russia into a market economy. This kind of reasoning might have resonated with the chaotic reality of the times, but today such reasoning prevents Russia attaining the normality so many in this country claim to desire.

    Since Yeltsin left office, state and society have developed a "normalized" corruption equilibrium partly because of the enormous expansion of the economy since 2000 and annual inflation growth.

    This equilibrium can be explained as follows. As long as there is a modicum of economic stability, most Russians -- including the fledging middle class - do not appear very interested in tinkering with the status quo. Bribery is acceptable as long as the sums are not exuberant and the desired goal of the bribe is achieved. Bribery is predictable and often the first form of action to resolve a problem with the state. Being able to bribe officials and "arrange things" is almost chic.

    Given this new social arrangement surrounding corruption, Putin's hope of making bribes less attractive by increasing wages for some civil servants appears to be problematic at best.

    International experience demonstrates there is little statistical correlation between state officials' pay and the level of corruption in a government. Higher state salaries can hardly compete with salaries earned by top managers in the private sector. A state salary of $500 remains a pittance compared to the hot money floating around in Russia's booming economy. It's hard to see official rent-seeking meaningfully impacted even with this five-fold pay increase.

    In Russia's case, higher state salaries may in no way be an incentive to break with past corrupt practices. Holding a state office in Russia is also about the ability to interpret laws as the bureaucrat sees fit. Clearly a pay increase will be welcomed, but it also remains to seen if a higher salary will change the habits of governance so deeply embedded in state service. It is a mistake to believe that more money can always change habits, practices and mentalities.

    The bribe givers, particularly the very wealthy not averse to paying off a bureaucrat, will most likely be indifferent toward a bureaucrat who now earns $500. Because of the huge income differentials in Russia, $500 is a sum many people are willing to pay for a meal in a posh Moscow restaurant.

    However, as the INDEM report points out, the "corruption equilibrium" may now no longer serve its purpose. In the past, the effectiveness of a bribe was a near certainty; today paying a bribe does not assure the "service" will be provided. Not only is corruption unhealthy for a society, but if the rules of corruption become uncertain, political instability can result.

    The authorities have taken a first step and have sent the message that corruption is an issue that needs to be addressed - finally. Increasing the salary of officials has little impact on behaviors. What needs to be confronted is what public service means in Russia. Once serving the state can create a sense of pride, salaries and rent-seeking will diminish in importance.

    The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

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