Corruption in Russia in '90s and '00s. Experts' opinion

“Find 10 differences”: did Russian corruption change in a decade?
01.12.2017
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On November 30, at the Higher School of Economics, Elena Panfilova and Yaroslav Kuzminov discussed corruption in modern Russia. The conversation took place in the framework of the discussion club of the Higher School of Economics’ Laboratory for Anti-Corruption Policy. Russiangate retells the main points of the discussion.


Participants:

Yaroslav Kuzminov, founder and rector of the National Research University Higher School of Economics, a deputy of the Moscow City Duma

Elena Panfilova, founder of the Russian branch of the international anti-corruption movement Transparency International, the head of the HSE’s Laboratory for Anti-Corruption Policy

An envelope for a "dear doctor" and quasi-charity

“Corruption is changing, perception of corruption is changing, as well,” says Elena Panfilova. “In 1999, when I was just beginning to work with corruption in Russia, I came across the text called Theses on Corruption by Yaroslav Kuzminov. You wrote about the corruption of the 1990s, then, the 2000s passed before your eyes, and now we’re in 2017. In 1999, you wrote that corruption has become systemic. Sounds like what we have nowadays, but has anything changed? How can we compare this corruption of the 1990s with the way you, a scientist, comprehend corruption today?

“The 1990s gave a classic example of corruption in the formation of private relations. You consider a corruption payment as inevitable: a “kickback” is not as an encumbrance, but is an integral part of the price,” says Yaroslav Kuzminov. “You price it in, you plan it. Your normal economic relations are mediated by corruption.

As a result of many years of the state’s efforts, today, we can say that corruption is not systemic. The state switched part of the corruption moves to itself. Moreover, we’re not talking about specific individuals: the general situation in the economy is such that virtually all economic relations are mediated by a certain payment. It is non-taxable and takes place for the companies of the first sector – oil industry. This is a fairly transparent contribution to a development fund, which nobody considers corrupt.

The second sector is medium business, construction. They are burdened with social “quasi-charity”. The governor, who lacks social facilities, negotiates with the business: for example, on financing a football team. This is not a corruption investment, but it is a forced charity in favor of the state. It cannot be avoided if you sit in the region for a long time.

And the third sector is small business, “stall business”, where the relations of the 90s were preserved. There, corrupt allocations are systemic. There is also common corruption – the corruption of a policeman, a doctor, a teacher of a secondary school. In one of the medical centers, a kiosk sells envelopes with the inscription: “To the Dear Doctor!” This is an absolutely remarkable institutionalization of corruption payments. This kind of common corruption has decreased – in particular, it is the effect of growing prosperity. In a number of Moscow schools, it is almost eradicated, the farther from Moscow – the more corruption there is.

Corruption in law enforcement

“The “silovik corruption” – corruption in the law enforcement bodies is not a common one, but a major one: raiding, extortions of bribes, framed up cases against medium and small entrepreneurs in order to seize business. In my opinion, nothing much has changed here,” Elena Panfilova continues the discussion.

“There was, and still is, what is called a “silovik corruption”. But we have  very important changes there,” Yaroslav Kuzminov considers. “Siloviki in the 1990s often acted as agents from business, that is, they were hired. Now, you get bullied by the system itself. Two-thirds of the pressure on business is not corrupt in nature – it's just a car that went off the road. In this case, we are dealing with the excesses of that system of state struggle – there are indicators of efficiency, there is a ticket quota system, given indicators.

Conflict of interest is not what it seems to be

“The second form of corruption is the conflict of interest, a story that has no end. It's about friendly networks. All researchers of corruption believe that we, as Russia (the state - Ed.), do not have effective mechanisms to deal with this precisely because we do not know how to control these networks and cannot even describe them approximately. Kickbacks are not so bad compared to the distribution of state contracts among affiliated entities. Has something changed compared to the 1990s?” asks Elena Panfilova.

“What is a conflict of interest? Very often there is an expansive interpretation of the conflict of interest, it is insane – everyone sitting in this room is connected through it. Therefore, it is necessary to have fairly clear legal and economic criteria for determining this concept. The first: the conflict of interest is not affiliation of structures and transactions, it’s a private interest. If you, as an academician of medical sciences, accepted your daughter to the same institution, it’s not a conflict of interest, this is nepotism, because you did not get any money for it.

Calling all these unpleasant things a conflict of interest is the fashion of the last ten years. If something does not fit into corruption, but we do not like it, then it's just a conflict of interest.

“So this is just a euphemism for other forms of corruption?” asks Elena Panfilova.

“For non-corruption, for other socially negative phenomena. A classic example of a conflict of interest is the situation where you have a majority in some kind of board and try to use that in your favor. Conflict of interest is a very dangerous thing: unfortunately, the conflict of interest model has a peculiarity to reach absurdity. We can use it for almost any action, any situation. If the working relationship is formed between a husband and a wife – is it a conflict of interest? The HSE, for example, does not welcome it. And if we’re talking about a relationship between two friends, what’s the essential difference?

Here, we just need to agree on something. Each community should have a convention. When the public understands that this is indecent, and the person involved gets ostracized, then it will work.

On exactions in the HSE

“People often say that the HSE is an island of transparency in the endless sea of ​​corruption in universities. Students still say that they are coming here because there are no exactions. How did you manage to build something like that, especially in the nineties? Are there any forms of corruption that still leak in?” asks Elena Panfilova.

“When we established the HSE in the nineties, there were several factors that allowed us to hold,” answers Kuzminov. “First, we sought support from the European Union, the French government, and looked at how the situation in the European universities. We saw how you can live without it.

Secondly, we were close to power. Every fifth professor of the Higher School of Economics was a major minister, he had his income. There was a very high level – we knew what we are working for, we were introducing reforms. Reformation and taking money from students do not really fit together.

The HSE in the 1990s began to form anti-corruption institutions. We introduced the public rating of students – if you bought a mark, it will kill everyone, and you will be ostracized by all students. We introduced written exams: it is much harder to cheat.

As soon as we ran out of the Western grants, we began to earn, and all the money was sent strictly to salaries. Already in the late nineties, our salaries began to differ from the usual market one: first twofold, then - threefold. There was something to lose.

In addition, collecting money from people, then teach them for five years and look them in the eyes is just unpleasant. I do not know what kind of psyche one should have to live in such a paradigm.

The corruption of the future

“What will corruption in Russia look like in ten years?” asks someone from the audience.

“I think that the corruption on the “second floor” – the corruption of medium-sized businesses – it has more chances to be limited,” says Yaroslav Kuzminov. “Here, the system is based on the fact that the state feeds this sector, forming an expectation of firms that they will receive not 7% ​​per annum, but 10-30%. Now, there are no economic grounds for such behavior anymore. The first step from the corruption relations will be taken by businessmen who will cease to be guided by the norm of profit of LUKOIL, and will be guided by the norm of profitability of European companies, which amounts to 10-15% per annum.

The availability of loans and mortgages will help. People become corrupt, because they can exist for 60 thousand rubles, but they cannot buy an apartment for their child, here’s when they break.

Common corruption will be greatly reduced, because the labor market will be shovel-mixed. Corruption of public procurement is a subjective issue. Here, everything depends on how the state will be ready to deal with this. With the siloviki, it is also a matter of political will.

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