The Corporatist Culture of Corruption

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Transparency International, a non-governmental anti-corruption organization in Berlin, classifies Russia as one of the most corrupt nations in the world. The organization defines corruption explicitly: "The abuse of entrusted power for private gain." Transparency International's 2010 Corruption Perception Index, an assessment administrated by independent institutions on corruption in the public sector, ranked Russia 154th out of 178 nations, below Iran, Kenya, Cambodia, and Pakistan. The CPI measures corruption in the following way:

The surveys and assessments used to compile the index include questions relating to bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and questions that probe the strength and effectiveness of public sector anti-corruption efforts...It captures information about the administrative and political aspects of corruption.

In response to global distrust, the Anti-Corruption Council meeting on January 13, chaired by Russian President Dmitry Medvedev, outlined Russia's emphatic difficulties with bureaucracy. The President sketched out a plan for reform, while emphasizing the need for civilian cooperation in all anti-corruption initiatives.

Medvedev's plan involves a fine for bribery convictions equaling to 100 times the amount of the bribe. He also discussed an audit on the accuracy and thoroughness of government officials' income declarations, to catch false information and discrepant accounting practices. "If someone has purposely underestimated their declared capital," the President said, "This has to be punished."

At least Medvedev concedes there is a problem, as he stated to the Anti-Corruption Council, "You know the situation well. Let's admit that there are very few successes in this direction." The question is whether or not he will follow through with effective reform. Skeptics have valid concerns, considering the countries' authoritarian history and the hollow promises from Russian political leaders over the last several years.

Though more favorable to past decades, post-Soviet Russia is still plagued with a corporatist culture of corruption, where every day business life consists of backstreet dealing and political pyramid schemes. Corruption is so turbulent that according to the Indem think tank, corrupt government officials and businesses rake in $300 billion annually. Furthermore, Konstantin Chuichenko, head of the presidential financial oversight administration, said in late 2010 that corruption costs Russia 2.9 percent of GDP every year, with state procurement programs alone costing $33 billion.

Russian corporate debt to foreign lenders is high, with state-controlled entities such as Rosneft and Gazprom covering the bulk of the load. Gazprom, Russia's largest company and the biggest natural gas extractor in the world, is a prime example of Russia's corporatist culture. The government is adamant about taking on private assets, and in Gazprom's sake, it comes through buying up electricity-generating capabilities. This is common of the Russian business world, as companies lobby the government to pay off their debts, and government officials are repaid with financial kickbacks and high political stature.

In an open letter to President Medvedev, whistleblower Sergey Kolesnikov unveiled the planning of a $1 billion Italian-style palace on the Black Sea, claiming the project was mostly financed by Russian businessmen for the use of Prime Minister Vladimir Putin. This costly project includes a fitness spa, a hideaway "tea house," a concert amphitheater, and a pad for three helicopters, and is speculated to be used to entertain guests during the 2014 Winter Olympics in Sochi.

Kolesnikov regretfully notes, "This unpleasant tale of illegal payments, with threats, and with rampant corruption portends poorly for our beloved nation as we continue to struggle to improve the lives of all Russians and be a full partner in the global community of nations that ascribes to the rule of law."

He believes "The story of [the] palace began in 2000" when President Vladimir Putin took office, a man who appeared to be "a dynamic young president, willing and capable of making real change." Putin was not committed to change, but instead encouraged a bureaucracy of rampant corruption that turned business opportunities into a means of shoveling money into government officials' pockets.

A big part of the problem lies with the Russian people, who have an overwhelming desire to work for the bureaucratic regime that is the Russian government. They are resistant to change. Many have accepted the fact that corruption is the way business and politics function. Just like in many countries with bloated public sectors, people are comfortable in their cozy government jobs, and those already in government jobs enjoy the benefits of a corrupt political system.

This is typical of government intensive economies, as politics picks winners and losers rather than competitive behavior and natural market forces. A $500,000 company simply cannot compete with a $500 billion company that receives government subsidies and political favoritism. Corporate welfare and sleazy government relationships create unnatural monopolies, developed through a command economy market structure. The economy becomes not a free market, but a "corruption" market.

The United States must be cautious about its own government spending, as the past decade we have seen increasing government expansion and regulation. Stimulus spending often breeds illegitimate Congressional behavior, as politicians narrow their focus to a minute portion of the country - their constituents - while ignoring overall economic health. And the most influential constituents are corporations and special interests groups, who are prime candidates for kickbacks and legislative bargaining.

Though corruption in our political system is not near as intense as in the Russian government, American bureaucracy is a rising trend, particularly among politicians who aspire to tangible wealth and elite political status. The Bush Republicans, who started the trend, and the Obama Democrats, who are taking the trend to a whole new level, are slowly nudging us into this direction.

It is important to note that the Russian populace does have the ability to elect their political leaders, and though politicians do not always hold their promises, the Russian people can produce change. The same goes for Americans. The electorate decides the elected, and if the electorate submits to the flowery rhetoric of the bureaucrats, consequences will follow.

This is precisely what happened in the United States' 2008 elections, the results being an eruption of new spending and backroom deals that benefited an elite few. Closed door meetings and legislation jammed through Congress are dangerous measures/ they are the actions that define bureaucracy. If this imprudence does not cease, and the government does not prove signs of fiscal responsibility, the United States may someday join Russia in its corporatist culture of corruption.


Brian Koenig is a politics and economics writer, and is a regular contributor to The New American, American Thinker, and Hawaii Reporter.  He can be reached at

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