Corrosive Corruption

I have written a few posts recently regarding corruption in Russia.  As evidenced by an article in today's Washington Post, the sad truth about Russian corruption is that it silently and slowly subverts the nation by eroding citizens' confidence in the government and increases international distrust of Russia and Russians.  It is an acrid acid that is corroding the nation from the inside.  Here are a few telling quotes from the article:

There is, [Yelena Panfilova, director of the Moscow office of Transparency International] said, a "catastrophic gap" between civil society and "state sabotage." Corruption is everywhere - in hospitals and in schools, in utilities and courts, and especially in the ranks of the traffic police - but she said Russia is falling ever more deeply down the international list because of a sense of immunity in the higher levels of government ...

According to the report, Russia was the most corrupt among the G-20 nations. The United States, because of financial scandals, dropped out of the top 20 least-corrupt nations for the first time since Transparency International began issuing its annual list 15 years ago. The United States fell from 19th place to 22nd, behind Chile* ...

Nearly 80 percent of Russians say that corruption is a major problem and that it is much worse than it was 10 years ago, said Denis Volkov, who analyzes polling data for the Levada Center in Moscow. A majority say Medvedev is right about the problem of corruption and think he is sincere about it. But 71 percent in the most recent poll say any government efforts to fight corruption will amount in the end to window dressing ...

But now corruption has been monetized. Satarov [head of the Indem Foundation in Moscow] calculated in 2005 that corruption amounted to $316 billion that year, or more than Russia's federal budget. He thinks it has grown since then ... Corruption has become a nearly insurmountable obstacle to Russia's economic development, he said.

Because the way corruption appears to be structured here, which appears to be a pyramid scheme in which many participate while a few powerful elite get obscenely wealthy, there is little incentive to change the system.  Basically, because it tends to be those that are in control that benefit the most from corruption, there is no real incentive to kill the goose that lays the golden egg.

Transparency International's World Corruption Map

There are three potential end-states from the current situation:

1. A structural, anti-corruption reform cleans up Russia and makes the country a better place by making it more equitable and competitive on the world stage;
2. There is stasis, and the elite few keep the situation under control while trying to reap the profits of corruption;
3. Corruption becomes bad enough that it leads to radical structural changes in hopes of a better system, analogous to the 1917 revolution.

Scenario 1 is the only sane option forward.  This is because, while scenario 1 is the only positive path, scenarios 2 and 3 are not real options.  Scenario 2 requires discipline and strong centralized control.  But, maintaining discipline is hard when greed, a fundamental character of the human nature, will drive individuals towards extracting more profits from the system.  As such, scenario 2 will eventually lead to scenario 3.  Having lived through a revolution myself, I can attest that it hardly serves anyone's interest except those who have the inclination to be the most brutal for the longest period of time**.

As I have said repeatedly, Russia has tremendous potential and can credibly become a member of G5*** (versus G20).  Whether this becomes a reality heavily depends on the Russian will, capacity, and capability to implement scenario 1.

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* Indeed, US is moving in the wrong direction.  On 24 October I wrote: "Not long ago, similar [corruption] situations existed in the US (and unfortunately they seem to be making a comeback)."  The article's rankings prove the point.

**  The American Revolution is the only revolution in history that has not been followed by a prolonged period of bloodshed.  All other revolutions have been followed by a period of cataclysm.  This pattern is unlikely to be disrupted by future revolutions.

*** The G5 are five of the world's leading economies in mid-1970s — France, Germany, Japan, the United Kingdom, and the United States.