Corruption

   During the Soviet period, the accumulation of commodities rather than capital drove corruption. Through extended informal networks, Soviet citizens used blat (connections) to acquire everything from meat and fruits to apartments and refrigerators. The Soviet command-and-control form of state capitalism created a nexus binding together Communist Party officials, firm managers, and commodity-hungry citizens. With the introduction of perestroika and the small-scale market reforms under Mikhail Gorbachev, entrepreneurs were able to take advantage of the so-called shortage economy to provide high-quality and in-demand goods to consumers. This required a rapid expansion and careful management of their blat-based networks; the most successful of these proto-businesspeople would emerge as oligarchs in the new regime.

   With the transition to a market-based system under Boris Yeltsin and his team of neo-liberal reformers, mass privatization and the capitalization of the post-Soviet economy occurred. Preexisting and new networks of budding capitalists and state officials transferred the Soviet state’s massive holdings—which once belonged, at least in name, to the people—to a small number of individuals in an environment devoid of transparency, creating massive wealth for a few and impoverishing tens of millions. A shadow economy grew rapidly in this environment, abetted by poorly paid bureaucrats who regularly shook down small-business owners for every sort of bribe imaginable.

   Large transnational companies hoping to invest in Russia’s hydrocarbon and mining industries also felt the pinch. Full and honest reporting of profits in the 1990s would result in taxation rates that would destroy any business. Consequently, the keeping of two sets of books and bribing of government officials became common business practices in Yeltsin’s Russia. Wage arrears, rampant inflation, evaporating savings, and low salaries promoted corruption in a number of professions beyond commerce, government, and industry. Police, particularly traffic cops, became infamous for their solicitation of bribes for the unlucky to avoid real and imagined offenses. In the field of education, it became commonplace for students to pay teachers for grades; a big bribe would result in a good grade, while a small one would produce a poorer mark. In the health care industry, doctors would see patients who bribed them before those who did not; access to certain treatments was also informally monetized. As a result, corruption became a “normal” fact of life in postSoviet Russia, with payments to corrupt state employees taking the place of paying taxes. Under Vladimir Putin, a vigorous anticorruption campaign was announced. While it is unclear if actual levels of corruption have dropped since 2000, public awareness of such practices has increased dramatically, partially as a result of enforcement and publicized court cases. In 2008 alone, 12,000 cases were filed against officials accused of corruption. Their collective take from such bribes was estimated to equal one-third of the state’s budget. Corruption as an aspect of daily life has decreased since 2000, especially since a majority of employees now receive their wages through bank transfers. Furthermore, a new system of examination was introduced in Russian universities to prevent malfeasance. The availability of private health care has also made corruption less pervasive in the medical field.

   See also Oil; Natural gas.