Russian Politics and Law, vol. 47, no. 4, July–August 2009, pp. 8–27.

© 2009 M.E. Sharpe, Inc. All rights reserved.

ISSN 1061–1940/2009 $9.50 + 0.00.
DOI 10.2753/RUP1061-1940470401

Svetlana Iu. Barsukova

Corruption
Academic Debates and Russian Reality

The author contrasts the approaches to the analysis of corruption taken

by neoclassical economists and by functionalists and institutionalists. She
compares the potential for corruption inherent in competitive, oligarchic,
and state–corporate market models and argues that Russia’s current tran-
sition from the oligarchic to the state–corporate model raises the level of
corruption and changes its character.
In its most general form, corruption (from the Latin verb rumpere, mean-
ing “to damage, break, violate something”) may be defined as an official’s
use of his position for purposes of private advantage. The manifestations
of corruption are innumerable. They include informal payments in the
context of business–state relations (“business” corruption), the suborna-
tion by one commercial firm of officials employed by another (“corpo-
rate” corruption), the endless gifts and payments that consumers offer to
public service authorities (“everyday” corruption), and the promotion of
business interests through the secret provision of funds to party bosses
(“party” corruption). But in all these cases we are dealing, in essence,
with a single phenomenon. The potential for corruption in its general
form depends directly on the monopoly held by specific actors over the
performance of certain kinds of work, on the lack of effective control over

English translation © 2009 M.E. Sharpe, Inc., from the Russian text © 2008 the Rus-
sian Academy of Sciences, the Presidium of the Russian Academy of Sciences, and
the author. “Korruptsiia: nauchnye debaty i rossiiskaia real’nost’,” Obshchestvennye
nauki i sovremennost’, 2008, no. 5, pp. 36–47. Translated by Stephen D. Shenfield.
Svetlana Iur’evna Barsukova, Doctor of Sociology, is a professor at the State
University—Higher School of Economics.

8 
 july–august 2009  9

them, and inversely on the likelihood and severity of penalties for abuses.
Realization of this potential is the outcome of a complex combination of
factors that go far beyond the calculable foundations of activity.
Representatives of various disciplines try to “decode” the phenomenon
of corruption. Different sciences compete to comprehend the mechanism
of corruption, the motives of its participants, and its consequences for
society, to assess its expediency and the limits to the fight against it. I
present the field of possible approaches to the study of corruption by
giving the floor to specialists in economics (in its neoclassical version)
and in economic sociology; then I discuss the consequences of corruption
for society and the likely outlook for the development of corruption in
the context of the changes taking place in Russia.

Approaches to the Study of Corruption: Economists

Versus Economic Sociologists

Economists have made a notable contribution to studying the essence

of corruption. Various schools within economics have developed quite
distinct views. For instance, members of the institutional school come
quite close to the conclusions drawn by sociologists and anthropologists.
If, however, we consider the methodological core of economic analysis,
it finds most concentrated expression in the neoclassical tradition of
economic analysis.

The Neoclassical Approach: Corrupt Relations as a Choice

Made by Rational Actors

The economic analysis of corruption started to undergo active develop-

ment in the 1970s, when [supporters of] the neoclassical (neoliberal)
doctrine, which is based on individualism and utilitarianism, seized
the leadership of methodology. Economic studies of corruption fit this
phenomenon into the general logical schema of neoliberal methodol-
ogy: actors try to find the optimal method of realizing their interests
under conditions of limited resources (Gary Becker, Robert W. Vishny,
Francis Lui, Susan Rose-Ackerman, Vito Tanzi, Andrei Shleifer, and
others). That is, corruption is a rational method of optimizing costs.
In this respect there are no substantial differences in the behavior of
politicians, officials, and business people: they all try to exploit exist-
ing resource constraints to maximize their own advantage; this found
10 russian politics and law

reflection in the concept “political businessman” (a term developed by

Donatella della Porta). Politicians work with political capital, officials
with administrative capital, business people with economic capital. At
the same time, the goals of participants in corrupt deals are not confined
to material investments: they also have an interest in getting reelected,
in keeping their position in the administrative hierarchy, or in obtaining
new business opportunities.
Economic theories, for all their methodological differences, assume
in studying corruption that the behavior of those who engage in it is ra-
tional. The economic modeling of corruption is, however, quite diverse.
Some authors develop the theme of corruption within the framework of
standard neoliberal theory (perfect competition, rationality of individuals,
and absence of state intervention); others allow for the imperfection of
markets and for a limited rationality of behavior. In any case, the deci-
sion to give or take a bribe rests on the same sort of calculation of costs
and benefits as any other economic decision.
To explain the causes and essence of corrupt relationships, economists
usually use the model “principal—agent—client.” In this model, the central
government acts as the principal: it sets the rules and assigns specific tasks
to the agents—middle and lower-level officials. The officials act here as
intermediaries between the central government and the clients—individual
citizens or firms. That is, the official (the agent) carries out the will of the
subject of power (the principal) in interaction with a private person or firm
(the client). The principal sets parameters (boundary conditions) that guide
the agent in exercising operational management. In a system of taxation,
for example, the principal is the state, which determines tax policy; the
agents are the tax inspectors; and all taxpayers are clients.
The interests of the agent and of the principal are, of course, not
identical. Corruption is a process in which the agent, for corresponding
remuneration, acts in the interests of the client while remaining within
the administrative parameters set by the principal. The principal is unable
to prevent corruption for three reasons: first, complex decisions cannot
be standardized, so there are no criteria by which they can be assessed;
second, asymmetry of information limits the effectiveness of oversight;
and third, by no means does the corruption of the agent necessarily
impede the goals of the principal: the goals of agent and principal may
be achieved simultaneously. Moreover, the agent will place a high value
on the position that brings him or her a corrupt income and therefore
promptly and efficiently fulfill all instructions of the principal.
 july–august 2009  11

The client may resort to direct contact with the principal, bypassing the
agent; this gives rise to a division into political corruption (at the stage
of adopting laws) and administrative corruption (at the stage of their ap-
plication). Several researchers, however, consider it incorrect to define a
client’s resort to the principal as corruption, proposing instead the term
“capture of power.” In any case, the theory of agent-mediated relations
describes only the small segment of corruption that is confined to the
bureaucratic milieu. In fact, corruption is regarded as a clandestine tax
on the private sector that officials collect because they hold a monopoly
on making decisions that are important for business (“privatization of
the state”).
This model (principal—agent—client) demonstrates clearly that the
main problem with the fight against corruption in the bureaucratic milieu
is not that political will is lacking or that anticorruption laws are too
lenient, but that an underlying condition of corruption is fundamentally
ineradicable. I have in mind the freedom of maneuver that is given to
officials—that is, their right to alter decisions at their own discretion.
Where they have no such right (by law, for example, a citizen must be
issued a passport at the age of fourteen, provided that formal require-
ments are satisfied), there is no corruption. But it is an essential feature
of administration that without the possibility of “responding to circum-
stances” at each level of the administrative hierarchy, the bureaucratic
machine soon grinds to a halt. A formal algorithm for administrative
decision making can be applied only to standard situations. Having to
choose a winning tender, let us say, is plainly not such a situation. Mat-
ters are clearer on the ground, and local officials take advantage of this.
If we set a goal of formalizing all actions by officials, then corruption
will be greatly reduced, if not altogether eliminated. Administration will
suffer, however, not to mention the costs of oversight. Society will pay
too high a price for the fight against corruption. The task of the state is,
therefore, not to eradicate corruption (that is impossible) but to limit it to
the point where the socioeconomic costs and benefits of the fight against
corruption are in equilibrium.
The model of principal–agent relations also applies to “corporate”
corruption. The shareholders (owners), acting as principals, try to achieve
their goals by hiring managers (agents in terms of the model) but are
compelled to give the managers freedom of maneuver by relaxing the
parameters of operational management. As a result, corruption becomes
possible as managers, in interaction with other market actors, pursue goals
12 russian politics and law

of their own and neglect or damage the interests of the shareholders.

The theme of crime and punishment is traditionally a favorite of neo-
classical economists. The three mainstays of the fight against corruption
in the bureaucratic milieu are oversight, incentives to promote honest
service, and sanctions for corrupt behavior. To compare expected gain
with possible costs, an economic model is constructed of corruption at the
micro level. Sanctions are assessed as the sum of direct losses (fine, con-
fiscation of property) and indirect costs (benefits forgone in connection
with arrest and loss of work). Besides the magnitude of sanctions, account
is taken of the probability of getting caught. That is, corrupt behavior is
only partly constrained by the system of penalties. No less important a
role is played by incentives to noncorrupt behavior, which increase the
indirect costs of a crime associated with loss of the legal income, public
respect, and privileges due to representatives of state power.
The assessment of risk depends on the position of the official and
on the information available to him. The easier it is to expose corrupt
acts, the higher the subjective assessment of risk. At the same time,
dependence of the penalty on the size of a bribe makes for smaller but
more numerous bribes. Conversely, a high likelihood of getting caught
reduces the volume of corruption-related services but increases the size
of a one-time bribe.
For all the diversity of economic models of corruption, one principle
unites them. They all ignore the social rootedness of economic actors,
understood as their involvement in a social milieu. Although mention
is made of morality and public pressure, in practice these are not taken
into consideration. This provokes strong protest from economic sociolo-
gists and from anthropologists and institutionalist economists, who are
methodologically close to the former.

The Economic Sociology Approach: Corruption as

Interaction Between Socially Rooted Actors

The main premise underlying studies of corruption by economic sociolo-

gists is to attempt to look at the phenomenon through the eyes of partici-
pants, who cannot be reduced to the model’s rational allocators of limited
resources. These studies share a categorical rejection of extrahistorical
and extracultural “knowledge” of corruption.
Indeed, economic history knows of numerous cases in which social
norms have restrained corruption motivated by economic expediency or,
 july–august 2009  13

conversely, in which social norms have fostered corruption on a scale that

is hard to explain. Specific ethnocultural and religious features, family
structure, network contacts, corporate culture, professional ethics, ideol-
ogy, customs, and other “social membranes” constrain an individual’s
behavior, substantially transforming that person’s idea of what is right
and proper.
For example, levels of corruption varied widely among the republics of
the Soviet Union; this was connected with differences in national culture.
The scale of corruption is strikingly different in Chile and in Mexico,
which are at a very similar level of economic development (Chile is
“cleaner”). Countries with a Confucian culture (Singapore, Japan) have
less corruption than countries in the same region that historically have
not adopted Confucianism as the code of conduct of the honest and wise
official (Pakistan, India).
It is not the calculable rationality of the individual but ideological
orientations and social norms that determine the scale of corruption
in a society. Even if the army of corrupt officials contracts as the state
becomes less involved in the economy, in the absence of a moral taboo
this victory may well be “compensated for” by a growth in corporate
bribes to facilitate the movement of goods and the purchase of raw and
other materials.
Social influences also reveal themselves in the circumstance that the
legal definition of corruption may not coincide with the boundaries of
morally condemned behavior. People are capable of condemning acts
in which the law finds no corpora delicti and, conversely, of justifying
acts that the law treats as corruption. Social norms are extremely inert,
while the law may be changed depending on the situation—in particular,
in response to the needs of one or another elite group. The holders of
state power are able, by changing the laws, to create scope for legally
enriching themselves, but they are unable to give these laws legitimacy.
Public opinion, therefore, usually exaggerates the scale of corruption,
whereas the power elite tends to understate it.
As for the gain accruing to the corrupt official, it is not confined to
the total “business supply” but includes perception of the bribe as an
element in the collective ethic of a certain group that induces a feeling
of complicity and inclusion in the group. Corruption may arise not as
a type of subornation but as an act by which officials demonstrate their
loyalty to relatives, political parties, former colleagues, and so on.
The subjective perception of risk is lower if an official shares a bribe
14 russian politics and law

with his superiors. He creates a network of participants in the corrupt

deal; and the more numerous they are, the smaller his feeling of guilt and
the lower the risk of spoiling his reputation in the event of exposure. The
network approach refutes the methodology based on individual rational-
ity, even though an individual makes the decision to accept a bribe. Its
focus is not so much on the balance of the costs and benefits of this step as
on norms of behavior in network structures. Networks possess a potential
for mutual aid and solidarity; the rights and obligations of membership
in a network may be more important than the utilitarian interest of the
individual and his obligations to the organization.
Corruption is inseparable from social practices that can be reduced to
imperatives: bargain, give gifts, help. It is precisely to these imperatives
that corruption owes its cultural justification and routinization.
Bargaining is conducted not only over prices but also over the rules
for setting prices. The Western treatment of the bribe as a commodi-
fied form of negotiation is complemented by the fight to choose a legal
register that limits transaction costs. Inasmuch as developing countries
and countries with a transitional economy have to deal with accretions
of legal registers, together with the forms of power that embody them,
the size of bribes is much more variable than in the West and the search
for channels of bribery more difficult. Rules, their applicability, and
their mode of interpretation are turned into objects of bargaining. The
art of maneuver under conditions of normative pluralism increases the
economic effect of a bargain by comparison with Western practice.
Gift giving in Russia, as in many other “non-Western” countries, is
stipulated in so many situations that the gift becomes an element in an
entire spectrum of interactions. In countries where gifts facilitate a wide
range of relations, bribery can hardly be distinguished from culturally
mandated gift giving. An extensive and dense web of reciprocal interac-
tions, which is extremely characteristic of Russia, creates conditions
under which unlawful gifts can be justified. The borderline between cor-
ruption and everyday practices of gift giving becomes very arbitrary.
Helping members of one’s social network is simultaneously a heavy
burden and a means of accumulating social capital. In many countries
relations among neighbors retain their significance; ties of kinship and
friendship are extremely important. Under these conditions, the individual
feels obligations to an enormous number of people. In a poverty-stricken
country, the state employee, possessing certain advantages, automatically
serves as a channel for redistributing benefits to poor relatives. The official
 july–august 2009  15

is caught between the upper millstone of formal requirements and the

lower millstone of informal norms that oblige him to help others. The
latter norms are bolstered by the fear of social isolation. Obligations to
help others are so diverse that a bribe is necessary only in extreme cases.
Only those who lack social capital resort to bribery. This leads to the
justification of “official abuses.” Only the accumulation of wealth that
does not serve as a resource for the network attracts censure.
A clear example of ignoring the historical and social context of cor-
rupt interactions is provided by all sorts of intercountry ratings based on
corruption indices. As is well known, these ratings favor the developed
countries of the West. It is not hard to guess that developing countries and
countries with a transitional economy, including Russia, come last.
But it is worth remembering how long European countries took to
achieve a separation of public and private spheres, to develop a rational
bureaucracy. As little as a century and a half ago, state offices in Europe
could be mortgaged, given as dowry, purchased, and often inherited.
In Spain, for instance, posts in the colonies were officially put up for
auction. Dutch officials paid for a “license to occupy a post” in colonial
Batavia and recovered the cost by establishing a market for conditions
under which Dutch businesses could enter the colony. The British crown
sold an enormous number of sinecures. At least until the middle of the
nineteenth century, a state office was regarded in most Western societies
as a kind of private property that yielded a signficant profit. But no one
called this corruption. The corresponding practices were either lawful
or were treated by the law in an ambiguous fashion. Only at the end of
the nineteenth century did there emerge the ethical, organizational, and
political–legal foundations for interpreting use of a state office for per-
sonal purposes as corruption. New legal standards for the performance
of state service bolstered this interpretation.
The developing countries were expected to achieve this outcome
instantaneously, almost from the day that they proclaimed their national
independence. Many states (in Africa, in particular) were created by the
stroke of a colonialist pen, receiving as a bonus a readymade package
of legislative norms. As the West declared a crusade against corruption,
the developing countries, in order not to bring the ire of the West down
on their heads and lose their eligibility for aid from the World Bank,
were compelled to adopt the strictest standards for the separation of the
public and private spheres. But social logic dissolved “implanted” laws
into a porridge of informal practices, demonstrating once again that such
16 russian politics and law

laws are ignored in developing countries not because the latter are sunk
in barbarism but because such laws are artificial in the context of those
countries’ cultural norms. The corruption of the non-West is a result of
applying Western yardsticks to the situation. When the same gauges are
used to assess different historical and cultural realities, stunning results
are guaranteed. The ideological purpose of these ratings is to shape the
ideology of the law-abiding West by means of comparison with the cor-
rupt and barbaric non-West (Bor’ba 2007).
There is no need, however, to deny that the ratings also serve purely
pragmatic purposes. The West is trying to test the world for the safety
of its investments. Corruption is a factor that threatens investors, since
economic indicators strongly depend on factors of a noneconomic nature
that the new investor is hardly in a position to control. It is for precisely
this reason that the Corruption Perceptions Index (CPI) plays a role not
only in political but also in economic life.
Ascertainment of a high level of corruption is followed by calls to
fight corruption, phrased above all in terms of the democratization of the
political system. There is neither logical nor empirical proof, however,
that a multiparty democracy generates a less corrupt system of power
than, let us say, a military dictatorship or a one-party regime. The differ-
ence lies not in the scale of corrupt interactions but in their form, agents,
mechanisms, and purposes and in the system of counterweights to the
spread of corruption.
It should not be forgotten that it was precisely the corruption of party
bosses (to judge their behavior by contemporary standards) that at the
beginning of the twentieth century helped parties in Western countries
to entrench themselves in the role of representatives of the interests of
various social groups. For many years, in a three-way dialogue among
government, business, and the electorate, use was made in the West—
quite legally and on a massive scale—of practices that later came to be
regarded as corrupt. It was precisely the trade in party mandates and the
absolutely unconcealed dependence of a deputy’s stance on monetary
reward that enabled parties to become a powerful channel of communi-
cation between government and business. Parties were “machines” for
forcing through paid-for decisions. In the course of time, the process
acquired a more orderly character: business came to be represented
by trade associations, and parties became “specialized”—that is, they
began to press not for any and all decisions but only for those that cor-
responded to their political image. Some practices were legalized in the
 july–august 2009  17

form of laws on lobbying and rules for the financing of political parties,
whereas others fell back into the “shadows.” But even today, if we are
to believe Transparency International, the most corrupt state institution
in the world is the political party (according to a questionnaire survey
conducted in 2005).
Yet countries where party building began much later were urged to
play by the new rules right away. Developing democracies are expected
to succeed at party building under the supervision of anticorruption
forces. Several countries with emerging party systems, however, find
themselves in a situation reminiscent of that which prevailed in the United
States at the dawn of party building (that is, at the end of the nineteenth
and the beginning of the twentieth century): voters lack occupational-
group and class self-consciousness and have little interest in politics. In
this context, political corruption has every opportunity to develop—not
because a given country is backward, but because it is going through a
specific period.
Analysis of the social rootedness of “corrupt” behavior enables us to
draw two conclusions. First, corruption is not an objective phenomenon
but a diagnosis of a society from a certain analytical vantage point. Such
a vantage point emerged in the West as a result of the formation of a
rational bureaucracy and the separation of private and public spheres.
Where this analytical schema is inadequate to socioeconomic reality, the
term “corruption” loses its content and turns into an ideological marker
and a means of pressure against political adversaries. Second, the use
of an official post for personal purposes is irreducible to a search for
economic rent, being conditioned by a broad complex of extraeconomic
calculations. For all its costs and risks, the bribe may be attractive as an
element of a group ethic, as an official’s act of demonstrative loyalty to
his social milieu, and as a method of joining networks that promise new
resource and status opportunities.
But perhaps the attention that corruption draws is exclusively specula-
tive? What kinds of consequences does it have for the economy and for
the sociopolitical sphere?

The Influence of Corruption on the Development of Society

The topicality of the theme of corruption is connected with the diversity

of its consequences. Besides its direct influence on economic processes,
it exerts an impact on the sociopolitical sphere.
18 russian politics and law

The negative influence of corruption on the economy was described

in the 1960s by Gunnar Myrdal—founder of the economic study of
corruption. Generalizing from the experience of modernization in the
third world, he branded corruption as an obstacle to economic devel-
opment. This position is shared by many contemporary investigators,
who note that:
—as a rule, funds accumulated through bribery sit idle in the form of
real estate, valuables, and savings (preferably in foreign banks);
—even if entrepreneurs manage to avoid paying bribes, they are com-
pelled to spend time talking with harassing officials;
—inefficient projects are supported, bloated estimates are funded, and
inefficient contractors are selected;
—corruption encourages officials to create an excessive number of
instructions, so that they can then “help” observe them for additional
payment;
—qualified staff who find systems of bribery morally unacceptable
are lost to state service;
—obstacles arise to the implementation of state macroeconomic
policy, because the corrupt lower and middle levels of the administra-
tive system, on the one hand, distort the information conveyed to the
government and, on the other hand, subordinate the achievement of set
goals to their own interests;
—corruption distorts the structure of state expenditure, because cor-
rupt politicians and officials are inclined to direct state resources into
spheres of activity where strict control is impossible and there is more
opportunity to extort bribes;
—the expenses of entrepreneurship are increased (especially for small
firms, which are more helpless in the face of extortionists) as bribes
become a sort of additional taxation; and
—corruption and bureaucratic red tape associated with the regis-
tration of business documents deter investment (especially foreign
investment).
Nevertheless, there is no clear negative correlation between the
level of corruption and the rate of economic development. This connec-
tion is detectable only as a general tendency, to which there are many
exceptions.
The negative influence of corruption on sociopolitical processes re-
veals itself in the following ways:
—social injustice is exacerbated in the form of dishonest competition
 july–august 2009  19

among firms and unjustified redistribution of population incomes. After

all, the largest bribe may be offered by a firm that is not the most ef-
ficient or by a criminal organization. The result is that the incomes of
those who give or take bribes increase, while the incomes of law-abiding
citizens decline;
—corruption in the tax collection system enables the wealthy to avoid
paying taxes and places a heavier tax burden on the shoulders of poorer
citizens;
—when corruption in the upper echelons of power becomes known
to the public, it undermines trust in those echelons and so casts doubt
on their legitimacy;
—corrupt administrators are psychologically unprepared to sacrifice
personal interests for the sake of social development;
—corruption discredits the judicial system, because the courts favor
those with the most money and the fewest moral inhibitions;
—corruption poses a threat to democracy, because it deprives people
of the moral incentives to take part in elections;
—the slogan of the fight against corruption may legitimize a turn
toward dictatorship and away from market reforms;
—corruption in the agencies responsible for law enforcement (the
armed forces, the police, the courts) enables organized crime to expand its
activity in the private sector and even to create a symbiosis of organized
crime and these agencies; and
—corrupt regimes are usually unpopular and therefore politically
unstable. The reputation of the Soviet nomenklatura as a corrupt corpo-
ration in large measure legitimized the overthrow of the Soviet system.
When, however, the Soviet level of corruption was vastly surpassed in
post-Soviet Russia, this led to the rapid decline in the authority of the
Yeltsin regime.
At the same time, we should not ignore the positive function of corrup-
tion as a shock absorber of institutional shifts. Max Weber was one of the
first to point this out, at the beginning of the twentieth century. Rejecting
the previously widespread moralizing tradition, he demonstrated the place
of corruption in the formative process of a rational bureaucracy as a his-
torically transient form of administration. Thereby he laid the foundation
of the functional approach, which regards corruption as a mechanism for
removing the tension between emerging and outdated norms.
Contemporary supporters of the institutional approach are often
inclined partly to justify corruption, if not from a moral then from a
20 russian politics and law

functional standpoint, as a means of redistributing resources from an old

to a new elite without causing a direct clash between them. They regard
corruption as a rational alternative to an armed struggle for power. The
more radical the change in social course and the more striking the diver-
gence of norms and goals between the declining and the rising order, the
larger the scale of corruption. Using as examples first the developing and
then the developed countries, they have shown the positive contribution
of corruption to the flexible and conflict-free transformation of institu-
tions. Thanks to this approach, corruption appears not as a type of deviant
behavior but as the discrepancy between formerly established norms and
the behavioral models called forth by new conditions.
Corruption also has other “virtues”: it mediates a dialogue between
living people and the faceless state; it gives the dialogue between official
positions the form of personal relationships; it stimulates entrepreneur-
ship by removing a series of bureaucratic prohibitions; it makes the
administrative machine work faster; it reduces uncertainty regarding
the price of resources distributed by the state, the size of bribes being
predictable; and it reveals the real correlation of supply and demand for
state-produced goods and services, facilitating subsequent correction of
prices. The impact of corruption on economic growth, however, depends
on its scale. Some analysts take the view that a small amount of corrup-
tion is permissible and even beneficial, but that its proliferation beyond
a certain limit blocks economic development.
Studies of market reforms in the post-Soviet states are indicative.
Corruption at the end of the 1980s, when socialism was at the point of
collapse, not only impeded the forward movement of society along the
“road to communism” but also, in fact, created a shadow mechanism by
which economic actors could realize their interests. Economic corrup-
tion did not simply undermine trust in the state authorities; it enabled
covert entrepreneurs to balance between formal prohibition and actual
permission. Thanks to corruption, there took shape a new economic
reality whose actors had an interest in legalizing their opportunities and
achievements and subsequently became the battering ram of perestroika.
In the first years after the disintegration of the Soviet Union, it was there-
fore widely believed that if officials were allowed to take “gifts” they
would work harder, and that corruption helps entrepreneurs overcome
bureaucratic barriers.
According to the logic of the functionalists, corruption dies out on
its own as confrontation between normative systems weakens, as new
 july–august 2009  21

rules supplant the old and one elite replaces another. In other words,
corruption was widespread in Russia in the 1990s because institutions
functioned poorly or in many cases did not exist, with institutional sys-
tems of the old and new type jumbled together. In this sense corruption
realized its positive potential, compensating for numerous institutional
mishaps and creating a compromise equilibrium between departing and
emerging elites. According to this logic, as the new institutional system
is consolidated and the “dual power” of elites overcome—this was the
achievement of the 2000s—corruption, having exhausted its positive
potential, should disappear from the scene.
Practical experience, however, does not permit us to draw such a
conclusion. Although the period of stormy sociopolitical and economic
change in post-Soviet Russia has come to an end, corruption has not
disappeared or greatly declined. Similarly, in many developing coun-
tries corruption did not decline after completion of a modernizing spurt.
Doubts have emerged concerning the correctness of the idea that cor-
ruption will die out as it exhausts its functional purpose of reconciling
competing normative systems during transitional periods.

Corruption in Russia: The Transition from Oligarchic to

State–Corporate Capitalism

Let me cite a few figures. According to the Corruption Perceptions In-

dex calculated by Transparency International, Russia in 2006 occupied
121st place, heading the most corrupt one-third of the world’s countries
(www.transparency.org/policy_research/surveys_indices/cpi/2006 [this
and all Web addresses accessed 1 July 2009—Ed.]). Characteristically,
the CPI for Russia has remained practically unchanged since 1996.1
Another organization that engages in intercountry comparative research,
Freedom House, in its report for 2006 states outright that corruption is
growing in our country.
In Russia the key player in the study of corruption is the regional
Information Science for Democracy (INDEM) Foundation, headed by
Georgii Satarov. This foundation conducted its first large-scale investi-
gation during the 1999–2001 period. It was found that people in Russia
spend about $36.5 billion a year on bribes (about $34 billion on bribes
in the sphere of business and $3 billion on everyday corruption); this
equals almost one-half of all revenue to the state budget in 2001 (www
.anti-corr.ru/awbreport/index.htm).
22 russian politics and law

In 2005 associates of INDEM repeated the investigation. Their conclu-

sions were even more shocking. Over the preceding four years, the size of
the average bribe had increased by more than thirteen times, while total
bribes in the business sphere had increased ninefold (corrected for infla-
tion, about sevenfold), reaching $316 billion. About 80 percent of all firms
pay bribes regularly (www.anti-corr.ru/indem/2005diagnost/2005diag_
press.doc). Everyday corruption had hardly changed, rising from $2.8 to
$3.0 billion. This increase in money spent on corruption occurred despite
regular and well-publicized official campaigns against corruption.
The INDEM estimates boggle the philistine imagination. Whereas
in 2001 the average bribe could buy a 30-square-meter apartment of
middling quality, four years later it could buy an apartment of over
300 square meters. Furthermore, whereas in 2001 the market for cor-
ruption was one-third smaller than the annual revenue of the federal
budget, in 2005 the market for business corruption exceeded federal
revenue by a factor of 2.66. Thus, if we measure the market for corrup-
tion relative to federal revenue, it had quadrupled (www.anti-corr.ru/
indem/2005diagnost/2005diag_press.doc).
If this calculation is reliable (Satarov emphasized that for the sake
of caution they understated the figures), then administrative barriers
have not fallen in Russia in the 2000s; on the contrary, they have risen
sharply. But even if we assume that these calculations have a systemic
defect that causes an upward bias in the estimates (as repeatedly as-
serted by opponents), the trend is important in itself. Other sources give
divergent absolute indicators but confirm the chief conclusion: the level
of “business corruption” did not fall but, rather, rose in the 2000s. Thus,
criminological statistics record an increase over the 2001–5 period of
about 20–30 percent in crimes connected with the giving and receiving of
bribes (see Maksimov and Naumov 2006, pp. 72–73). At the same time,
Russian criminologists note that the latency of corruption-related crime
in contemporary Russia is extraordinarily high, so that the proportion of
such crime that is reported is negligible.
The growth in corruption is confirmed by an expert survey conducted
in 2007 by the Institute of Social Forecasting. According to this survey,
corruption has grown precisely in relations between government and
business, while remaining practically unchanged in the sector of public
services. In the experts’ opinion, corruption is concentrated at the lower
and middle levels of power. At the highest levels there is little corruption,
or else very little is known about it (Priroda 2008, p. 24).
 july–august 2009  23

Indeed, the authorities themselves do not deny that the situation is

troubling. When at his last big press conference as president, Putin was
asked what he had not managed to do, which problem he had not been
able to solve, he replied without a moment’s hesitation: “Corruption.”
Alongside quantitative growth, change has been observed in the
qualitative characteristics of corruption in Russia. It is becoming in-
creasingly centralized and institutionalized. The extortions of the 1990s
were intensive but decentralized. The system of vertical channels for the
concentration of corruptly extorted revenue was still taking shape, and
this facilitated the personal enrichment of a mass of petty bureaucrats
without strengthening the system of bureaucratic power as a whole.
In the 2000s the situation changed. The rank-and-file tax inspector,
of course, “feeds” off the objects that he oversees, but far from all the
“payoffs” made by illicit business go to him personally. A considerable
proportion goes higher up. The more serious problems of a business are
settled at higher levels, where the price is also correspondingly higher.
And once again, the loot is shared with those even higher up. All levels
of the power hierarchy make their contribution to this stream of revenue.
The result is a corruption pyramid (Barsukova 2006). No single “share-
holder” is aware of the final amount, route, and—above all—destination
of the money sent upward. But each one understands that his place in the
system depends on undeviating maintenance of the prevailing arrange-
ment. It is not as terrible to wreck the plan for the collection of revenue
accruing to the state or municipal budget (it is always possible to cite
objective difficulties) as it is to fail to fulfill one’s obligations to saturate
vertical channels with “payoffs” from illicit business. The latter failure
is incompatible with remaining in the system. Under conditions of cen-
tralized corruption, the fight against corruption either is conducted in a
purely formal fashion (because an extremely wide range of officials, up
to the highest levels, participate in the corruption pyramid) or degenerates
into infighting between various networks (“young” officials against “old”
officials, customs officials against the procuracy, and so on).
As a rule, centralized corruption turns into an informal institution for
the protection of property rights. From the business viewpoint, institu-
tional corruption is more convenient to deal with than the disorderly but
large-scale imposition of decentralized levies. It reduces the cost in money
and time of seeking out information about corrupt means of settling
problems; by unifying rates of extortion, it also creates the semblance
of equal opportunities. This, evidently, is why business, while paying
24 russian politics and law

out more and more, demonstrates less and less inclination to protest: the
stability of the system makes its inefficiency tolerable.
Corruption is often compared with corrosion: it eats away at the sys-
tem of power. But to the degree that corruption is institutionalized, to
the degree that it turns into an informal institution for the protection of
property rights, it itself becomes part of the general institutional system.
In this case, corruption does not corrode the system of power: it becomes
part of that system. At the limit, this logic means that it is the activity of
fighters against corruption that corrodes the system of power.
There are also grounds for thinking that corruption will not go into
decline in the next few years. They come down to the following: the
authorities have reoriented market development from the scenario of
oligarchic capitalism (the project of the 1990s) to the state–corporate
variant of capitalism (the project of the 2000s). Competitive capitalism,
invariably proclaimed the goal all these years, remained a mirage.2
In all these formats, the state fulfills its traditional obligations: it
maintains law and order, defends the country’s borders, and exercises
a monopoly on taxation. But in each case it builds its relations with
business on a fundamentally different basis. In the case of competitive
capitalism, the state concentrates its efforts on creating and improving
business conditions that ensure competition among market actors. The
creation of institutions to foster competition by establishing universal
rules and by making market actors accountable constitutes the essence
of state economic policy. This model minimizes the direct involvement
of officials in making entrepreneurial decisions and in redistributing
resources (apart from social transfers). In short, this is the capitalism
that Russians know from the speeches of neoliberals.
Oligarchic capitalism signifies domination by large companies, includ-
ing monopolists, to which the state gives carte blanche in exchange for
political support. Coordination within the framework of “industrial policy”
gives the government the semblance of a leading role, while in reality what
takes place is the “privatization of the state” by the big economic players.
The famous loans for shares auctions, which not by chance coincided with
the 1996 elections, were, in essence, an allocation of oligarchic mandates
to those who were prepared to invest in maintaining the Yeltsin regime;
this led to the situation of “capture of the state by business.”
Finally, state–corporate capitalism signifies the participation of the
state, in diverse forms, in decisions taken by market actors. Reliance is
placed on economic growth fueled by a limited number of branches of
 july–august 2009  25

the economy (“strategic branches”), which receive state patronage (“re-

turn of the commanding heights”) at the price of constrained freedom in
entrepreneurial decision making. Big corporations become dependent on
the decisions of state leaders, on their project for economic development.
Their project, incidentally, may not be a bad one. What is bad, rather,
is a state leadership that has no such project. But the important point
here is not the plan but the mechanism for its implementation—not the
building of institutions to foster competition but the creation of (formal
and informal) rules for the subordination of business to the state; this is
embodied in the image “capture of business by the state.”
A number of investigators interpret this trajectory, which can be traced
clearly in Russia in the 2000s, as a reincarnation of the institution of
“power–ownership” (Nureev 2006). This may occur in the following
forms: conversion of indebtedness into state shareholdings; restructuring
of indebtedness to the state, using a block of shares as collateral; transfer
of shares in exchange for state investment; acquisition of shares on the
free market; revaluation of state property in the share capital of firms (of
material assets—above all, land—and of nonmaterial assets—intellectual
property).
There also arise informal methods of strengthening the role of the
state in decisions taken by corporations. These include lowered tariffs
of state monopolies for the “patronized” business, selective use of the
courts, the transfer of state orders to a narrow set of firms, and other ac-
tions that make the independence of private business from the state little
more than a formality. The ideological orientation of central and regional
government leaders toward a strong state, understood in the spirit of the
national-conservative—and not at all in that of the liberal—tradition,
shapes the general pattern of business expectations and induces in busi-
ness people a readiness to submit to the state.
The most paradoxical aspect of the current situation is the parallel
flow of two processes that would appear to be mutually exclusive. On
the one hand, state agencies have a growing influence on the fate of big
business and are increasingly acquiring the formal and informal right to
determine its development. That is, the state is “nationalizing” business
in the most straightforward sense: “It was yours, but now it’s ours” (the
example of Yukos is fresh in everyone’s mind). On the other hand, part
of the state property is passing into private hands at below its value and
by means of quite opaque devices: state-owned assets are being “priva-
tized.” Thus, in the course of three years (2005–7) Gazprom—with no
26 russian politics and law

competitive bidding—handed over to “third persons” three very impor-

tant assets: the subsidiary insurance company Sogaz, the pension fund
Gazfond, and the holding company Gazprom–Media. The lucky owner
became the St. Petersburg bank Rossiia, whose assets at the time of its
acquisition of Sogaz were worth approximately the same as the value
of the acquisition ($1 billion) (Milov and Nemtsov 2008). The biggest
shareholder in this bank is Iu. Koval’chuk, a personal acquaintance of
Putin’s from his time in St. Petersburg. Such deals, of course, take place
within the framework of a specific interpretation of “national interests.”
Whereas officials used to sell their signatures on minor permits, now
they sell the right to interpret national interests.
This logic makes it unavoidable that corruption will grow and change
its nature. The expanding powers of the state as the supervisor of big
business, the increasing influence of state monopolies, and the rise of
state corporations inevitably evoke in officials a burgeoning enthusiasm
for extending oversight to medium-size and small business. In response,
business inevitably attempts to slacken the leash by paying off its over-
seers. The tactic of corruption will probably be chosen. This, at least, is
more likely than protest. Big business will be incorporated into a single
governmental-economic hierarchy; accepting that this is inevitable, it
is trying, on the one hand, to put off this moment, and, on the other, to
bargain, to the extent that it can, for conditions of state patronage that
are as comfortable as possible. Corruption is beginning to serve precisely
these goals. The budgets for large investment projects already make
provision for the preplanned payment of bribes. The old “outlays on
representation” are now supplemented by a franker line item: “to ensure
conflict-free realization of the project.”
I happened to hear on the radio the optimistic forecasts of M. Barsh-
chevskii, who assured us that the fight against corruption is well within
our powers. I would like to believe him, but I am perplexed by the jurist’s
reasoning: in the 1920s the U.S. customs service collected bribes at a
level comparable with the official U.S. budget, but years passed—and
now the turnover of corrupt dealings in the United States is quite modest.
I do not find this example convincing. The point is not that “we are not
America”; it is that there is no single standard for the market as the an-
tithesis of the planned economy. There is a continuum of “markets” in the
form of diverse institutional combinations of business and government.
An extremely crude simplification gives us the triad of the competitive
market, the oligarchic market, and the state–corporate market. If we see
 july–august 2009  27

current Russian trends as pointing toward the state–corporate model, then

we cannot entertain hopes of an evolutionary cure for corruption that are
based on experience with the competitive market model.
In assessing the prospects of the fight against corruption, we must
note that it is not a bad state that generates corruption: it is the state as
such, with the bureaucratic form of administration that is intrinsic to it.
Any state is compelled to reconcile itself to a certain level of corruption.
Differences among institutional systems, however, lead to variations in
the scale of corruption. The state–corporate market model creates a much
greater potential for corruption than the competitive market model.
But the state never publicly admits that administration without cor-
ruption is impossible in principle; instead, it simulates an anticorrup-
tion campaign “to the victorious end.” Still less does it admit that the
chosen variant of a state–corporate market possesses a considerable
potential for corruption due to the growing powers acquired by officials
in the course of the general strengthening of the role of the state in the
economy. In reality, the fight against corruption often serves a mass of
other purposes—to destroy political rivals, to distract public attention
from economic difficulties, to elicit aid from international organizations,
to maintain people’s trust in the authorities. This should be borne in mind
in appraising the next anticorruption campaign.

Notes
1. This index is based on the aggregation of several surveys of experts (entre-
preneurs and analysts) and measures corruption only among state employees and
politicians. It does not capture “everyday corruption.”
2. Typology taken from Nureev 2006, p. 74.

References
Barsukova, S.Iu. 2006. “Srashchivanie tenevoi ekonomiki i tenevoi politiki.” Mir
Rossii, no. 3.
Bor’ba s vetrianymi mel’nitsami? Sotsial’no-antropologicheskii podkhod k issle-
dovaniiu korruptsii. 2007. St. Petersburg.
Maksimov, V.K., and Iu.G. Naumov. 2006. Korruptsiia (sotsial’no-ekonomi-
cheskie i kriminologicheskie aspekty). Moscow.
Milov, V., and B. Nemtsov. 2008. “Korruptsiia raz’’edaet Rossiiu.” Lobbist, no. 1.
Nureev, R.M. 2006. “Rossiia: istoricheskie sud’by vlasti-sobstvennosti.” In Post-
sovetskii institutsionalizm. Rostov.
Priroda i struktura korruptsii v Rossii. Otchet Instituta obshchestvennogo proek-
tirovaniia. 2008. Moscow.

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