Post-Communist Corruption: A Perpetual Virus

After many years following the fall of communism, many recognize that corruption has indeed risen in post-communist countries. Corruption in these regimes is often recognized as a direct result of inheriting the underlying communist structure. In 2011, Russia scores 13.3 out of 100 on the World Bank’s Worldwide Governance Indicator scale, with one being the most corrupt.

In 2003, Vladimir Putin’s government announced that corruption was of the utmost importance and was a priority to the government. This trend of emphasizing anticorruption programs during election campaigns has been present in many post-communist regimes. The Putin and Medvedev governments are shown to have implemented countless programs to combat corruption throughout their years in power. In November 2003, the Putin government created an anticorruption council. This board operates under the president and advises on anticorruption policies. If these operations are assumed as being successful, a decline in corruption should be observed by 2010, however, corruption in Russia has doubled since the early 2000s. According to data collected by INDEM and the Public Opinion Foundation, the number of bribes paid in Russia has almost doubled from 2001 to 2010.

Anticorruption rules and regulations adopted in Eastern Europe are not designed efficiently to reduce corruption. As more effective laws are proposed, the more difficult it becomes to pass them; the beneficiaries of the system are mobilized, reducing the likelihood of the law being implemented. The government aims to create the impression that misconduct is not taking place, but operates in underground systems. This report will focus on corruption in post-communist regimes through five interconnected themes; types of corruption, historical influences on corruption, the influence of clientelism, other variables influencing corruption, and the importance of corruption and behaviour towards it.

Types of Corruption in Post-Communist States

Corruption takes many forms. Many individuals believe that in order to continue with their lives peacefully, they must abide by the rules of the system in which they live, including the rules of corruption. In post-communist states, corruption is widespread from the lowest levels of society to the highest levels of government. Although corruption takes different forms in different post-communist states, the underlying fundamentals are similar. This hints at the possibility that corruption is linked to the structure of preceding regimes, emphasizing that communism leaves behind institutions suitable to the growth of corruption. Robert Karklins argues that the corrupt acts themselves are not as important as the impact they have on the political system. The electoral process has its stature muddied as corruption begins to infiltrate the higher authorities. In a society with widespread corruption, the temptation to misuse power increases as it is the accepted norm.

Corruption in post-communist states takes place at three main levels: lower level administration, self-serving officials, and state capturing organizations. Corruption at the lower level administration involves the use of bribery, obfuscation and the misuse of power. Bribery involves the act of citizens paying money or other forms of exchange to bureaucratic members to bypass rules and regulations. Surveys conclude that over half the bribes are given to the police and health services in post-communist states. Bribery in the education system is quite common as well. Bureaucrats also tend to purposely make obfuscated laws and increase regulations to complicate the system. These actions tend to increase the incentive to pay bribes, remove obstacles and simplify processes. Bribes also allow extortionist bureaucrats to benefit. Next, activities involving public goods tend to be associated with professional licenses, giving these actors power in the public sphere. These individuals often misuse their licensing and power to benefit themselves. For example, a survey finds that eighty-seven percent of Russian businessmen are required to pay bribes when obtaining licenses and permits. These individuals fall victim to extortionist bureaucratic pressures.

Under a communist government, the state has control and ownership over all property. However, after the fall of communism, the transition to a market system with private ownership sparks the temptation to acquire assets for self-gain. As a result, officials begin stripping assets from the state to benefit and serve themselves, creating a new norm. Assets are removed from the state through the diversion of public funding, procurement schemes, selling of positions, and from profiteering off public assets. Assets are diverted from public funding using hidden budgets. These hidden budgets often include supplementary salaries for members of the state. Salary supplements are often utilized to enforce compliance. Public spending is kept secret, signifying the illegality of spending. The culture of hidden benefits within the workplace has maintained its prevalence throughout and after the communist era. In the traditional communist tradition, the workplace provides access to assets not available to the general public. Money has little monetary value and the standard of living highly correlates with occupation. Many private firms also gain large excess profits through the procurement schemes utilized by the state; states regularly pay excessive amounts of money when procuring private property from private firms. Corrupt practices such as kickbacks, fraudulent assessments and sidestepping bidding rules inflate the prices, benefiting firms at the expense of the people.

Corrupt actions often involve the act of selling positions to help facilitate underground deals. These positions tend to be high-level governmental positions and give benefiters access to an abundance of public assets. A 1998 World Bank study on Latvia, Albania, and Georgia demonstrates that prices of high-ranking positions are well known by the public. This research finds that corruption is deeply integrated into the system. Although positions are used to bribe individuals into accepting corrupt actions, actions of blackmail, such as firing, are also used to ensure continued cooperation. In post-communist states, members of the government also tend to profit off public asset mismanagement. Civil servants can misuse public assets and can embezzle them to make profits. Official vehicles, supplies, and computers tend to attract the most attention. It is believed that in 1993 and 1994, Russian generals embezzled $65 million worth of military property which is intended to help build military shelters. Embezzlement has created a dangerous black market where individuals have access to military-grade equipment. Managers also tend to lease public spaces and keep profits for themselves; managers do not reinvest the profits into their companies. Corruption also comes in the form of self-renting. For example, surgeons can rent their services in private to make larger profits and professors may use facilities to teach private classes.

Post-communist societies fall victim to corruption through the widespread of state capturing organizations. State capture refers to the transfer of private assets to members of the public through illicit practices. State capturing allows corrupt private organizations to gain control over portions of government influence. State capturing is done through a few methods including de facto takeover, collusive networking, undermining elections, misuse of legislative power, corruption of the justice system, mishandling of oversight power, kompromat, and corruption of the media.

De facto takeover involves the infiltration of executive institutions by criminal networks. For example, in Georgia, essential anti-corruption institutions are highly targeted by criminal networks. The courts and police are also influenced by criminal organizations. Post-communist networks suffer from the formation of collusive networks. These networks limit political competition, creating obstacles for democratic transition. The majority of these networks originate from the nomenklatura era. In this era, the Communist Parties controlled appointments to powerful positions. After the fall of the communist era, those in powerful positions manage to maintain power in new forms. Collusive networks also tend to have large barriers to entry. These corrupt networks aim to keep power within the inner circle, keeping non-corrupt individuals away from powerful positions and preventing members from leaving. Fear of disclosure leads to the motive of protecting members. The elector system is undermined in post-communist states as parties engage in illicit financing. Candidates pay journalists to help build their reputation, giving up state control. Journalists and image-building corporations gain state control through their influence on elections and politician images.

Criminal organizations influence the political structure and laws of the state through their financial assets. In post-communist states, money is a symbol of power. Bureaucrats are often bribed, leading to the misuse of legislative power. Bribery influences decisions made within the nation and impacts low levels of government. According to World Bank researchers, businesses and criminal organizations utilize bribery to pass bills and laws. Corruption also seeps into the judicial justice system as judges and prosecutors are prone to bribery. Decisions can be purchased, and false prosecutions and investigations can be instigated through payment. Oversight is also misused as auditing and investigation are influenced and tampered with.

Corrupt officials use kompromat to gain state control. Using their influence, they intimidate their rivals and citizens. Media corruption helps hide illegal activities as large portions of private media are controlled by businesses that aim to capture state control. This helps cover up illegal activities. Media control allows businesses and politicians to generate narratives to skew stories in their behalf. False accusations are often created to attack rivals.

Influence of Historical Legacies

According to many political scientists, corruption is an integral element of post-communist systems. Although many communist leaders engage in anticorruption reforms, corruption still plays a vital role at most levels of government. The historical roots of communism are believed to play a role in corruption as they create incentives to engage in corrupt behaviours. Activities the Communist Party of the Soviet Union (CPSU) engages in have become widespread and are now the norm in post-communist societies. After the fall of communism, public property that supposedly belongs to the people during the nomenklatura era becomes the property of the powerful. As a result, property and power have been inherited through generations. The legacy of communist corruption has been preserved in the regimes that followed.

The legacy can be approached from two perspectives; supply and demand. The supply-side describes acts of giving and offering bribes. The tradition of paying bribes to achieve goals has been normalized in post-communist societies and citizens approve the act of bribery. The demand side refers to those who accept bribes. These individuals include bureaucrats, doctors, teachers, etc. Obydenkova and Libman hypothesize that higher levels of membership to the CPSU in the past has a causal relationship to higher levels of corruption in the future. They also hypothesize that higher levels of CPSU membership is associated with a higher acceptance of corruption and increases the probability of bribes being requested.

Communism’s design is not one to strengthen and support corruption. After the Khrushchev era, individuals no longer joined political parties due to ideological loyalty to communism, but instead for personal gain (312). This leads to the decline in commitment to communist values within the CPSU. Members only need to comply with the social structure of the system to be appointed and benefit from the structure. Paying bribes and CPSU membership are methods of accessing luxury goods. Therefore, members of the CPSU are incentivized to engage in corrupt actions.

During the fall of communism, control over the law enforcement system and bureaucracy weakened, leading to the rise of corruption. There is a horizontal diffusion in CPSU practices. Former CPSU values spread across to all citizens. There is also a vertical diffusion, meaning these values persist and remain within the system over time.

Libmanb and Obydenkova create models to determine the impact of CPSU legacy on levels of corruption. They find that CPSU memberships have strong implications for corruption in post-communist regimes. As CPSU membership in the 1970s-1980s rose, approval of corruption and bribe payments experience comparable growth. Greater CPSU legacies are correlated with a readiness to pay bribes upon request. These areas of higher past CPSU influence also demonstrate higher levels of demand for corruption. When conducting surveys, they find respondents are more likely to have paid a bribe during their most recent encounters with public officials. Their models support their hypotheses, concluding that regions are still affected by CPSU legacies today. Values and behaviours are passed through generations. Libmanb and Obydenkova suggest that areas with large CPSU membership experience a persistence in CPSU legacies because these regions exhibited little change during the transition period.

Clientelism in Post-Communist States

The social structure in post-communist states is clientelistic, meaning it is a system based on relationships and the exploitation of them. This structure is related to the previous communist nomenklatura. Clientelism directly impacts anticorruption and its success. The rule of law is designed to protect the status quo, normalizing clientelism and corruption. Laws are created in a way that authorizes insider dealing.

The operation of clientelism in post-communist states is a result of the nomenklatura legacy. During elections, parties take favours from organizations. As a result, patrons of the winning party benefit as the favours are returned. The level of corruption and clientelism depend on the level of property that has been privatized. Privatization is highly dependent on investment. During the fall of communism, foreign investment plays a large role in privatization. Resource-poor former communist countries, such as Hungary, are unable to refuse foreign investment. However, resource-rich countries, such as Russia, do not require foreign investment; Russia has oil. This creates diverging paths of clientelism in post-communist countries. In resource-rich countries, competition is shut down by the government and foreign companies are refused entry. For example, foreign banks emerge in Russia, however, they are expelled, despite the international ramifications. Unlike Russia, the Hungarian government concedes to competition, allowing foreign and domestic banks entry. This eventually leads to foreign investors taking over. The Russian government’s actions demonstrate clientelistic actions; the government acts according to the wishes of its patrons. This system emerged from the fall of the nomenklatura era. Other forms of social organization are either rare or non-existent, meaning clientelism dominates. As a result, clientelist networks survive the transition and become the core of relationships. The systems that emerge are based on the principle of exchanging favours rather than operating through an impartial legal system.

Other Factors Influencing Post-Communist Corruption

Corruption in post-communist regimes plays a large role as a barrier to economic development. According to a report by Transparency International in 2016, Central and Eastern European countries have some of the highest levels of corruption. Many believe post-communist corruption is a result of the institutions left behind by communism in the nomenklatura era. These institutions and norms are adopted and determine the path of development. Andrzej Cieślik and Łukasz Goczek test the source of corruption within post-communist regimes. They hypothesize that corruption is due to the nature of the communist past and that the flawed transition process is a result of business and political integration. During the transition, elites take actions to preserve their interests and interfere with reform policies.

Utilizing data from the World Bank and EBRD, Cieślik and Goczek investigate corruption in twenty-seven post-communist countries from 1996-2014. Their findings show that corruption is path-dependent, meaning previous levels of corruption impact future levels. Countries that tend to be corrupt are therefore likely to remain corrupt. They also find that the level of development in these post-communist regimes is important in determining their levels of corruption. The data shows that development separates economic planning and business from personalization, however, this is not the case for many post-communist regimes. Separation increases the chance of misuse of power is discovered. The resource curse also demonstrates a negative relationship with corruption. Countries with large amounts of natural resources tend to distribute the rights of use to others. Opening the economy reduces the local government’s control over resources, reducing their ability to misuse resources and reducing their potential for corruption. In post-communist countries, however, the likelihood of licenses being bought from politicians must be considered as organizations often aspire to capture the state.

The importance of democratization is also found in Cieślik and Goczek’s research. Their model shows that democratization has a positive impact on controlling corruption. Political rights and civil liberties both reduce corruption. In a democracy, corrupt politicians are held accountable for their actions. Democratic politicians are therefore more likely to abide by the laws. Their findings also suggest that competition tends to reduce corruption. As rents are captured and monopolies are created, these businesses gain power, some even rivalling the state. This results in the monopolies capturing state institutions and resources. This behaviour is demonstrated by powerful businesses within post-communist regimes.

A second model designed by Cieślik and Goczek reveals some interesting information. This model looks at the effect of the institutions left behind by the communist system and looks at their effect on corruption. Their findings show that communist related variables are insignificant at impacting corruption, however, variables related to low levels of development positively impact corruption. This suggests that post-communist states are not susceptible to the communist institutions left behind but are instead impacted by issues in developing. This goes against a considerable amount of prevailing wisdom regarding communism. Communism is often labelled as a method of preserving low economic development, therefore preserving the structure required for corruption. It is not the historical institutions impacting corruption. Looking at Cieślik and Goczek’s research, one can say post-communist countries are corrupt in large part due to them being developing countries. They share the same characteristics as developing countries such as being resource-rich, less democratic, and integration between business and personal life.

The increase in corruption in post-communist systems is often viewed as a transitional phenomenon. Corruption in the transitional phase is regarded as resulting from a lack of democracy, inefficient bureaucracy, the lack of a strong state, and an inefficient market. It is shown that once democracy is institutionalized, corruption will reduce and stabilize. Democracies are generally viewed as being anti-corrupt by design. In a democracy, individuals are appointed to positions of power through an electoral system. In democratic societies, citizens entrust politicians with power and hold them accountable for representing the public. The system is designed to not delegate power to a single authority in the government, representing the mistrust democracies hold towards human nature. Democracy is not a cure for corruption, however, it helps mitigate and reduce it; political actors are less able to misuse their power for personal gains. At least in theory, actors will lose power if they displease the population.

In democracies, citizens trust politicians to represent them, however, this element of trust is missing in other forms of government. In post-communist regimes, corruption does not occur from the lack of a democratic system, but from the social structure. The social structure is designed to promote clientelism, reducing trust individuals hold in authorities. Survey data from post-communist regions show low levels of public trust, democratic legitimacy, and rule-of-law credibility. Corrupt practices are institutionalized in the system and are the norm. Post-communist societies are like most transitioning societies. At the surface they operate as emerging democracies, however, the clientelistic nature continues underneath.

The Importance and Acceptance of Corruption

It is generally agreed that the impacts of corruption are largely negative, however, in post-communist societies, corruption also plays functional roles. When observing criminality, illegal activities such as the black and gray economies play a crucial role in the economy. Therefore, the corruption required for facilitating criminal activities plays an essential role in the economy. During elections, political parties require funding to help promote their party. Private sponsorship is widely used in post-communist societies, meaning not utilizing private funding leads to the loss of the party. Therefore, private funding is essential, however, the reciprocity of exchange is inevitable (ibid). Many post-communist societies have built a reliance on structures that promote extortion. Power is assigned and regulations are designed to maximize opportunities for extortion and corruption. Corruption may be essential for obtaining required services from governments that are the sole provider. The institutionalization of extortion is therefore promoted.

Post-communist regimes promote and hide corruption, however, it is known and accepted by the population. In a society where private payments are normalized, corruption is not seen as corruption. For example, in a society where tipping doctors is the norm, it will not be observed as corruption, however, the same action will be viewed as corruption by states where this practice does not exist. Perceptions of corruption therefore vary from state to state, and in post-communist regimes, corrupt actions are integrated into the system, making them normal and accepted. Corruption acceptance is also fuelled by nostalgia. In societies of higher levels of past CPSU membership, demand for bribes and corruption rise as these members remember the benefits of the original system. This leads to the creation of a feedback loop.

Conclusion

Corruption is widespread in post-communist regimes. The system revolves around clientelism, giving rise to the argument that this is due to historical institutions left behind by the Communist Party of the Soviet Union during the nomenklatura era. In an era with a hostile environment, favouritism arises. Individuals focus on developing networks that promote their survival. After the fall of the system, the situation is no longer as dire, however, the system survives as it is essential for obtaining the necessities for survival. A system of shortages leads to the survival of a system of negotiation and an appropriation of public resources; a system of shortages results in the mixture between public and private goods. However, other characteristics such as economic development must be analyzed. It is possible that corruption will reduce as post-communist countries leave the phase of development. This report investigates the characteristics of corruption in post-communist regimes. It demonstrates that there is an abundance of corruption, however, there are also other qualities that contribute to the overall state of these political systems.

Photo: Map of the Soviet Union and Soviet Republics, by Morwen via Wikimedia Commons. Licensed under CC BY-SA 3.0.

Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.

About Ravdeep Sandal

Ravdeep Singh Sandal is a fourth-year undergraduate student studying in the economics and political science specialist program at the University of Toronto Mississauga (UTM). He is a teaching assistant for a second-year econometrics course and a third-year economic history course at UTM. In January 2019, he obtained his immigration license and became a Regulated Canadian Immigration Consultant (RCIC). As an RCIC, he manages his own business and consults individuals who aim to immigrate to Canada. Entering his fourth year, Ravdeep began his internship as a Program Editor at NATO Association of Canada. During his free time, Ravdeep works on learning new compositions and raags, as he sings and plays classical music on the harmonium. In the future he aims to pursue his Masters of Economics. His interests include international relations, economics, political science, immigration policy, and the arts.