Isn't corruption the biggest obstacle to small business?
Michael Perelman
Corruption is the biggest obstacle to EVERYTHING. (And corruption is parasitic upon low salaries for government employees, which is itself parasitic upon people not paying any taxes, depriving the government of the money it needs to pay people. The main reason bureaucrats and cops are such avid bribe-takers is that they don't earn enough to live. A cop in Moscow earns something like $80 a month. You cannot raise a family for $80 a month, believe me.)
The fire inspector who comes to inspect your business premises is usually not there not actually check for fire safety violations, for example. He or she is there to get the money you will pay him to give your premises the OK.
Speaking of corruption, this was an interesting piece (see why people like Putin?):
This article was published in The Russia Journal ISSUE No.12 (155), DATE: 2002-04-05 ---------------------------------------------------------------------------- ---- Corruption noose tightens around St. Petersburg Governor Yakovlev
By GORDON M. HAHN / The Russia Journal Crime and corruption seem to go together everywhere, perhaps no more so than in Russia’s "Venice of the north," St. Petersburg. During Vladimir Yakovlev’s first term in the governor’s Smolny mansion, Russia’s "northern capital" consolidated the dubious honor of being its criminal capital. In his second term, Petersburg has become Russia’s corruption capital, and the Kremlin has taken notice.
The Kremlin versus Smolny, phase I
Last summer, Yakovlev’s right-hand man, Deputy Governor Valery Malyshev, was charged with taking bribes in return for placing city business in certain St. Petersburg banks. Malyshev soon was forced to temporarily step down from his post. In autumn, an inspection commission to St. Petersburg dismissed Vladimir Shamakhov, chief of the Northwestern Customs Administration, and Alexander Puchkov, chief of the Baltic customs. During the winter, another deputy governor close to Yakovlev, Alexander Potekhin, in charge of media and public relations at Smolny, was charged by prosecutors with conducting business while in office and was forced to step down.
In February, the Audit Chamber’s St. Petersburg office uncovered the misappropriation of money from the city’s Road Fund. St. Petersburg media close to NorthWest Federal District Envoy Alexander Cherkesov suggests federal authorities are behind this venture. This investigation could bring down a third Yakovlev vice governor, Finance Committee Chairman Viktor Krotov.
Phase II
Now, this spring, two additional corruption scandals are shaking Smolny, claiming a fourth vice governor in some nine months and soon, perhaps, the governor himself. In early March, another of the city’s long-brewing "Insulin Affairs" was brought to a head by investigators. St. Petersburg’s Internal Affairs Department accused the Vice Governor and Chairman of the city’s Health Committee Anatoly Kagan of misappropriation of the budget funds designated for the purchase of medical and pharmaceutical products. The misappropriation of funds cost the city 5 million rubles.
Kagan’s machinations included the use of the funds to pay off a non-existent debt, payment of purchase prices that nearly tripled market prices, and the misapplication of exchange rates to siphon funds for non-budget purposes. The investigators’ chargers have been forwarded to prosecutors. Kagan has not been arrested or forced from office, and has rejected all 15 pages of charges as groundless. The investigation continues, however, and the vice governor has been ordered by police not to leave the city.
In late March, a fourth, much larger scandal reared its ugly head. The St. Petersburg Prosecutor’s and Internal Affairs Departments charged the Finance Committee with distributing city budget funds in 13 commercial banks, among other violations. This violates the Russian Budget Code’s stipulation that regional governments must deposit budget funds with the Central Bank. The city department of the Audit Chamber has chimed in as well. Its head, Dmitry Burenin, claims that the St. Petersburg Administration borrowed 5 billion rubles in 2000 from one of the banks, BaltOneksimBank, and paid 20 million rubles in interest.
Mafia connection?
Financial scheming with BaltOneksimBank could have serious repercussions for everyone in Smolny right up to the governor. The chairman of BaltOneksimBank, Yury Rydnik, has a more-than-dubious reputation, including alleged ties to the famous Tambov organized crime group. Yakovlev himself is also believed to be the Tambov crime group’s "krysha." In September, MVD Chief Boris Gryzlov, a former Petersburger who ran President Valdimir Putin’s campaign in the city in 2000 and headed the pro-Putin Unity Party’s deputies’ faction in the State Duma, condemned the city administration’s failure to rein in organized crime. He made special reference to the Tambov group. This was widely interpreted as a warning to Yakovlev by federal authorities to clean up the city’s act, especially with its 300th anniversary celebration arriving fast (May 2003) and receiving some generous funding from Moscow. However, Gryzlov’s gambit could also be in! terpreted as an open implication of the Yakovlev-Tambov connection.
Crime, corruption and punishment
What are the implications of all this? First, corruption is bad, but corruption scandals are good. Such scandals expose the mold of crime and corruption to the light of public scrutiny. They testify that corruption is condemned and that those involved can be exposed, if not prosecuted.
Second, it is becoming ever more clear that the Kremlin is developing a case or at least threatening a case against Yakovlev. It hopes to keep him from running for a third term or successfully handing the baton to an ally. The highest-ranking Russian official, President Vladimir Putin, and the third-highest-ranking Russian official, Federation Council Chairman Sergei Mironov, both are Petersburgers and inveterate opponents of Yakovlev. What better way for anti-Yakovlev Petersburgers in Moscow to get rid of their nemesis and claim the mantle of fighters against crime and corruption than by uncovering the financial tie between Yakovlev and the Tambov mafia?
Yakovlev has responded to the threat "asymmetrically," attacking on another front. Commenting on the Kremlin’s apparent attempt to remove Gennady Seleznyov from the State Duma chairmanship, he stated he saw no alternative to his fellow Petersburger.
It is high time that, in the city of Dostoyevsky, crime and corruption beget punishment. However, it remains an open question whether Putin and his allies in Moscow and St. Petersburg – themselves tainted by corruption and, perhaps, even crime – have what it takes to carry the risky business of combating crime and corruption as far as it needs to go. If they do muster the courage, then the Russian people might forgive them their past and present sins. In this event, Putin and his Petersburgers might not merely conquer the corridors of power in Moscow, but secure their authority across Russia and a deservedly prominent place in Russia’s post-Soviet history.
( Dr. Gordon M. Hahn is The Russia Journal’s political analyst and a visiting research fellow at the Hoover Institution, Stanford University.)