http://www.businessweek.com/stories/2000-08-13/commentary-why-putin-has-to-bust-the-bureaucrats-intl-edition

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Commentary: Why Putin Has To Bust The Bureaucrats (Int'l Edition)


International -- European Business

Commentary: Why Putin Has to Bust the Bureaucrats (int'l edition)

President Vladimir V. Putin is frightening Russia's notorious band of oligarchs by encouraging prosecutors to pursue accusations of criminal misdeeds. But if this is to be a season of crackdowns, it's high time to scare the folks without whom the wayward tycoons could never have made it: Russia's legions of corrupt bureaucrats. Crooked capitalists couldn't live without them.

The New Russia is a monument to the limitless varieties of government graft. It costs the state at least $20 billion annually in lost revenues from rigged property auctions to tax-fraud schemes, according to Moscow researcher Georgy Satarov, a former assistant to President Boris N. Yeltsin. Add to that billions of forsaken investment dollars, withheld by foreigners for fear of shakedowns. There ought to be a new memorial constructed in Moscow--a statue of a government clerk, palm out.TAX RACKET. Political corruption, admittedly, is an age-old problem in Russia. But post-Soviet Russia's turn to capitalism offered a singular opportunity for greedy civil servants. Suddenly, it was in their power to determine who could become a millionaire--or to become millionaires themselves. New Russian businessmen lined up to pay bribes to obtain a favorable oil-export license, approval for a new drug, or a generous fishing-catch quota. Even officials in charge of collecting economic statistics managed to concoct a racket. Two years ago, police discovered $1.5 million in cash in the Moscow apartments of a trio of bean counters suspected of helping companies to escape taxes by underreporting output. In the provinces, local officials often trade favors for a secret stake in new enterprises.

Yeltsin railed about corruption but did little to stop it. Along came Putin, elected in March on a platform to rid Russia of its many forms of lawlessness, political depravity included. He's not sugar-coating the problem. "Given the current level of corruption in the customs sphere," he told the Russian newspaper Izvestia in an Aug. 14 interview, "it is useless to have a large number of customs duties, because the state does not get what it should."

What to do? On one front, Putin recently won passage of legislation allowing him to sack popularly elected governors who have become dishonest. As for unelected civil servants, he proposes to pay them more to make bribes less tempting. But extra pay can't compete with the sums slipping into greased palms. That's why there is no alternative to criminal prosecutions--not simply to right past wrongs but, more important, to send a signal to the bureaucratic class that a new day has arrived.

Putin, in all likelihood, well understands that. He comes from a law-enforcement background in the security services. At the moment, he has his hands full battling oligarchs and isn't ready to strike out against political corruption rackets. But Putin's fight with the oligarchs provides a blueprint for a possible plan: to give investigators and police a green light to prosecute crooked bureaucrats. The Federal Security Service (FSB), the principal successor agency to the KGB, can be expected to be on the front line.

Yet that prospect sends shivers down the spines of many Russians. The danger of giving new powers to agencies with a tradition of trampling civil liberties and pursuing political vendettas has already been glimpsed in Putin's campaign against the oligarchs. Media baron Vladimir A. Gusinsky, a Kremlin critic, was arrested without charges and spent three nights in jail. He was later charged with embezzlement. That charge has since been dropped. But the fear of arbitrary arrests lingers.

A strong court system could help rein in overzealous police and prosecutors. In the long run, though, the best way to eradicate systemic political corruption is to reduce the role of the state in determining winners and losers in the economy. Putin is seeking to do this by simplifying the tax code and through other liberal reforms. But it will take years to detach the business and political classes from each other. The immediate need is for everyone to understand that lawbreaking will be punished. First the oligarchs--now the bureaucrats.By Paul Starobin; Moscow Bureau Chief Starobin Covers Russian Politics and Business.


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