The cost of Russia’s public corruption even more astonishing than you think
At this time of year, I binge read the lists that newspapers put together of potential gifts to give your friends and relatives. Partly, they’re useful for ideas, but also, they’re helpful for cross-checking against. Am I spending too much, or too little? Is this the kind of thing that normal people give as a present? Would a proper nephew think a novelty t-shirt was acceptable for an uncle who doesn’t appear to like anything very much?
Anyway, imagine how much more stressful this dilemma would be for a Russian businessperson who’s keen to give their government contact a gift that will be appreciated; eager not to over-pay (because that will cut into their end of the deal); but also determined not to give so little that the contact gets the hump and has them thrown into prison for being corrupt.
As such, I think this piece of research by the Institute for Public Administration and Governance (IPAG) of the Higher School of Economics National Research University in Moscow, plays the same role for nervous entrepreneurs as a funny Christmas T-Shirts list does for a lazy nephew. Academics canvassed 1,200 Russian businesspeople involved in working with state organs and asked how much of the total volume of the contract they would expect to pay as a bribe. The results may surprise you.
Taken together, more than 70% of respondents said they expected to encounter corruption when dealing with officials (I reckon that’s on the low side and at least some of the other 30% were lying), and they paid an average of 22.5% of the contract’s value to the official who signed off on it. That meant the total added to state contracts last year to settle the corrupt demands of officials was 6.6 trillion rubles (about $89 billion). That is more than a third of Russia’s state budget, or approximately 6% of the country’s GDP. The equivalent proportion of the American economy would be $1.4 trillion. It is an incredible amount of money and explains quite a lot about why Russia struggles to innovate or diversify.