Category Archives: India

If Sunlight Is The Best Disinfectant, Why Is The Russian Mafia State Opening The Blinds?

Posted on by

My latest for the US-Russia.org Expert Discussion Panel. Also as usual it appears at Voice of Russia. The version printed here is a slightly longer one:

There are already a lot of opinions on the topic of Russian corruption, and I see no pressing need to add more to that morass. I do however think it will be useful to ground the scale and trajectory of Russian corruption in quantifiable facts and statistics.

There are three major ways of measuring corruption: (1) Subjective assessments; (2) Objective assessments; and (3) Opinion polls.

The most famous subjective assessment is Transparency International’s Corruption Perceptions Index. Russia might go up and down this index across the years, as per the businesspeople and “experts” it queries, but overall it remains consistently stuck somewhere in between Honduras and Equatorial Guinea. Bearing in mind that they also believe Italy is more corrupt than Saudi Arabia – a country that is owned by its royal family even in name – one must ask to what extent this PERCEPTIONS index reflects actual corruption in any particular country, as opposed to the generosity of the expat packages it offers and its friendliness to the international business community. Is it a complete coincidence that Russia’s already low CPI score started plummeting to new depths about the exact same time it jailed Khodorkovsky?

russia-corruption-subjective

(1) CPI = Corruption Perceptions Index.
(2) WBGI = World Bank Governance Indicators.

Russia does much better on assessments that include precise methodologies for calculating scores, i.e. a particular anti-corruption law either exists – or it doesn’t. On the Global Integrity Index, it scores 71/100, which is comparable to many other middle-income countries like Lithuania (74), Hungary (73), and Mexico (68). On the Open Budget Index, which measures fiscal transparency, Russia improved drastically from 47/100 in 2006 to 74/1000 by 2012, and is now ahead of all the other BRICs, all of East-Central Europe barring the Czech Republic, and even ahead of Germany.

Likewise, widespread tropes of shady siloviki appropriating all the proceeds from the Russian oil industry – typically accompanied by terms such as “Muscovite patrimonialism” or “rent-seeking clans” by those seeking to project an aura of learnedness – to the contrary, Russia is second only to Brazil and Norway in the transparency of its oil and gas accounts, as measured by the Revenue Watch Index.

Now all of this is not, of course, to say that the Germans steal more from their budget than the Russians; that would be ridiculous. These indices try to tally laws that promote integrity and institutional transparency, not corruption per se. It does however mean that Russia releases more information about its budget than a wide array of other middle-income and even developed countries, which – all else being equal – should make any thefts and shady dealings easier to detect. For instance, Navalny’s work to expose corrupt state tenders is hailed in the press – and rightly so! – but had not the kleptocratic Kremlin made those tenders publicly accessible on the Internet, his activities wouldn’t have even been possible in the first place! If Russia truly were the “mafia state” it is frequently painted as by the Western chattering classes, why on earth would it want to shine more light onto its own rotten essence by steadily increasing its integrity and transparency indicators?

russia-corruption-objective

(1) OBI = Open Budget Indicators.
(2) GII = Global Integrity Index.
(3) RW = Revenue Watch Index.

The final method of measuring corruption is both the most direct and democratic – asking ordinary Russians how often they experience it in their everyday lives, as opposed to the musings of ivory tower “experts” and limousine expats. Unfortunately, opinion polls on the matter – most of which come from Transparency International’s Global Corruption Barometer, the Levada Center, and FOM (The Foundation for Public Opinion) – are too irregular and differently worded to confidently discern any decadal trend. On average, as we can see from the graph below, about 20%-25% of Russians tend to say they or their families have experienced corruption in the past year or two.

russia-incidence-of-bribery

(1) GCB = Global Corruption Barometer (“In the past 12 months, have you or anyone living in your household paid a bribe in any form?”)
(2) Levada – “Did you have to pay a bribe anywhere in the past 12 months?”
(3) FOM 1 – “In the past year or two, have you personally met any state servant who asked or expected an unofficial payment or service from you for doing his/her work?”
(4) FOM 2 – “Have you ever given a bribe to a state official or not?”

In the most comprehensive international survey, that of Transparency International’s Global Corruption Barometer, some 26% of Russians said they or a member of their household paid a bribe in the past year. This is directly analogous to countries like Hungary (24%), Romania (31%), and Mexico (33%) – and not far below the worst-performing “old European” country, Greece (18%). This is, of course, nothing to write home about; but neither is this comparable to India (54%), let alone aforementioned Honduras or Equatorial Guinea. Bear this in mind the next time you read some opinion columnist pontificating about Russia as “Zaire with permafrost” or “Nigeria with snow” (for the record, more than 60% of the respondents from those two countries said they or a member of their household paid a bribe in the past year).

If ordinary corruption is difficult to quantify, it is doubly so for elite corruption. And rumors about Putin’s $40 billion dollar Swiss bank accounts – especially if they are sourced from his political opponents like Stanislav Belkovsky and Boris Nemtsov – aren’t going to get us very far. We need concrete sums and figures – say, the total of $100 million or so that appears to have been stolen in the recent Oboronservis scandals. This is an order of magnitude or so higher than the largest corruption scandals in developed Western countries, but on the other hand, it’s unfortunately quite typical of major corruption scandals in places like China, India, and Latin America. (The overall sums are smaller in truly deprived regions of the world because there is far less to steal in the first place).

Case in point. In a Twitter argument about whether it was better to live in Russia or India, the Swedish diplomat Mats Staffansson wrote to me, “India has enormous poverty but has one big advantage. A functioning noncorrupt legal system. Good British heritage… Corruption in India is definitely a problem but on a much smaller scale than in Russia.” In response, I challenged him to find a single Russian corruption case from the past decade that is remotely comparable to the theft of food worth $14.5 billion in India that was supposed to have been sold at subsidized prices to the poor – and the poor in India are really poor, as half of India’s children are chronically malnourished - but was instead looted by “corrupt politicians and their criminal syndicates.”

I am still waiting for an answer from him…

As for Vlad Sobell’s question of whether corruption in Russia can ever become “the exception rather than the rule”… Well, where precisely is this threshold? Corruption is part of a continuum, not a set of discrete states. I will venture to say that with the correct incentives and cultural propaganda, it is certainly plausible for Russia to reduce its levels of corruption from the levels of Romania or Mexico today… to the somewhat better levels of Italy or Poland. I do not know if improvements beyond that are possible. Whether it was due to Protestantism, or the out-breeding fertility patterns specific to family life within the Hajnal Line (which according to some theories promoted altruism), the peoples of north-west Europe seem to have reached a level of very low corruption that has been equaled by very few other societies. In Russia’s case, just converging with Mediterranean and Visegrad corruption norms would be an adequate achievement.

Russia’s Budget Is Getting More Transparent

Posted on by

Not often that you see Russia in some color other than bloody red on a world map of corruption or institutional quality. But according to the Open Budget Index (2012 results), the Russian budget is actually pretty transparent as far as these things go.

Of the major countries, only the UK (88), France (83), and the US (79) are ahead. The other major developed countries in the survey like Germany (71), Spain (63), and Italy (60) are all behind Russia (74), as are its fellow – and supposedly far cleaner – BRICs fellows Brazil (73), India (68), and China (11). Of perhaps greater import, only the Czech Republic (75) edges above Russia in the CEE group, whereas all the others – Slovakia (67), Bulgaria (65), Poland (59), Georgia (55), Ukraine (54), Romania (47), etc. – lag behind it. Also noteworthy is that Russia’s typical neighbors on Transparency International’s CPI, such as Zimbabwe (20), Nigeria (16), and Equatorial Guinea (0), reveal almost nothing in their national budgets.

Now of course the Open Budget Index is not the same thing as corruption. You can have an open budget but still steal from it (and this does happen in Russia frequently), and you can also have a closed budget from which few people steal, at least directly (as was the case in the USSR… or to take a more modern example, while Russia’s OBI is now higher than Germany’s, it is inconceivable that state corruption is even in the same league in these two countries).

Nonetheless, there is surely a very significant degree of correlation between the two. Having an open budget means that it is can be subjected to scrutiny; were Russia’s budget closed like China’s or Saudi Arabia’s, Navalny’s work to expose corrupt state tenders would be simply impossible (as it is, the latest ploy corrupt bureaucrats have been forced to resort to is to sprinkle Latin characters into the Cyrillic texts of state tenders so as to confound search engines).

Second, a high OBI score demonstrates the state’s commitment to fighting corruption. If Putin and Co. really didn’t care and were truly the kleptocrats they are repeatedly labeled as by the Western media, they would instead do everything in their power to hide the budget so as to remove the possibility of scrutinizing it. But they don’t. To the contrary, Russia’s OBI has increased from year to year.

Continue reading →

Russian Wages Are Fast Converging To Western Levels

Posted on by

Via The Economist, I’ve come across some fascinating research by Orley Ashenfelter and Stepan Jurajda (Comparing Real Wage Rates, 2012) showing how real wages can be meaningfully compared across different regions by taking notes on prices and wages in McDonald’s restaurants.

The methodology seems solid. Big Macs are a very standardized product, hence they are already used in the so-called Big Mac Index to assess international price differences (and whether currencies are undervalued or overvalued) and REAL wage rates (prices tend to be lower in poorer countries, mitigating the effects of lower nominal wages). By combining these two measures, you can derive the quantity of Big Mac a McDonald’s worker can buy through one hour of his labor (BMPH). This in turn is a good proxy for real median wages, i.e. the life of the average Joe and Ivan in comparative perspective. While we might not want to people to buy too many Big Macs it’s a positive thing if they can actually afford to.

The results for Russia are stunning, and no doubt go a very long way why Putin has retained 70% approval ratings since 2000. Russia’s BMPH increased by 152% (!) from 2000 to 2007, and a further 43% through to 2011, leaving all other economic regions in the dust, even despite a sharp recession in the latter period. The only major region with a comparable performance is China. In contrast, the BMPH has stagnated throughout the developed world since 2000; and Not So Shining India joined them from 2007.

Continue reading →

Ernst & Young: Russian Corruption Is Rather Banal By World Standards, And Improving

Posted on by

When I cited TI figures showing that Russian everyday corruption is middling by global standards (percentage paying bribes: 26%, compared to 15% in Latvia, 18% in Greece, 24% in Hungary, 28% in Romania) – as opposed to being on the same plank with Zimbabwe or Liberia – one of the most common counter-arguments was that corruption in Russia is especially concentrated in the upper commercial/political social crust.

However, as Vedomosti recently covered (h/t Nils), the acceptability of corruption in Russia has basically converged to global averages. According to the table below from the original study by Ernst & Young, Russia in fact now appears to perform slightly better than the global average (and vastly better than  low-income countries like India, Indonesia, and Vietnam, all of which are nonetheless ranked higher than Russia in the Corruption Perceptions Index).

Furthermore, the last year has seen significant improvements, e.g. whereas now only 16% see cash payments as acceptable to win or retain business, this figure was 39% in 2010. This is practically equal to the global average of 15%, which unlike Russia rose from 9% in 2010.

Power summary: Russia is a normal country in the sense that its level of corruption, as reported by ordinary citizens and businesspeople, is what you would expect of a middle-income country. However, it is near rock bottom as perceived by various self-appointed experts. I wonder who’s more reliable.

Russian Journalists Are Far Safer Than Mexican Journalists, Ordinary Russians, And Their Own Counterparts Under Yeltsin

Posted on by

One of the most common tropes against Russia is that critical (independent, democratic, etc) journalists there are dying like flies, presumably because of the “culture of impunity” created by Putin or even on his express orders. It is rarely mentioned that the statistical chances of a Russian journalist dying by homicide is an order of magnitude lower than in several countries widely recognized to be “democratic” such as Brazil, Mexico, Columbia, and the Philippines, or that – unlike Turkey or Israel (!) – Russia does not imprison any journalists on account of their professional work. To this end, I compiled a “Journalism Security Index” to get a more objective picture than the politicized rankings produced by outfits like Freedom House that put Russia on par with Zimbabwe.

As usual in these situations, a few graphs are worth thousands of words.

The graph above shows the numbers of journalists killed in Russia for every year since 1992 as compared with other “democratic” countries like Brazil, Mexico, India, and Colombia. As one can see, the situation has improved greatly in the past three years, with only one journalist (in Dagestan) getting killed in 2011; meanwhile, the situation in Mexico has deteriorated to levels unseen in Russia since the early 1990′s. Does this mean that Felipe Calderón is the next Stalin? Or is it that he is just faced with a drugs war that is rapidly spiraling out of control?

Continue reading →

Russia’s Economic “Stagnation” In Global Perspective

Posted on by

Иn the wake of the 2009 recession, declinist rhetoric has come to dominate discussion of Russia’s economic prospects. Jim O’Neill, the founder of the BRIC’s concept, has his work cut out defending Russia’s expulsion from the group in favor of Indonesia, Mexico, or some other random middle-sized country. Journalists in the Western media claim its economy is “not growing”, as do liberal Russian newspapers such as Vedomosti. Comparisons between Putin and Brezhnev (who presided over the Soviet Union’s period of stagnation, or zastoi) are piling up. Even President Medvedev isn’t helping the situation, telling a forum of international businesspeople that Russia’s “slow growth” hides stagnation (good job promoting your country, DAM! not….).

I don’t want to exchange rhetorical barbs in this post (which you may note is not tagged as a “rant“), and my skills at mockery and picking apart tropes aren’t nearly as well developed as those of Mark Adomanis or Kremlin Stooge, so I’ll do what I do best and go straight to the statistics. And so we have Fact #1: what is described as stagnation for Russia is a growth rate of 4%. It grew 4.0% for 2010. It was 4.1% in Q1 2011, and the government predicts it will be 4.2% for the whole year. The World Bank predicts 4.4% in 2011, 4.0% in 2012; the OECD expects 4.9% in 2011 and 4.5% in 2012; and the IMF forecasts 4.8% in 2011, 4.5% in 2012, tapering off to less than 4.0% in the “medium-term.”

This does not strike me as being particularly bad by global standards. This is obviously no miracle economy of Chinese-like 10% growth rates, but Russia (4.4%; 4.0%) does not compare badly to the World Bank’s projected growth for other typical middle-income countries such as Turkey (4.1%; 4.3%), Thailand (3.2%; 4.2%), Brazil (4.4%; 4.3%), Mexico (3.6%; 3.8%), or South Africa (3.5%; 4.1%). Facing real stagnation, many countries in the developed world such as the UK could only wish for Russia’s growth rate; though this is an unfair comparison, because Russia is poorer and can therefore find it easier to grow faster (see economic convergence), it is not less unfair comparing Russia to countries such as India (8.4%; 8.7%) or Indonesia (6.2%; 6.5%) because the latter are so much poorer than Russia in their turn.

Continue reading →

Names Of The Oligarchs On A Map Of The Motherland*

Posted on by

Not really arguing anything in this post, just sharing some interesting stats I found about the affluent class in Russia (as compared with BRIC’s and others).

First, as we know Russia is (in)famous for the opulence of it oligarchy. But according to the research firm Wealth-X, despite a relatively high number of billionaires, its overall share of Ultra High Net Worth Individuals (UHNW) is far more modest as you can see in the table below. As a percentage of GDP (caveat: this is comparing apples and oranges, but still instructive since national wealth is correlated to yearly output), the wealth of the Russian UHNW’s is equal to 43% of a 1.5tn GDP in 2010 (as compared with 28% in China, 43% in Brazil, 44% in the US, and 55% in India).

So, same picture as with income inequality – as I’ve noted before on this blog, Russia’s levels of inequality are in fact quite modest by world standards – with a Gini index of about 40, it is higher than most European countries (25-35) but lower than the US and China (45) and most Latin American countries (50+).

Continue reading →

Russia Demographic Update VI

Posted on by

As we’re now approaching mid-2011, I suppose its time to give my traditional update on Russia’s demography. So here’s the lay-down:

1. In February, I predicted a population decline of c. 50,000 in 2010 (after a 23,000 rise in 2009). This was due to the excess deaths of the Great Russian Heatwave of 2010, and a substantial fall in immigration. The latest figures confirm it: population declined by 48,300. As of January 2011, it stood at 142,914,136 people (this is by the new Census estimates).

2. Three years ago, I predicted – going against 90%+ of “experts” – that the medium-term future of Russia’s demography is stagnation or small increase. In late 2009, I wrote that even under undemanding assumptions, “the population size will remain basically stagnant, going from 142mn to 143mn by 2023 before slowly slipping down to 138mn by 2050.” To give an example, the 2008 World Population Prospects of the UN Population Division predicted Russia’s population would fall to 132.3mn in 2025 and 116.1mn in 2050. As of their 2010 Revision, Russia’s population is projected to be 139.0mn in 2025 and 126.2mn in 2050 (High: 144.5mn in 2025; 145.3mn in 2050). What a difference two years make! In any case, “official” predictions are now beginning to converge with my own (not to mention Rosstat’s).

Continue reading →

Why Russia And China Won’t Fight

Posted on by

Every so often there appear claims, not only in the Western press but the Russian one, that (rising but overpopulated) China is destined to fight an (ailing and creaking) Russia for possession of its resources in the Far East*. For reasons that should be obvious, this is almost completely implausible for the next few decades. But let’s spell them out nonetheless.

1. China regards India, Japan, and above all the USA as its prime potential enemies. This is tied in to its three geopolitical goals: (1) keep the country together and under CCP hegemony – an enterprise most threatened by its adversaries stirring up ethnic nationalism (India – Tibetans, Turkey – Uyghurs) or buying the loyalties of the seaboard commercial elites (Japan, USA), (2) returning Taiwan into the fold and (3) acquiring hegemony over the South China Sea and ensuring the security of the sea routes supplying it with natural resources. The major obstacles to the latter two are the “dangerous democracies” of Japan and India, with the US hovering in the background. In contrast, the northern border is considered secure, and more generally, Russia and Central Asia are seen as sources of natural resource supplies that are more secure than the oceanic routes.

Continue reading →

Why Russia is cemented to the other BRICs

Posted on by

In the wake of the economic crisis in which Russia’s GDP fell by a stunning 7.9% in 2009, its status as a BRIC economy – with its connotations of promise and progress – was brought into question. After all, isn’t it a dying nation with rapidly degrading infrastructure? Isn’t it amazingly corrupt? Wouldn’t its contempt for liberal democratic values doom it to stagnation? And what happens now that oil production, the main locomotive of the Russia economy, has stalled thanks to the politicized persecution of “brilliant entrepreneurs” like Mikhail Khodorkovsky? Indeed, was not its economic collapse in 2009 a portent of things to come? And so on*.

There are many reasons to dismiss these arguments, as I will try to show in this post. First, the very inventor of the BRICs concept, Jim O’Neill of Goldman Sachs (who has probably thought more about it than anyone else) dismisses the argument that Russia is ineligible on the basis that is was the only country amongst them to show (highly) negative growth during the economic crisis as “rubbish”. He goes on to add that “the only reason that Russia was hurt so badly was unlike the others, it borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.” ** Of course, the Russian economy’s dependence on Western intermediation for its credit is a structural weakness, and one that was exposed in late 2008. But potential faultlines like this are hardly unique amongst the BRICs – its most promising member, China, critically depends on exports for continued growth***, and its banks are saddled with bad debts.

Continue reading →