But
at least this new law seems to indicate that the authorities
understand how damaging the shockingly high level of state corruption
is for the country. At the same time, however, this law is also
precisely an example of that personal and non-consensual
decision-making style that so permeates Russian business and
political life. Indeed, like so often, it sprang from the populist
reaction of one man – Vladimir Putin – to recent scandals
concerning the ownership of foreign assets by senior public servants.
It
is not surprising therefore, that this ban on foreign investment does
not target the causes
of state corruption, but only one of its visible and embarrassing
consequences
- asset flight. Why should not a senior official be able to hold
assets abroad as long as they have been legitimately earned? He might
of course be called “unpatriotic” for doing so, but it should be
legally possible for him to take this risk. The underlying reason why
this law now makes it illegal is, of course, that the huge wealth
amassed by many Russian politicians and civil servants is suspected
to be the proceeds of graft. It is worth keeping in mind that, at a
minimum, 10% of the value of state tenders of around 10 trillion
rubles ($350 billion) per year are lost in this way. It is sometimes
said that leaders should lead by example; ironically, this is perhaps
exactly what they are doing in Russia, albeit unintentionally. Thus,
attempts to reduce state corruption should be made also because of the
likely beneficial effect for the whole society.
But,
if corruption at state level is now truly a concern for the
authorities, they should start by upholding existing laws, rather
than creating new ones. If this happened, then firstly, senior
officials would not be able to get their hands on as much wealth as
before, and secondly, they would feel less need to funnel money
abroad because they would perceive Russia as a safer place in which
to invest. That the most powerful and well-connected people in Russia
– those who best know the system – must be prevented by law from
transferring funds abroad is indeed a worrying sign of the
difficulties facing Russia.
A
more fundamental question is: Would such a law be necessary if the
political system wasn’t pervaded by career politicians and
life-long civil servants? Corruption feeds on permanent bureaucracies
that allow close personal relationships and long lasting business
ties to be established. Both in Russia and abroad, the wealth of a
career politician should always be seen with suspicion, unless it
comes from inheritance. If all political terms in office and public
service mandates were limited to, say, a maximum of two reelections
or reappointments, graft and cronyism in government would undoubtedly
decline.
Such
term limitations are sometimes discussed in the media but are
obviously rarely implemented, since they disserve the very persons
who can pass them into law. Naturally, public servants will resist
all changes that are not in their interest, and it is therefore
surely not a coincidence that the final version of the bill signed by
Putin exempts ownership of foreign real estate. Indeed, houses on the
Riviera and apartments in Miami have been the preferred type of
foreign investments by wealthy Russian public servants, and this will
likely be the case also in the future, if the recent drop in house
prices are considered.
Term
limitations is not of course not the only way of impacting the level
of state corruption; there are other measures, though there is no
time to review them in this article. What such measures have in
common, though, is that they generally target the causes, not the
consequences, of state corruption.
The
new law limiting foreign investments of senior officials should,
therefore, not be cheered too enthusiastically since it can
metaphorically be described as only a bandage on the gunshot wound of
state corruption from which Russia suffers.
