Corruption takes many forms, and all of them distort the workings of a political system…

Elizabeth Pyle Doing business in C.E.E. Henry Sichel Wirtschaftuniversitaet - Wien

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

“the currency of the corrupt act, be it a bribe, profiteering, nepotism, or something else, is less important than how it distorts the workings of the political system”

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

Low Level

administrative

corruption

Self Serving

asset stripping

by officials

“State Capture”

by corrupt

networks

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

“payments to police and the health services account for about half of all bribe expenses.”

Bribery to Bend Rules

Misuse of Licensing and Inspection Powers

Over-regulation, Obfuscation and Disorganization

• Bribes to break rules and regulation • The whole political regime can change

• “corruption thrives on disorganization” • More rules, regulations and burdens to

induce the public to offer more

• Ukraine 1999 –26 agencies but no published rules!

“ “Russian generals are believed to have embezzled $65 Mll from sales of military

property intended to pay for military housing”

• Hidden „second‟ budgets

• Exploitative use of natural resources; • Not useful leasing of pubic spaces; • Quasi privatization of state owned

enterprises

• Privatization‟s officials concentrated on their own enrichment;

• Decisions without open market competition, public scrutiny or accountability procedures

Profiteering from Privatization

Diverting Public Funds

Mismanagement and Profiteering from

Public Assets

• The prices the state pays in procurement are typically too high

Procurement Schemes

Nepotism, Clientelism and

“selling” of Positions

• Shady hiring practices;

• Corruption occurs by commission as well as omission, „old comrades network‟;

• Threat of firing

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

• Corrupt or criminal networks penetrate

executive institutions at critical points.

• Especially difficult to prove and fight

De facto Takeover of

Institutions

• Democracies cannot function properly if

collusive power blocs capture the political

market

• Nomenklatura elites

Forming Collusive

Networks

• Illicit financing of parties electoral slush

funds linked to power oligarchies

• Pay for hidden political advertising in

supposedly objective media

Undermining Elections

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

• Laws purchased by business or criminal

interests that illegally pay legislators to pass

specific bills.

• Confusing and contradictory legislation

promotes corruption.

Misuse of Legislative

Power

• Executives often bribe prosecutors and

judges

• Judicial complicity – lack of evidence

Corruption of Judicial

Justice

• Misuse of auditing, investigative and

oversight powers to hide and promote

corruption

Misuse Oversight

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

• Intimidate citizens and political rivals

• Concrete legacy of soviet system

• Mutual blackmail

Kompromat

• The most crucial player in promoting or

hindering efforts to stamp out corruption

• News stories are sometimes skewed

• Innuendos and false accusations are spread

against political or economic rivals

Media Corruption

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

Corruption is the chief obstacle to democratic and economic progress in the post-communist region.

The misuse of public power for private gain has political consequences that need to be spelled out and assessed.

Officials charged with securing the public good focus instead on securing their own private good

The people at large pay a cost

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

1. Currency of

the corrupt act

2. Its

institutional

aspects

3. And its

consequences

for the polity

Corruption has 3 dimensions that affect the quality of its politics:

Elizabeth Pyle Doing business in C.E.E. Henry Sichel

Corruption undermines the principles on which democratic regimes are built, such as the rule of law, free and fair electoral competition, and representation and responsive government. If corruption becomes so persuasive that it seriously undermines these principles, then the entire system of government has changed and a new vocabulary will be needed to explain the outcome

Elizabeth Pyle Doing business in C.E.E. Henry Sichel