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Essay: Too Much Corruption or Simply Too Much Talk of “Corruption”?

23.12.2016 10:17:32

Making a distinction between informal transactions and truly destructive graft is crucial to understanding the challenge facing Ukraine.

Abel Polese

“…I maintain that there are two informalities. One, which can be named “positive,” helps a society function in areas where the state fails to operate (beyond the state) or where state institutions and rules are not sufficient to manage a sphere of societal life (in spite of the state). “Negative” informality, on the other hand, tries to replace state structures, institutions, and rules even when they are effective in regulating citizens’ lives.

In other words, positive informality complements the state, while negative corrupts the system.”

A short essay on two recent (2016) books:
Polese, A., C. Williams, I. Ursachi and P. Bejakovic (eds.) (2016 – in press) The Informal Economy in Global Perspective: Varieties of Governance, London: Palgrave
Polese, A. (2016) Limits of a State: How Informality Replaces, Renegotiates and Reshapes Governance in Post-Soviet Ukraine, Stuttgart: Ibidem Verlag (distributed by Columbia University Press)

Since my arrival in Kyiv in 2002, corruption and bribery have been one of the main topics in the media, as well as in ordinary people’s daily conversations.

That would seem obvious to many. Indeed, Transparency International ranks Ukraine 130th out of 168 countries in 2016, on a par with Nepal, Cameroon, and Iran, a performance far from impressive.

Accordingly, anti-corruption measures have been on the agenda of virtually every political party in the country, as well they should be.

Officials and anti-corruption crusaders must, however, be especially careful with their terminology. In my latest book “Limits of a Post-Soviet State: How Informality Replaces, Renegotiates, and Reshapes Governance in Contemporary Ukraine,” I, for one, intentionally avoid the use of the word “corruption.”

I use “informality” instead, and for a reason. Corruption concerns particular incidents involving the exchange of money or favors – with the goal of acquiring a personal advantage at the expense of the state. Informality constitutes a wider category, including all transactions that happen without state control, often illegal but not necessarily socially unacceptable.

I certainly agree that parliamentary deputies buying their seats or a civil servant giving preferential treatment to those who can pay extra is not the best way to run a country.

But the international standards for interpreting corruption go further than that. Corruption is the word used to describe both a million-dollar “present” to a politician and an under-the-table payment to a doctor of 50 Hryvnia (around $1.95).

When Public and Private Moralities Diverge

How can a pensioner enjoy retirement on a miserable monthly income, without working a bit under the table? In principle, retirement does not stop you from working, but after 40 years one might like to rest a bit. Besides, if all pensioners decided to re-enter the job market, that would affect the labor supply, raising unemployment rates and lowering salaries.

Likewise, if I am a doctor and my salary is not enough to pay my bills, is there any legal way to earn more without killing myself by working 20 hours per day? Should I move to the private sector instead? If so, we are lucky that some doctors still agree to work in public hospitals.

The limits of a post-Soviet state essentially require alternative and critical explanations to phenomena and behaviors that are often too quickly classified as corruption, reflecting the absence of the rule of law.

As a starting point, we need to consider that the moral codes of a state do not always overlap with the moral rules of its citizens. The more the citizen is alienated from public and state life, the more these two moralities will differ.

I maintain that there are two informalities. One, which can be named “positive,” helps a society function in areas where the state fails to operate (beyond the state) or where state institutions and rules are not sufficient to manage a sphere of societal life (in spite of the state). “Negative” informality, on the other hand, tries to replace state structures, institutions, and rules even when they are effective in regulating citizens’ lives.

In other words, positive informality complements the state, while negative corrupts the system.

When the state is thus absent or failing to provide a service in some way, citizens will step in and start acting as if there were no state. Given that institutional corruption is technically the abuse of a state (public) function for private gain, if the state is absent, it makes little sense to talk of corruption.

The end of corruption

When talking to Ukrainians from any social class, it is easy to gather the impression that corruption is everywhere – but virtually absent in some other countries that are held up as archetypes of propriety.

This is misleading in at least two ways. First, analysts and practitioners often give advice to local governments based on ultimate models of institutions and practices that exist only in an ideal world, but not necessarily in any country, however advanced. By doing this, they deceive local elites into thinking that that model is possible and a blanket solution for everything.

In a number of countries with low levels of corruption, public medical care exists next to the private one, often using the same structures and the same doctors, but at a higher price. If you want a faster or more dedicated service you will have to go private. This means paying extra and seeing the same doctor privately. Sound familiar?

A number of companies or professionals (lawyers, architects) in countries like Italy, Spain, and Belgium will give you a “discounted” price if you agree to pay cash. Being impossible to track, cash payments decrease the final income these service providers have to declare at the end of the year and thus the taxes they have to pay.

I am not aware of any studies on the matter but work posts demanding a high degree of responsibility (i.e. the top manager of a large corporation) are rarely distributed through an open competition. It is more likely that an informal pre-selection takes place, and current managers would have to propose someone they see as trustworthy. Is that corruption?

And a prince on a white horse came

The experience of countries that rank very low in the corruption index tells us that it is possible to reduce corruption. But could this ever attain a zero level? Is it possible to control the exchange of favors between politics and business? Or to have no conflicts of interest in any field?

Acknowledging informality means accepting that human agency counts, that one might choose to work not with the best candidate for a post but with someone lower-ranked simply because they get along better in person.

But two things can be done. One is to work on trust. If citizens trust their state, and in turn the state has reasonable claims, they are more likely to abide by the state’s instructions.

The other is to stop being obsessed by informality, which is not bad per se. Informality can help people deal with a situation where formal rules do not apply, and where they don’t have any previous knowledge of how to solve a given situation.

Informality can occasionally replace formal rules to get something done or solve a Catch 22 without any major harm taking place. The problem arises when informality systematically replaces formal rules. This may lead to the people “overruling” the state, and having to be corrected.

But it may also mean that a state simply has unrealistic expectations from its people.

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