Corruption still remains, perhaps, the hottest topic of the day for Ukraine
Recent detention of Roman Nasirov, the Head of notoriously corrupt State Fiscal Service, sparkled nearly an euphoria about long-awaited success in fighting corruption. This is, of course, in any account, a significant step forward. But even if Mr. Nasirov will be proved guilty and convicted (that is unclear at the moment), there is little hope that under his successor the tax collection cease to be a corruption nightmare for Ukrainian business any more unless the very system gets fundamentally reformed.
The main point not yet embraced by the majority of people both in Ukraine and abroad is that fighting corruption is not “just a matter of political will”. This is a dangerous oversimplification that makes the most of anti-corruption efforts futile or even counterproductive by focusing them on infeasible or just wrong goals instead of addressing the fundamentals of the problem.
“Natural states [such as Ukraine and the most of countries in the World] are not sick. Natural states may appear to be corrupt according to the norms and values of open access orders [the ones that characterize all of the developed countries], but that corruption is an inherent part of the operation of the social order. Failure to understand [this] … is a major impediment to a better development policy and better social science history”.
Ukraine appears exactly the case of this sentence: broad misunderstanding of the nature of what looks as “just corruption that should be persecuted by a political leader” – both to the Western and domestic observers unfamiliar with (quite complex) modern institutional and political economic concepts leads to populism and oversimplification.
Thus, I have bad news for such kind of observers: the “political will” in what North and his co-authors call “natural states” can hardly be effective against the kind of “corruption” that constitutes the essence of their social orders, their modus operandi. Rather, it will work against corruption of this very social order – which, in many cases, means opening-up, therefore heading to progress. As, for instance, it was the case in the Medieval Western Europe, where new technologies were strongly prohibited by law – and could be developed only through corruption of the supervisory authorities. Furthermore, below I argue why relying on the strong executives’ political will is likely to be counterproductive in case of Ukraine, as well as many other countries. Advocates of the “political will” approach use to quote Li Quan Yu, but try to forget lots of other, less famous or even infamous, “strong leaders” that have got to power under the motto of “fighting corruption” – from Zia ul-Haq to Alexander Lukashenko. And many, if not the most of them, eventually appeared as corrupt as their predecessors, or even worse.
Then, one should distinguish between different types of corruption that need equally different tools to fight them. A mine can be very much effective against a tank, but not against a warplane. Still, in the prevailing anti-corruption rhetoric the simple and evidently harmful embezzlement is treated in the very same way that “overtimes” for “greasing the wheels of bureaucracy”, collusion in circumventing the stupidly cumbersome or burdensome regulations (that should be better eliminated as such), and complex issue of law-backed extortion described in more detail below. No doubt, all of them are eventually harmful, and all of them lead to similar unlawful enrichment of certain empowered officials, but it happens in dramatically different ways and leads to very different outcomes. Besides, the motivation of involved parties and other stakeholders is equally different in all of these cases. “Just put all of them to jail” work only for some cases, where, in addition, “all of them” really means 5-7%, not 50-70% of all involved officials. In the other cases no political will is able to solve the problem by punishment.
A bit of local context is helpful in understanding these points. The Russian proverb, “laws are written for fools” is, unfortunately, one that characterizes Ukrainian society. According to deep-rooted historical traditions, laws are deliberately made impracticable, and as a result discretional enforcement becomes a central feature of how the country is run. This discretion endows official with some vaguely defined personal discretionary power (vlast’) that would be unimaginable in a state that embraces the rule of law. Note that it is only in Russian (and Ukrainian) a public servant is called “nachal’nik” (literally chief) precisely because he or she does not just impersonally implement the law, as a bureaucrat should, but rule over the people using the law as a stick.
Applying this to the Robert Klitgaard’s formula, “corruption = discretion + monopoly – accountability” mostly explains Ukraine’s key challenge. The most of state functions are tied to its monopoly on coercion and there is little to be done about this fact. Until the democratic and judicial institutions mature, accountability remains weak and discretional by itself, thus the nachal’niks can abuse their discretionary power with impunity. They gladly use it as an instrument to extort their victims, for political pressure, corporate raiding or elimination of their cronies’ competitors etc. And the most important, to support this very system by keeping laws impracticable.
As long as these foundations remain more or less intact, corruption will rear its head as a practical, sometimes even exclusive, alternative for getting things done; while the best “anti-corruption” legislation suffers from the same selective, discretionary enforcement as other norms. Under these conditions, simply prosecuting individuals, even those of note, at the discretion of some higher nachal’niks leads only to prosecutors lining their pockets or, if their offense is to egregious, they are simply replaced with equally corrupt individuals, albeit ones that are more loyal to the system and their benefactors. Within the above-described system of relations, the others interpret such selective punishment for common violations as a signal to express more loyalty, not integrity. An anti-corruption offensive against specific individuals, if not grounded in deeper institutional change and the rule of law, may well even be counterproductive as it is a familiar instrument for meeting out selective justice towards one’s political and business competition, hence strengthening the personal vlast’ – there are lots of such examples in Ukraine’s history, and even more in Russia, where the corruption keeps flourishing in spite of juicy scandals over corruption of the key Ministers like Serdyukov or Ulyukayev.
Yet, the very system described above is used not only for an individual seeking out personal gains, but also for other purposes, sometimes fully legitimate, including the execution of their official duties. To put it differently, Ukrainian bureaucrats utilize the opaque nature of their duties and powers to operate normally. And this is why “corruption vulnerabilities” are so hard to eliminate; and why under the current system, those at the top should not be left alone to carrying out the very reforms that would render the system they thrive in redundant. This is how seemingly modern Ukrainian state institutions actually often operate as the ones of a (medieval) “natural state” so brilliantly analyzed by North et al.
To put it more bluntly, the conflict of interests inherent in officials’ positions and duties is at the heart of the prevailing systemic corruption. And it is obviously foolish to rely on them to enact real change. There can be some exemptions of “angels” dedicated to genuine reforms in their sectors who pursue changes addressing some real issues, as in case of a team that went to the government after Maidan, or, more recently, Alexander Danilyuk, the Minister of Finance that last year managed (amid extremely fierce resistance) to push through the ambitious anti-corruption package in the administration of taxes. But this success has got possible only because instead of habitual practice of all of his predecessors (including Natalie Jaresko that was widely (mis)perceived as such an “angel”) he debarred tax authorities from their previously pivotal role in development of the tax legislation, instead included the civil society experts. And this is much more far-reaching and systemic move than even imprisonment of Nasirov could be.
Nevertheless, the problem too often boils down to prosecution of some persons at the top, and relying on personal integrity of some others. The West, for all of its good intentions has unfortunately not come to grips with the fact that systemic corruption cannot be rooted out by either of these means. Selective punishment for a massive crime is totally ineffective, especially when the prosecutors are corrupt themselves or politicized as explained above; while the integrity, in practice, is relative and matters only in comparison to opportunities. Instead, these corruption opportunities that rest in country’s legal and institutional foundations, such as the ones allowing for the law’s discretionary enforcement – need to be properly addressed.
Therefore, the corruption in Ukraine will ever win a fight as long as the Western advisors mostly read the laws (written for fools) and listen to the powers that be – which, in turn, are happy to deceive advisors and continue doing business as usual. As developments since the EuroMaidan have shown, there is still little hope for serious technocrats or reformers to land a post in the Ukrainian bureaucracy that would permit them to carry out real change from within. Since the problem is not necessarily the individuals in question, but the institutions, the solution should be institutional too: reforms to combat the system must largely come from outside of it. Of course, the officials should be given the necessary powers to execute and administer reforms, but, as a rule, not design them.
There are many different examples of institutional arrangements that have already been tried in Ukraine and other countries. From separate governmental “offices for reforms” staffed with independent local and Western experts, to civil society that produces the bills and advocates for them through MPs. Back in 2010 Brian Levy and Francis Fukuyama suggested that Ukraine is among the few countries where, “Bottom-up development engages civil society as an entry point for seeking stronger state capacity, lower corruption, better public services, improvements in political institutions more broadly—and a subsequent unlocking of constraints on growth” – an insight that is as apparent as ever now. Not the least because domestic experts-activists are fully aware of the rather sad realities facing Ukraine now, but also because at least the reputable ones maintain a sincere hatred for the rampant corruption that plagues the country and often have clues on how to make the law working even in spite of it. The more the West listens to these experts and cooperates with them – the sooner they can achieve their common goal: the rule of law in Ukraine.
 Maybe these 50-70% of civil servants just should be made redundant. The problem is that “staff reduction” in corrupted organizations means mainly firing the least loyal (and often the least corrupted) employees or reduction of the least palm-greasing positions. Staff reduction should go hand in hand with the reduction of corruption opportunities as done in regulatory bodies in Georgia.