Window on Eurasia: Corruption behind Fifty Percent of Inflation in Russia, Khasbulatov Says

Paul Goble

            Staunton, October 8 – Fifty percent of the inflation in the Russian Federation today is the result of corruption, according the Ruslan Khasbulatov of the Plekhanov Academy, and unless Moscow reduces corruption, “high inflation will continue” as far into the future as anyone can foresee.

            In an interview published today on the Svobodnaya pressa portal, Khasbulatov, who was the last chairman of the Russian Supreme Soviet and is a corresponding member of the Russian Academy of Sciences, says that if corruption forms 15 percent of the economy, then inflation will remain high and damaging to the economy (svpressa.ru/society/article/59459/).

            That is because, he continues, “at a minimum,” 15 percent of the budgets of all governments in the Russian Federation involve corruption, and these funds go into the shadow economy.  This “enormous mass of money, because it is not involved in trade (even if this money is exported) exerts enormous inflationary pressure.”

            And Khasbulatov said that “of the seven percent inflation projected by the Ministry of Economic Development for 2012, half – or 3.5 percent – is the result of corruption.”  If the level of corruption is higher than 15 percent, then the impact of this will be even greater.” Neither the Finance Ministry nor the Central Bank can deal with inflation if corruption is not overcome.”

            Khabulatov notes that he and his colleagues have been studying corruption for some time and have found that “corrupt relationships exist both at the federal and regional level,” involve various offices, medicine, education, and housing. Moreover, he says, corruption is not falling but has been at “a consistently high level for the last five to six years.”

            Corruption and the inflation it causes are cutting per capita incomes, he continues, but what is the most unfortunate aspect of this situation is that “under the existing system and current government policy, [Russians] will always have inflation”  unless and until President Vladimir Putin fulfills his promises to reduce corruption.

            Khasbulatov notes that “Putin has created a regime of personal power in which he alone can make serious decisions.  [But as a result] it happens that around him – both at the federal level and in the provinces are weak people who are not distinguished by their leadership qualities.”

            If Putin is going to address the problem, the academician says, he will have to do far more than he did in Pikalevo and at the Sayano-Shushen hydroelectric station: He will have to remove many governors and “all local bureaucrats.”  People say that “Putin is an awesome wllful leader. In fact, he is giving the impression of a weak and indecisive one.”

            But even if corruption is eliminated, Khasbulatov concludes, “this would not mean that you would immediately get growth.” Ending corruption is only one of the steps needed. But preventing officials from sending their corruptly gained money abroad is, the scholar says, the kind of first step that can make others possible.