INSTITUTIONAL FACTORS OF THE KLEPTOCRATIC ECONOMY

Abstract

The post-communist history testifies: the worst economic consequences of transformational processes are observed in countries, where state’s power on the basis of the kleptocratic structure uses the own potential for the arbitrary interpretation of property rights and hampers the competition, whereas representatives of its socio-political elite break dangerously the imperative of social formal institutions and use the own power rights for a fast enrichment and a strengthening of the own key positions in the society.
As distinct from the “daily” forms of corruption, the “large-scale corruption” as a basis of the kleptocratic economy has deep roots on the level of governmental structures, leads to the illegal appropriation of huge assets, undermines the legitimacy, and conserves the socio-economic backwardness. Under these conditions, the administrative-bureaucratic apparatus, which governs the all-embracing administrative procedures, becomes the institution of frightening and repressions. Further, after an institutional adaptation, the corruption actions become a standard customary behavior, and the bribe acquires the contractual or standardized form outsides the frames of tenders and agreements. Simultaneously, the systematic generation of a rent under conditions of the mentioned “institutional trap” is the most important means to control the violence in a kleptocratic state and the functioning of its institutions. Namely the kleptocratic economy creates a quasimarket system for the realization of the key goal of redistribution of assets and for the receipt of a rent not favoring the growth of a social welfare due to economy’s real sector and overcoming the negative externals of a market.
Under such circumstances, the studied institutional kleptocratic structure in Ukraine started to develop since 1991 under the guidance of President V. Yanukovych. The most profitable branches of the economy were rapidly transferred in the ownership of his clan. But, under conditions of the unstable unfavorable institutional medium, this structure became to degrade. In other words, the so-called “decadence of the pseudoelite” happened, which led to the power change. But the present place of Ukraine in the corruption level rating testifies that it is one of the most corrupt countries, as earlier.
To counteract the kleptocratic factors in the economy, it is necessary to create an institutional medium, which would destroy the corruption structure of the economic activity, remove the obstacles for a law-abiding business, ensure the legal guarantees for the business, and transfer the responsibility and the initiative monopolized by state’s bureaucratic apparatis into the private hands.
To this end, it is necessary to solve, in the first turn, the following institutional problems: liquidation of obstacles hampering the consolidation of the legal and shadow sectors of the economy; support of their institutional formalization; “transparent” appointment on positions in the sector of public administration only on the basis of professional qualities, rather than by virtue of the “nepotism” and “political favoritism”; and introduction of such system of payment for the labor of officials and employees of the budget sphere on the whole, which would allow them to receive the competitive income stimulating them to the qualitative execution of official duties and to the efficient public administration. The key restraining means, which will eliminate the corruption intentions of officials, is a reliable nonengaged system of permanently acting monitoring of their incomes and expenditures, which would foresee, in parallel, the inevitability of a severe punishment for corruption actions.