Saturday, August 12, 2006

old essay on corruption in Armenia. What has changed since?

I wrote the essay that follows, back in 1997, as a term paper for the Public Administration course. Periodically I thought about updating it. Maybe eventually I will, but meanwhile I think it is a good idea to let readers compare situation as it was described then (I still think it was a pretty correct description) with a current situation. Please feel free to comment/suggest corrections and point me to what was described incorrectly/changed since.

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Corruption within Bureaucratic Structures of Transitional Society

Hovhannes Vardanian

Research Paper for PS 620 course

Summer 1997

American University of Armenia


Table of Contents

Introduction, Hypothesis

Monopoly on political power prevents reduction of corruption, and punishes any attempt directed to change established distribution of power within society.

Working Definition

Behavior of public officials directed to achieve private gain and personal advantage (or to give such advantage to interested parties) using public resources.

Corrupt Society of Transitional Period

New power holders

"Clusters of relationships based on networks of relatives, friends and acquaintances"

Distrust

Formation of "administrative class"

Conclusion

Possible measures to reduce corruption


Introduction

If monopoly on political power belongs to one party or group within society, and that power has economic incentives to perpetuate that situation, corruption in the long run can not be reduced in such society because anti-corruption measures taken are such that they ensure dominant position of the monopolist, and punish any deviation directed to change established distribution of power within society. So any activity is paralyzed because laws adopted reflect interests of monopolists, and corruption become characteristic to highest levels of political elite. Author considers the existence of diverse and plural centers of economic activity as prerequisite for existence of diverse interest groups with different economic and political interests. Such interest groups do function as a basis for deviant--from standpoint of monopolist--political behavior and are capable to back it financially. They perform watchdog functions which help to fight corruption productively, and eventually change political situation. That organized interests are not only means to develop plural and viable polity (thus actualizing democracy), but they can reduce corruption and keep it on acceptable for society levels.

To the matters discussing general strategy as well as both short- and long-term anti-corruption measures is devoted this paper.

Perception of corrupt behaviors differs in different cultures. In order to get the data to analyze actual level of corruption in particular society at first it is necessary to define phenomenon itself, define scope of enquiry, work out the methodology and operationalization issues, as well as the questionnaire. That scientific aspect of discussion (definitional aspect, as well as all others aspects mentioned), lies without the limits of this paper.

Our focus will be on discussion of source of corruption and on possible ways to cope with that vice. So discussion will lie more in practical plane. It is based on certain assumptions--mainly derived from impressionistic evidence (from everyday life and informal sources, and from the analysis of that information):

1. Levels of corruption within bureaucratic structures of most NIS are very high.

2. Source of corruption lies in either possibility to extort payments because of preferable positions in bureaucratic hierarchy, or because of access to important sources within it.

Exploitation of the possibility to adopt laws, decrees and orders giving unfair advantage to certain groups is the second main source of corruption.

We can add to this exemption from taxes in exchange to illegal payments going into the pockets of public officials, or extortion of one-time payments going to fill the budget shortages in exchange to tax arrears' write-off I.

3. In nowadays Armenia both conditions are present, both give unfair advantage to new elites which monopolized economic and political power.

4. In short run it might prove itself effective (easing the ways to do business, coping with bureaucratic ineffectiveness), but in the long run it could be detrimental for the development of both economic, and political viability of the country, not to mention public morale and spirit.

Premise of this paper is that corruption is negative phenomenon, which induces various costs for society (economic, business, moral, political), and imposes unbearable burden for the society in the long run.

Business costs includes not only losses from closed businesses, and high transaction costs which inhibit business activities of domestic business, but also reduce foreign direct investments--referring to economic costs of corruption1.

"Political costs of corruption weaken society's ability to reform itself, and to build more open, responsive, credible, and legitimate political institutions. In the short term, corruption estranges people from government, from politics, and from each other. In the long run, they also mean that the anti-corruption potential of politics itself is lost. "2 Not to speak about moral costs of corruption which reduces trust of the people in market reforms, and democracy itself.

Another premise is that all measures directed toward reduction of corruption both on societal level (macro), and on the level of particular bureaucracies (micro) should take into consideration costs for efficiency of bureaucracy, and costs of enforcement of anti-corruption measures3.

The issue of feasibility plays the major role in implementation of programs directed towards reduction of corrupt behavior. Political will is not enough for success of the policy--existing societal forces has to be taken into consideration, and respective policies should be directed to disbalance coalitions of corrupt elites. Process should start from the top--in order to escape revolution, and degradation of polity (economic and moral). Main emphasis should be on economic policies of liberalization, in order to strengthen diversity of plural centers of influence. Economic strength of diverse centers of influence will entail demonopolization of political process and deconcentration of political power, which in its turn will activate desire to watchdog activities of public officials, structures and institutions, as well as the process of the policy implementation itself. That will lessen the chances to express corrupt behavior.

Working definition

There are different definitions of corruption underlining different aspects of that phenomenon. For example, Vito Tanzi, Director of IMFs Fiscal Affairs Department, defines it as "the intentional noncompliance with the principle of arms-length relationship, which states that personal or family relationships ought not to play a role in economic decisions by private economic agents or government officials."4 Other definition underlines impact of corruption on business: "use of power by government and quasi-governmental officials and agents to extract quasirents from businesses for their own profit."5

Our working definition of corruption used in this paper define it as Behavior of public officials directed to achieve private gain and personal advantage (or to give such advantage to interested parties) using public resources. It by no means contradicts to such definitions of corruption as used in the Encyclopedia of the Social Sciences--cited by George Moody-Stuart--"Corruption is the misuse of public power for private profit."6, or with broad definition used by Michael Johnston--"abuse of public roles or resources, by officials or by the private parties who seek to influence them, for private benefit--with "abuse" being identified by legal or cultural standards."7

Corrupt Society of Transitional Period

In Fred Riggs's words "The prevalence of corruption in a country is an index of the extent to which bureaucrats are able and willing to violate laws or permit their violation. Bribes may be given to induce officials to perform their duties--as when granting licenses and permits--as well as to overlook non-performance."8 The phenomenon of "pseudo rule making" also shows the degree of corruption in society as well as powerlessness of legislature to implement the laws made. In post-soviet transitional societies such pseudo rule making are widespread (it can be viewed as Soviet legacy of non-implementation of adopted laws--even the Highest Law--Constitution was "pseudo" law).

Old system was neither less corrupt, nor less self-serving than today's fluid transitional "system". Then there was just dominance of party bureaucracy, which formed a sort of party aristocracy, or oligarchy. Then existed an arbiter in the center (CPSU in Moscow, thus a sort of control, and appellate instance)

To illustrate the situation I have chosen method of commentaries. References are Vache Gabrielian & Frank Fischer's as well as Nora Dudwick's articles9.

"In the former Soviet Union bureaucracies were the main (and still continue to be important) avenues of interest articulation and aggregation. They are also the most cohesive and powerful interest groups."

"Today, many of these nomenclature families continue to play important roles in their communities as part of the new ruling party."

"They are clusters of relationships based on networks of relatives, friends and acquaintances hierarchically bound together through the ongoing exchange of favors and obligations. Such relations characterized Armenian society under Communist rule, although not to the degree present in Central Asia."

"Since 1991, the new power holders have become entrenched. Today the ruling elite consists of...competing teams clustered around key figures such as president Levon Ter-Petrosian [now ex-], his elder brother [died in 1997], Prime minister [now ex-] Hrant Bagratian [which today heads the party, and works as IMF expert of Russian Republic payment problems], Minister of Interior [now ex-minister and ex-mayor of Yerevan], and defence Minister Vazgen Sarkissian [today we can add few others such as the newly elected president Robert Kocharian (who gained power during his ascendancy to the prime minister office), Speaker of the Parliament--once it was Babken Ararktsian, now it is Khosrov Haroutiunian--and couple of other names]. These men in particular are seen as nodes in a new "clan" system which many people consider more ruthless and self-serving than the previous Communist regime."

"Well-placed people are scrambling to secure their access to the wealth by buying and selling of government holdings which are being privatized, gaining control over natural resources, and establishing trade and production monopolies"

"The endemic distrust so common in post-communist regions facilitates the continuing atomization and fragmentation of social and civic life. Distrust, combined with harsh economic conditions and competition for funding, sponsors, equipment and so forth, discourages the sharing of resources or even information." Here comes to mind differentiation between societies of high and low trust characterized by degree of spontaneous sociability10. Armenian society could be referred as low trust society, in a sense that sociability here is not confined to family and kin (that pattern is more characteristic to the politics in Arab states), but rather to circles of acquaintances and clientele not related to kin. Certainly, voluntary associations here are confined mainly within circles of people who know each other personally. No stable voluntary association of Japanese type formed on the basis of trust to compatriots, or on the basis of common economic interests, as in US, is probable today in Armenia.

"Since 1988, Armenian society has assumed the shape of a sharp pyramid [which it had before as well]. At the top are members of the old and new nomenclature who have managed to profit in the post-communist free-for-all."

"The increasing power of vertical, clientelistic relationships are displacing the horizontal ties [they were never horizontal here] fundamental to civil society even despite the "Potemkin village" of "civil organizations" largely controlled by a tight circle of westernized elite.

Functionalist Perspective

We saw negative sides of transitional Armenia. How situation could be improved taking into account present realities? One of the possibilities open to todays elite is the formation of the aristocratic class (in civil service), and loosening its monopolistic grip over business (letting it to the middle class businessmen. As a pattern in such transformation could serve Britain. We see parallels in evolution of British aristocracy with Armenian realities.

British civil service organized along the principle of "administrative corps", administrative class, which rests upon a general political acceptance of the hierarchic idea11. That idea actively rejected by mass propaganda during the Soviet era at the same time was successfully implemented by elites. It remains to be unacceptable by society, but continues its attempts to realize itself on the elite-level, adopting itself to existing realities.

"From the Revolution of 1688 until 1832, public service was the special domain of an increasingly functionless aristocracy whose monopoly of public office was tacitly supported by the upper middle classes of the cities." The similar pattern we see in tendency to occupy poor salaried position within Armenian government (even with little avenues to express corrupt behavior).

"Administrative class idea rests upon a scholastic system that creates the educated nonspecialist, and a recruiting system that selects him." Idea of "educated gentleman" produces "generalist" minds." Certainly Soviet system of education prepared such "generalists".

"A successful administrative class rests upon the condition that such a group possesses the prestige of an elite; for unless the class has an elite status, it is in a poor position to compete against any other elite for the brains and abilities of the nation.(to acquire the best of the nation's competence)." That condition is not supported in Armenia, so corruption is explainable and even socially acceptable to some extent.

Conclusion

It is clear that there can not be simple and drastic administrative solution to the issue of corruption. Tighter control could reduce elite-level corruption, but not the bottom-level one, and elite level corruption on the other hand is lowering the public morale which instigates bottom-level corruption. Latter if unresolved, can slow down, or even bury any reform movement.

The higher the stakes, the higher prices. As the result of strict anti-corruption rules corruption could become even more blatant.

Solution for the issue of elite-level corruption could be found in complete separation of executive and judicial power, and Attorney General lifetime appointment. Creation of the institute of Special Attorneys (under procedural--but not substantive--control of Attorney General) could be helpful in controlling and punishing corrupt practices (but not in preventing them) on the elite level. That measure in the corrupt environment can induce even more corruption, so it has to be well devised, and cadres of such corpse of Attorneys have to be paid very well and positions have to be very attractive in order to be matter of ambitious competition. In preventing corruption--both street- and elite-level encouragement of whistle blowing practices, and a kind of act protecting witnesses and whistle blowers (and encouraging them by giving incentives) could get the results and be of certain help. It would transfer watchdog functions from formal channels to informal ones.

Of course there are drawbacks in all proposed measures. Implementation could induce both higher effectiveness and enforcement costs, and make bureaucracy more inefficient and less compliant to follow public interest. By shifting watchdog functions to informal channels we could initiate witch-hunt and give birth to both intolerance and factional rivalry on the societal level.

It seems that the most cardinal way to reduce corruption on both levels is in creation of career service starting at very early stages of education, and aimed to internalize moral values and norms of honest behavior. Achievements of British and French bureaucracies in terms of reduced corruption and high level of expertise and knowledge partially seems to be the consequence of proper education, career service and aristocratic background of civil servants. My point is that proper education--for both elite and bottom-level cadres--from very early on, and instillation of desirable values will make possible existence of both honest, honorable and potent bureaucracy, as well as development of honest and potent elite.

But the very prerequisite of honest behavior of officials is the proper pay level. Here the cardinal choice of downsizing bureaucracy as the requirement of its better quality, depends on the political will of the elite, as well as on the feasibility of restructuring the scheme of governmental expenditures. Here that means less bureaucratic restrictions, and less room for the discretion of the public officials. The spheres of such reforms are self-explanatory, and demanding: Army, Customs, Police, Education, Culture (I mean downsizing and narrowing the prerogatives of respective ministries).

In the sphere of military that mainly means shift to professional cadre army, elimination of conscription boards.

In the sphere of education resent decision to eliminate exemption from military service for undergraduate students shows undergoing changes towards desirable end.

One of the best examples of bureaucratic discretion which creates possibility to exercise corrupt practices can be seen in such sphere as culture and language practices--as curious it might sound. Language Committee created for checking proper usage of the Armenian language and its propagation now extorts payments from proprietors of certain businesses (mainly in services).

In general in the corrupt society any restriction which gives opportunity for bureaucratic discretion opens door for corrupt practices, so the most possible liberalization of economic, social, and political life should bring positive results.

Here is what can be proposed as possible measures II:

1.Reduce number of regulations which open way to administrative discretion.

2.Increase salary within bureaucratic organizations by simultaneously reducing their size.

3.Improve quality of staff by creating possibility for free competition for positions--free competition and free access to information about vacancies within organizations

4.Develop human resource management programs--within respective ministries--in order to develop job classifications which will reduce arbitrary administrative discretion. Develop job descriptions reflecting new realities of market economy of 1990s. Such work should be done by respective minstries in collaboration with all potent and qualified forces which should be determined by free public tender of the projects.

5. Exercise tight control over high-rank public officials through institution of independent Attorneys appointed by Attorney General--which in its turn should be appointed for life-term.

6. Developing a system which will give both incentive and protection for whistle blowers III.

All these measures has their apparent advantages, and hidden dangers, so when we would turn to their practical implementation we should take into account realities of informal networks, and already existing corruption of higher officials and law makers. In order to achieve the results these administrative measures should correspond to liberalization of the whole society in order to give it possibility to parallel efforts of civic minded public officials.

Endnotes

I. Otherwise indisputably justified measures directed toward tax collection in the environment of interclan rivalry of transitional society (when certain clans are supported by government) could in reality turn to be just one of the strategic moves of the clan tending to gain power and undermine the influence of the existing elites.

II. A wise policy-maker consequently expects that his policies will achieve only part of what he hopes and at the same time will produce unanticipated consequences he would have preferred to avoid.(Lindblom)

III. Points 5. and 6. are the result of discussion of the issue with Dr. Donald Fuller (American University of Armenia)

References

  1. Research study of "association between foreign direct investment and perceptions of corruption experienced by potential investors" by Laurence Busse- Noberu Ishikawa-Morgan Mitra-David Primmer-Kenneth Doe, Transparency International.
  2. [on-line]_May 2_(1997) Available URL:

  3. http://userwww.service.emory.edu/~tyavero/ip/project2.html

  4. .Michael Johnston, Political Costs of Corruption, address to the international Forum on the Struggle against Administrative Corruption, Bogota, Colombia, 17 November 1993

    [on-line]_May13_(1997) Available URL:

  5. http://149.43.1.8/departments/polisci/papers/colombia.zip

  6. Judith E. Gruber, Controlling Bureaucracies. Dilemmas in Democratic Governance, University of California Press, Berkeley and Los Angeles, California, 1987: 61-84.
  7. Cited in Transparency International Study, Introduction
  8. [on-line]_May 13(1997) Available URL:

  9. http://userwww.servise.emory.edu/~tyavero/ip/intro.html

  10. Ibid.
  11. George Moody-Stuart, The Costs of Grand Coruption, (mooe22.htm)
  12. [on-line]_May 13_ Available URL:

  13. http://www.cipe.org/

  14. Michael Johnston, Social Development as an Anti-Corruption Strategy, VI International Anti-Corruption Conference Cancun, Quintana Roo, Mexico, November, 1993.(cancun.rtf)

    [on-line]_May 13_(1997) Available URL:

  15. http://149.43.1.8/departments/polisci/papers/cancun.zip

  16. Fred Riggs, Bureaucrats and Political Development: a Paradoxical View, in Joseph LaPalombara, ed., Bureaucracy and Political Development: 350.
  17. Nora Dudwick, The Mirage of Democracy, a Study of Post Communist Transition in Armenia, Paper for the Workshop on Post-Comunist Democratizxation and Political Participation in Russia, Ukraine, Belarus and Moldova, School of Advanced International Studies, John Hopkins University, 1995.
  18. Vache Gabrielian & Frank Fischer, Reforming Post-Communist Bureaucracies: Organizational Modes of Transition, IPSA Research Committee No.4, Amsterdam Round Table Conference, Amsterdam, Netherlands, 1994.
  19. Gabrielian, op.cit.: 19.
  20. Dudwick, op.cit.: 3
  21. Ibid., 11
  22. Ibid.
  23. Ibid.
  24. Ibid., 16.
  25. Francis Fukuyama, Trust. The Social Virtues and the Creation of Prosperity, 1995, The Free Press, New York.
  26. Dudwick, 17
  27. Ibid., 19
  28. Robert Dahl, The Science of Public Administration: Three Problems, in Classics of Public Administration, ed. Jay M. Shafritz, 1978, Moore Pub. Comp., Oak Park, IL, 130-131.
  29. Ibid., 130.
  30. Ibid., 131.
  31. Ibid., 132.
  32. Informal interview

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