Corruption is forcing Russia’s best and brightest to flee the country
newsweek.com
newsweek.com
Capitalist economy + corrupt judicial system + corrupt government officials at all level = hell for businesses.
You cannot do anything unless you bribe or do something illegal. Then if you become successful, both the mafia and the corrupt govt officials come after you. The police threaten to press charges, the mafia offer protection from the charges. You are fucked either way.
The country I left and frequently keep visiting is great: I love the people, the food and the culture. I love what I hear from young graduates, I like seeing people smile more and new businesses pop up everywhere. I like doing business there myself. And by the way we are growing. The quality of tech. talent is impeccable, easily on par with US schools and the latest waves of graduates have good English as well.
Not everything is rosy yet, but the risks are manageable, especially when you "zoom out" and face the entire spectrum of possibilities of why your business may fail. Lack of customer interest/traction is orders of magnitude scarier problem that issues with authorities.
Be my guest and stay out, it only makes me easier to compete because I'm in.
I am sure I would love the people and the food. However the culture and the business environment is rotten.
> ...but the risks are manageable, especially when you "zoom out" and face the entire spectrum of possibilities of why your business may fail.
When my business fails there I want it to be because I screwed up in my execution, marketing, finance, but not because I didn't bribe the right official enough. If that is the risk, then screw it, I don't want to deal with it there. I am not that kind of a person.
And culture. Well, folklore and such, is great. If by culture you mean a culture of alcoholism, bribery and corruption -- then I don't want anything to do with it.
> Be my guest and stay out, it only makes me easier to compete because I'm in.
Agreed. Will do.
Not really. I live a hundred meters away from the future Skolkovo site and if they decide they want my land, it will not be manageable for me, even though they have no rights for it.
You're right though that not everything is so bad. But I don't see it getting better at macro-scale. If anything, the economic growth of the last X years was despite, not because of government actions.
My grandfather owned a grocery store on the path of a new highway in Texas. The government bought every house in the neighborhood first, depriving him of customers, then made him an extremely low offer based on his now extremely-reduced revenues. Better than arson or threats, but not exactly nice or fair.
Offers of compensation are small comfort to people that are being forced out of a home they care about, especially when they have no choice, recourse, or influence in the matter.
And the corollary: the second situation does not, by comparison, improve the first.
Presumably you're expecting to be mistreated automatically just because you're in Russia and this happens to you. I don't believe there are any grounds for that assumption. Granted, chances of that happening in Russia are higher but as I mentioned earlier, on the grand scheme of things I (and most entrepreneurs I know) find those risks to be insignificant.
Its kinda stupid to deny such problems although that something that government puts most of its efforts to. Still Russia is a promising market for you(think no taxes, lots of customers with dirty money..) if you are willing to play that rules. I am out. Pretty much snow Nigeria.
You know, my Russian friends are learning history of their own country from history books written in Poland. Even with recurring anti-russian bias in these books there are actually different points of view and you can build a picture of events by reading different authors, there's some diversity. Contrary to the official historical doctrine taught in Russia which has only one point of view, totally made up and a ridiculous bullshit.
Theoretically, even the most egoistic government who's only purpose is to get more for themselves must realize that in order to preserve it's welfare it must make sure the citizens are doing fine. Russians are not desperate yet, so maybe the government has found the right balance. Obviously, many are involved in the scheme and many people have things to lose if the government initiates a real war on corruption. So the government must be afraid too and that fear is greater. However, I don't think you can keep that balance forever. Like the article suggests, the brightest flee the country and someone has to make the economy going.
I realize I probably don't know many things guys up there are aware of, but it seems pretty obvious from down here that the only thing that should be done to help the country bloom is to eliminate corruption. For real. Then all those silicon valleys and scientists start reappearing on their own, healthcare starts recovering, investors begin coming back. Focus.
This is true if the government is secure in its power. If the rulership--or factions within the rulership--are worried about losing their privileges, they may just grab what they can when they can.
So, I would hazard a guess the folks you speak of are simply not conditioned to be thinking about 'later'.
Sadly, this theory has eluded Russian and Soviet governments for many decades.
However we don't see any changes and I've been puzzled why.
I think, fundamentally, the transition to a society ruled by law is a very long and difficult one. It was long and difficult in the countries where the modern form of the notion originated. It's probably going to be longer and harder elsewhere.
No time to go into depth, and probably won't do it justice, but a good summary would be "Institutions matter". Like it or not, the kind of negative entropy found in the west isn't easy to come by, and trying to build it from nothing most times will fail in strange ways.
The trouble is an egoistical government rarely possesses the ability to draw a line and stop interfering(rules and regulations) and collecting money(taxes,bribes) so that people can have enough to do fine. The people who run it are blinded by greed and always want a little bit more. Also, while the people at the top might realize that corruption should not exceed beyond a point, it is hard to enforce as your lowly clerk/officer does not possess the ability to see the bit picture. All he/she knows is everyone is corrupt(it is institutionalized) and tries to take the biggest pie he/she can.
Interview: http://www.youtube.com/watch?v=HwZLhqDEnSo&feature=playe...
To give you an impression of how it probably should be, may I remind you of Mikhail Saakashvili, a Georgian president, who is so much hated in Russia. Personally, I don't know what happened at that war in 2008, but what many people in Russia realized recently is that he managed to eliminate corruption in Georgia in a matter of 3-4 years. How? One example: they fired all of the police force there overnight, hired and trained new people, raised their salaries and punished seriously for any bribes. What was the result? A great raise in respect for police in Georgia in less than 2 months.
I will believe it when I see it. Right now, the situation is that nobody will sell me health insurance /at any price/ and the things that are wrong with me are really pretty minor. The health plan says this won't be a problem in 2014.
Then, the people this bill was really meant to help are screaming bloody murder because they are now going to have to pay for health insurance. the thing is, most people are just getting by. Sure the bill provides help for low-income folks, but people worry they might not meet the low-income cut off, what with the payments on the truck and the house.
So yeah, I'll be /very/ surprised if this actually goes in to effect. My personal plan is to try to get a group plan for prgmr.com; I've gotta bring nick on full time anyhow, so I might as well.
Government power in the U.S. is limited by the Separation of Powers as well as the Constitution.
Edit: Someone downvoted me? Why not post an argument with your position?
Edit: Actually, I take that back. Since the citizenry and Congress can neglect their oversight duty, presidents can in fact increase government power, as evidenced recently by George Bush Jr. However, in theory the mechanisms exist to place limits on what any single person/politician can do. Making a blanket statement that Obama is increasing government power without providing specific arguments how is not substantive. After all, the same could be said by picking any of the other 43 presidents at random.
That's because he doesn't have a clue.
Last step is to rename "militia" to "police" with trivial changes to law enforcement and direct insult of all those who served in supposedly "ineffective" Soviet militia.
Russian President Dmitry Medvedev agrees—in theory at least. [...] But his bold speeches against corruption are largely ignored.
I left Moscow for Vienna 4 years ago. In Moscow some of my former classmates (in their late 20s) are managing departments in Big Four companies; in Vienna people spend 20 years working at the same desk.
When oil prices are high, the opportunities are booming. Young middle-class career-builders sure consider Russia as a temporary location ("I'll leave as soon as I'll be able to") and their children will attend Western universities and will stay some other place forever, but certainly idea about overthrowing this government is a last thought in their heads now.
I think you can trace this whole mess to Brezhnev's Zastoy(Stagnation) period of Soviet history (http://en.wikipedia.org/wiki/Brezhnev_stagnation). The upper echelons of government achieved a comfortable and stable enough level of life and pretty much froze the rest of society in time, in order to support their lifestyle. They cracked down on any dissension or change from the status quo which by definition means that they cracked down on the most entrepreneurial and dynamic members of society. They jailed the makers and made the thieves rulers.
And unfortunately you can keep this charade going for a while; in the 70's-80's you can steal technology from the West; in the 90's you can sell minerals and in the 2000s you can wait for your people to invent something and then steal it from them. When the Soviet Union fell down there was a glimmer of hope but it was silly to think anything would change. You have now 2-3 generations of people at the highest levels of power who grew up with this mentality and it's not going to change any time soon.
It's sad, I remember watching a talk show on a Russian satellite station where the discussion was whether Russia needed an "innovation economy" or whether pumping and mining is perfectly fine. An obviously liberal member of the panel was pleading and cajoling with the others that oil and timber don't last forever and they only enrich a few people. The other side, a representative of a mining concern, had an awesome reply: "They'll last long enough for me"
...and to hell with the rest of you
Corruption, weak law enforcement, very strict laws, everyone is guilty, selective enforcement, no rule of law, government has a backdoor to every process, government can block or initiate any action (think business operations, bankruptcy, legal actions), courts not independent of course, weak property rights, insanely complex and outdated legislation, people adapted to this system, some actually prefer it because they can buy their way out of troubles.
I hope I will be able to immigrate out of here in 2011. It's not my job to estimate my brightness though.
Where to?
* You are taxed on any income over $85,000.
* You can deduct any taxes you pay to the host government from your Federal Income tax.
The first and second apply to me and every year my US tax bill is 0.
Now, if I was making FU money it might be different, but most Americans working abroad never worry about this situation. Except if your Geitner, who just forgot.
I think that's a bit of a misrepresentation. It's "miniscule" compared to the number of Americans living outside the country. Mainly because the majority of Americans living outside the country are in the military and not affected. There are various places in at least Europe where $85k is extremely easy to hit.
Further, it's not just the fact that you'll have to file this stupid tax form every year for the rest of your life. There is a new law that if you have more than $10k at any moment in time throughout the year you have to report the bank accounts that held the money. That's right. Even though you live and work in some other country, the US expects you to tell them your bank account information. Failure to comply results in a pretty hefty fine. Needless to say, even if you're willing to do this, you bank may not be. The end result is that it's damn inconvenient to be an expat. And it gets worse every few years.
Oh and did I mention that inheritance taxes still apply to you (when you die or when you inherit)?
The last important line item is deduct the taxes you paid locally from your estimated US tax contribution. If you come out negative you owe the IRS 0. If you live anywhere in Europe 90% of the time you will hit 0.
>It's "miniscule" compared to the number of Americans living outside the country. Mainly because the majority of Americans living outside the country are in the military and not affected.
To me, the military doesn't count because 1) bases are treated as US territory they aren't taxed locally 2) Most military is tax exempt for duty and hazard pay. I'm referring to the 100,000 Americans in London and 50,000 in Paris. There are no US military presence in either of those cities and the US embassies can't hire them all.
>There is a new law that if you have more than $10k at any moment in time throughout the year you have to report the bank accounts that held the money.
This only applies to citizens living in tax shelters (ie Switzerland, Luxembourg, etc.) and if you are putting your money their and not honestly reporting it I have no sympathy at all when you get audited.
>Oh and did I mention that inheritance taxes still apply to you (when you die or when you inherit)?
Can't forget inheritance tax. Ole Dubya had to repeal it even though it only applied to his billionaires club.
In "Europe"? You mean parts of Europe or even most of Europe. In Switzerland, Lichtenstein, etc., it's lower.
>This only applies to citizens living in tax shelters (ie Switzerland, Luxembourg, etc.)
Uh... why do you think that is, eh? Think about that for a minute.
>and if you are putting your money their and not honestly reporting it I have no sympathy at all when you get audited.
Oh yea? If I live and work there and happen to put my money where I live and work you have no sympathy for me not wanting the US to bother me about it? Why does the US need to know? Why is it there business? I don't use their resources. No other first world country does anything like this and there is no excuse.
The reason I say all this about India is that a western journalist could write a similar story about India or China, yet there exist many versions of reality in which the story would be wrong.
Both India and China export a lot of people too. But normally you would not describe that as "fleeing corruption" but more of "seeking economic opportunity." Is Russia any different from that perspective? I don't know the answer, I am just asking the question.
From what I got in Russia the cut is an all level corruption, often with organized crime involved taking their own cuts.
Ex: Say in India you have to pay a bribe for a business license, in Russia you'd have to pay a bribe for a business license and then you have to pay for protection from the mob, then you likely have to pay protection from the crooked cops.
At least, this is how it's always been represented to me.
The league table can be found here :
http://transparency.org/policy_research/surveys_indices/cpi/... .
It doesn't seem that France is overly corrupt (if maybe overly bureaucratic) and I'd like to second your question for clarification.
There is no doubt that France is overly bureaucratic — but having lived there for almost 25 years, I've only heard about a handful of corruption cases.
Chichvarkin was able to build his "multi-billion dollar empire" with clean hands, and then all of a sudden the corrupted government noticed his success and cracked down on him.
I am sorry, I find this very hard to believe. A more plausible explanation is that "Russia's best and brightest" simply stepped on the toes of the very same corrupted officials that helped him with his rise.
This is not to say that best and brightest, those who are considering starting a business, are not leaving the country because of the corruption. It's just that Chichvarkin is not a good example to illustrate the point.
If they become successful they'll get the knock on their door from the "anti-corruption" officials who tells them charges will be pressed since they used "unclean" methods in the past. Unless, of course, you offer to pay even more bribes to bribe the anti-bribery police....
And yes, it is a chicken and egg problem. Even on the cultural level. Starting from the hospital when the baby is born, up through kindergarten, high-school, university and so on there are expected bribes to be payed. So people already grow up with this constant culture of corruption in mind. It is like a latent infection, always there in the background.
1) if you're doing the business in Russia with clean hands you're wildly uncompetitive
2) in most cases you won't be able to do that anyway because the laws assume benevolent government therefore giving it too much power
Disclaimer: I'm a Russian living in Moscow. Wouldn't dream of starting a business here. Life as a programmer is pretty nice, though.
There are good reasons Sergei Brin called it Nigeria with snow.
I'd like to point out two issues. 1. Too many people here want a tough and strong leader with nearly absolute political power. Few days ago I ran into my childhood friend. And he told me, by the way, 'You know buddy I'd like to see a Tsar as a leader'. I was deeply depressed. I think it's a heritage of the Soviet where people could sidestep responsibility of their own life.
2. Most people do not like entrepreneurs. So you are entrepreneur. Then you're fraud and rouge by definition (in the eyes of common people). That's why Chichvarkin did not gain public backing. And it's a sad and shameful thing.
I think things will change someday. But it will take neither one nor three years but half a score.
Ikea recently withdrew, abandoning several in-construction stores. Supposedly, they couldn't take the twists and turns anymore.
http://www.ikea.com/ms/en_US/about_ikea/facts_and_figures/ik...
While corruption is pretty high, it doesn't impact most people's day-to-day lives. However, serious institutional problems are becoming apparent: there have been cases where company directors have been removed by politically connected individuals, due to corruption at the government agency that registers companies. Significant amounts of real estate have been stolen due to corruption at the deeds office. And mineral rights are being seized because of weak controls at the government department that regulates these rights. In one case last week, a listed steelmaker was forced to buy mineral rights from a group of politically connected at a huge premium. All of these have been widely reported in the media, but that is where the problems start.
South Africa's media and constitution generally allow for free expression, but, a few weeks ago a newspaper was launched with an explicitly pro-ruling party stance (by some of the same people who benefitted from the steel shakedown described above). At the same time, proposals were released for a statuatory tribunal to regulate the print media (South Africa already has libel laws, so this has been interpreted as an opportunity to muzzle the press). The government is also pushing an act that would allow government officials broad powers to classify information. And a journalist was dramatically jailed (on what seem to be trumped up charges) by an elite police unit, days after reporting on a huge, and apparently irregular lease made by the Police Commissioner, again with a politically connected individual.
Will South Africa lose whatever gains it has made and follow the path of Russia? I hope not, but I am becoming increasingly pessimistic.
As for me, I left for London when I was 23, 4 years ago, never visited Russia ever since and have no intention of going back. Many (most, almost all?) of my friends who exiled feel the same.
For some it would be war more then corruption and for a very few it's not true at all, but they won't be developing for long.