And these are only few (albeit high-profile) examples of how tens of thousands of Russian officials operate on every government level.
They engage in rent-seeking, attempting to earn money illegally from the market segments they are entrusted to regulate. Some officials have their “favorite” firms to whom they casually grant licenses, permits, subsidies, and state orders. As a result, these firms may pay off the official for keeping regulators and inspectors at bay, thus enabling the company to continue operations unhampered.
From others, the official might take kickbacks in return for profitable contracts or permits. Still, other firms simply give the official and his close friends a cut in their business.
This distorts the business environment at all levels. Fair rules of the game are impossible: Every market segment has its own “winners” that always come out on top thanks to their official ties. That places the whole country in an institutional trap: reforms are only possible to the extent that they do not violate the interests of officials who are on the take.
Political science usually refers to such systems as neopatrimonialism. It is common in countries around the world, granting material benefits — a higher salary or a better professional post — to those with ties to power.
But Russia’s neopatrimonial system is among the worst. The country’s officials involve their relatives, college chums, school classmates, and friends in their corrupt dealings. With no seeming end to the flourishing micro-empires built under the auspices of state officials, the country’s economic prospects look bleak.
