Corruption: The mistake you make…

By Tymofiy Mylovanov, University of Pittsburgh and VoxUkraine

The mistake you make, don’t you see, is in thinking one can live in a corrupt society without being corrupt oneself. After all, what do you achieve by refusing to make money? You’re trying to behave as though one could stand right outside our economic system. But one can’t.
― George Orwell, Keep the Aspidistra Flying

Many people will agree that the following three hypothetical examples constitute corruption.

1. A director of a volunteer network involved in relocating refugees receives a 13% kickback per refugee from the funds paid by the Ukrainian government to an organization providing shelter to the refugees.

2. The school administration collects 50,000 USD in cash each semester, fall and spring, from the parents of the students. There are no receipts and no accountability.

3. A university professor sells passing grades in his/her course for 500 UAH.

Here’s the problem: these examples are not hypothetical; these are true stories.


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How to fight corruption: Time for qui tam laws?

By Keith Darden (American University, USA)

 

Corruption is the main impediment to Ukraine’s prosperity and long-term security.  If Ukraine had an effective, efficient and less corrupt state, it would enjoy legitimacy, investment, and, as a country of 46 million people, would face few threats—either foreign or domestic—to its sovereignty and territorial integrity.  

 

How can Ukraine become less corrupt?  One solution is lustration, or a purge of corrupt officials through massive anti-corruption campaigns.  To the extent that corruption is caused by the personal characteristics of officials, then firing or prosecuting corrupt officials and replacing them with people of integrity and ability is part of the solution.  But what if the problem is not simply bad people, but bad incentives and institutions?  Or if it is not so easy to select “good” honest and capable people to staff the bureaucracy?  If this is the case, then lustration will not solve the problem.  And the history of massive anti-corruption campaigns and lustration efforts is not terribly promising as a means to root out corruption.  Prosecution is often selective—targeting one’s political enemies rather than treating all potential cases equally—and such campaigns often devolve quickly into politically motivated efforts to redistribute the spoils of the state.  Purges of this kind may result in a turnover in personnel as the loyal members of one political faction are replaced with those of another, but not a change in the corrupt nature of the system.  Corruption remains.

Georgia’s lessons from the reforms: Could they help Ukraine?

By Nickolay Myagky

It is widely accepted that Georgia has a good track record in carrying institutional reforms.  Fighting corruption was at the heart of these reforms. To illustrate that, Georgia’s percentile rank in the World Governance Indicators has improved from 7^th to 64^th in 2002-2012 for controlling corruption. The rank of Ukraine remained virtually unchanged during that period, being at 16^th in 2012 up from 13^th in 2002. Undoubtedly, Georgia’s experience could be very useful for Ukraine, and it is worthwhile to understand key ingredients of the successful reforms.

How can we ourselves improve the economic situation in Ukraine?

Tom Coupe (Kyiv School of Economics)

Whenever there is a new government, academics, experts and NGOs start writing reports on what the new government and the individual ministers should do to improve the economic situation in Ukraine and finally realize the Ukrainian economy’s full potential. This advice is typically well meant and to the point, however, it often does not reach or fails to convince the people to whom it is addressed. That, at least, is the impression one gets if one compares the reports that have been addressed to previous Ukrainian governments and what has been realized by these government.

Hopefully this new government will be more receptive to some of the ideas proposed but in spirit with the Maidan movement, it might be a good idea to not just wait for politicians to do something, but instead also let the men-and-women-in-the-street take the initiative. Here are some ideas on how non-politicians can improve the Ukrainian economy.

Ending the Russian-Ukrainian War

Volodymyr Bilotkach (Newcastle University, UK), Yuriy Gorodnichenko (UC Berkeley, USA), Tymofiy Mylovanov (University of Pittsburg, USA), Oleksandr Talavera (University of Sheffield, UK)

Millions of Ukrainians want to see an end to the Russian-Ukrainian war. In this post, we review some pressing issues in the East and propose a set of solutions.

Ending the war

• Buy loyalty of the indifferent, which is majority in the region, by increasing salaries of state employees and pensions by 20-50%, even if temporarily.
• Provide an exit option to the locals committed to insurgency by offering amnesty to those who were not involved in grave crimes (murder, torture, etc.), and stipulate that the amnesty will not apply to those who will continue to fight.
• Send a message that corruption is over by prosecuting most flagrant cases of local corruption, including new cases in the recaptured regions (e.g., abuse of the humanitarian aid), systematically firing corrupt officials and neutralizing their networks, and staffing the state offices with new people, loyal to Ukraine and the region.

Sustaining peace

• Rely on the middle class by helping them restart their businesses through tax forgiveness, cheap credit, training and capacity building.
• Create independent local media and activist groups from the pool of regional bloggers, volunteer networks supplying the military, local entrepreneurs and farmers
• Create jobs by employing locals in reconstruction projects, providing incentives for businesses to enter the region, and simplifying regulation for the small and medium size enterprises

The war will be over, one way or another, maybe as early as in a month. This will be a pivotal moment in Ukraine’s history but everyone should understand that the end of the war does not mean a lasting peace. The scars of the war are already running deep and the short-run problems (unemployment, shortages of essential goods, destroyed infrastructure) are likely to continue to alienate locals in the East to the new Ukrainian government. Without solving these problems, a new wave of violence may erupt.

Local Government Reform: Corruption and Accountability

By Donna Kim and Yuriy Gorodnichenko (UC Berkeley)

Robert Hawkins once said that corruption has been with us since the beginning of human organization but one cannot be complacent about corruption because it eats not only at the economic fabric of society but also at the moral foundations. It is hard to imagine that corruption is going to be eradicated completely but there is a simple set of rules that can minimize corruption. “Corrupt cities” is a wonderful cookbook of such rules. The guiding principle is that one can identify areas where corruption can arise and then prevent it.

Specifically, the book offers a simple formula: corruption = monopoly power + discretion of officials minus accountability. In other words, corruption is strong where an official has exclusive power to deliver a service (e.g. issue a permit), where he or she has freedom in interpreting facts and rules (e.g., there is no framework or formula for making consistent decisions),  where he or she does not report to anybody and his/her activity is not subject to the public’s scrutiny (e.g., all documentation is for “internal use only”). “Corrupt cities” presents many examples of how one can break corruption by a combination of simple policies that reduce monopoly power (e.g., use procurement or vouchers to obtain services) and discretion (e.g., minimize stages of decision making and simplify rules) and increase accountability (e.g., make hearings on key decisions public, publish reports about tenders, and use e-governance).

Comments on anti-corruption effort in Ukraine

By Tymofiy Mylovanov (University of Pittsburg)

 

There is a broad consensus that corruption is the number one problem in Ukraine. This is a cross-cutting issue and no reform can be successful without eradicating or, at least, minimizing corruption. How can this goal be achieved? In my capacity as an economist with expertise in design of institutions and incentives, I would like to offer some remarks on the anti-corruption effort in Ukraine.