Corruption – Destroyer of values

Why politicians love infrastructure development
The roads in Bulgaria are in a notoriously bad state, to the extent that the casual visitor may be forgiven to think he is in rural Africa, rather than in a EU members state. The depth and sheer number of the potholes are extraordinary. The creation of new holes seriously out paces the state’s feeble attempts to fill in the holes. Why is it so difficult to construct proper roads in Bulgaria? Is the terrain particular difficult, is there a lack of know how? No. The simple answer is corruption. This is how it works or rather how it does not work out in the end, neither for the drivers nor the taxpayers.
Step 1. Central or local government decide on a piece of road to be built.
Step 2. A public tender procedure is announced, in accordance with national procurement laws and directives of the EU. Road construction companies prepare technical offers and, yes, bribe enough public administrators and/or local politicians to win the tender.
Step 3. The winning company starts construction. As a standard the layer of macadam should be, say 50 cm and the asphalt layer minimum 15 cm. However, to quickly recover the “success fee” (fancy word for ‘bribe’) and to make a whooping profit, the construction company reduces the macadam layer to 20 cm and the asphalt to 5 cm.
Step 4. In a ‘normal’ country, a construction company would not get away with such simple tricks, easy profit on the account of road safety. The local municipality or state organ financing the construction would hire an independent agent to evaluate the work of the construction company, measures would be taken and the truth would come out. However, in the Balkans this is common practice. Because the construction company has already paid off the politicians to win the tender, the same politicians will respond by looking the other way.
Step 5. The poorly constructed road starts to break into pieces already on its maiden voyage, effectively creating a new market for ad hoc road repair. This explains why so many Bulgarian roads look like a grey quilt, and why road construction is such a popular business and why the state loves to invest in infrastructure.
Lessons learned: To cheat pays off in the Balkans.
Negative consequences: A higher than EU average number of horrific accidences with loss of human lives and the rapid destruction of automobiles are the two most obvious negative consequences of having roads that look like Swiss cheese. Beyond that, the flow of easy cash through public institutions suddenly makes holding public office or working in public administration attractive. Unfortunately, it attracts the wrong people, persons who encourage and feed-off corruption and bribery. “You pay me, I will serve you” for services which by law is free of charge for citizens! Now, because so many public servants owe their job, not to their own skills and experience, but to a ‘patron’, the focus of these servants are to serve the wishes of the patron, and not the general public or their immediate supervisor. This means that most of the time at work is spent doing jobs for the patron, identifying new opportunities and playing video games on the laptop. There is little or no time to complete the services required by the job description in serving the public. As a consequence, public administration in the Balkans is notoriously ineffective and rude. A non-functioning public administration has direct negative impact on the overall competitiveness of the private sector, as enterprise owners have to spend endless of hours standing in queues or finding ‘personal’ solutions with every single public office.

The right not to pay taxes
All Balkan countries suffer from inadequate health care, education, social services as well as poor infrastructure and transportation. The obligation to care for the well-being of all its citizens, the status of its assets and resources, clearly fall with the state. Yet, the state is incapable of generating sufficient financial resources, quality human resource and proper management to even offer basic, but quality services to its inhabitants. To do so, the state needs money. Enter taxation. Let’s look at taxation in the Balkans, where avoiding tax is a national past-time, and for many regarded as a constitutional right. Not to care about the obvious connection between taxation and better functioning society can only be described as a reflection of a high degree of ignorance and/or pure egoism. There is a political and business elite in most Balkan countries, who are in power for one purpose only, to fill their own pockets.
The large majority of the self-proclaimed businessmen in the Balkans are not really businessmen by any Harvard Business School definition of the word. Yes, they have registered enterprises pursuing some economic activity, but that does not mean that they are neither competitive nor economically viable. Still, they do not go bankrupt, some even grow and generate enormous wealth in relatively poor countries. How is this possible? Have the Balkan businessmen discovered flaws in the theories of Adam Smith. Of course not. Their simple business plan is to cheat the state. Cheating the state has long, proud traditions in the Balkans. To cheat the Ottoman rulers was a sign of emerging nationalism, to cheat the communist rulers was a survival mechanism. Even the communists themselves were cheating the state (re-selling cheap oil from the USSR to the West, smuggling of other assets, etc.). The post 1990 generation of con artists, all dressed up in muscles, tight black t-shirts, suits and driving cars right out of the latest Frankfurt car show, have institutionalized tax evasion and late payment, and through aggressive use of the local media created an image as successful ‘biznizmen’. They are not. Their bread and butter is old style racketeering, muscling in on public tenders, not paying VAT, not paying their suppliers, not paying Custom duties and tariffs, privatizing state assets at a price far below market value, grabbing state property for no money at all, etc, etc. Of course, all of the above could not happen if the police, prosecutors, courts, media and politicians were doing their job, which is to protect the state. But the truth is that in most Balkan countries nobody defends the state. Even public officials, hired to protect the state, act like visitors, grabbing what they can as they run for the door. If there were one or two cases of bad behavior, nipped in the butt right away by the authorities, like a kid caught with the fingers in the cookie jar, and punished by his parents, it would have been ok and the other kids would have learned something from the ordeal. But, in the Balkans, the kids are in the jars, all the time, and the parents too. The biznizmen play closely with corrupt public servants, bribe their way out of legal cases and keep the politicians off their backs by financing their political parties.
When this self-destructive system, in which corrupt and criminal behavior is tolerated, even applauded, become the norm a society will find it extremely difficult to grow economically and the quality of life for the majority of the people will remain rock bottom. This is the Balkans, because this is how the Balkans has been for a very, very long time. People in the Balkans may not like it, but they are so used to it, they adapt to survive and they become a quite contributor to the norm.

Why go to school?
Education is the key to economic growth and social progress. This appears to be a universally recognized truth. In Asia, parents will work double jobs to afford sending the kid(s) to a good school, modern Turkey is famous for its attention to quality schooling and in Scandinavia the governments are not holding anything back in financing life long learning initiatives. This is not the case in the Balkans. Public schools are under-financed, poorly staffed, run-down and stuck with old teaching styles. Public universities are not much better, suffering from under-financing, poor management and corruption. It is a well-known fact that university diplomas can be bought. Care to become a MD anyone? €10.000 will do the job, fancy diploma and all. Enter privately owned education facilities. Let’s be honest, most of them are diploma print shops, mainly targeting the newly rich, most of whom do not believe in education, since their own wealth is a result of contacts rather than brains. And as a spoiled brat with newly rich parents, why should I bother to study when mom and dad will fix me up with a job (read, ‘place to go’) upon graduation? In such a climate, it is not difficult to understand that access to quality human resource is a core weakness among Balkan companies. This matters if your are running a hotel catering to the needs of German tourists, or manufacturing furniture to the quality standards of a French buyer, but less so if your main business activity is cheating the state through corrupt practices.

The human casualty of corruption
Corruption makes a fool out of good people and good behavior. If bending the rules is norm in a society, whoever is standing up for what is right and civilized behavior, such as paying taxes, working hard, not throwing litter on the street, not parking your car on the sidewalk, adhering to traffic rules, will inevitably be made a fool of. By not punishing bad behavior among the few, the majority of people will soon adopt the same bad behaviors and the fabrics of a well-functioning state and democracy will start to decay, to the point when people will not care about anything but themselves. To reverse this negative trend will require, first of all, that the judicial system work also against the rich and influential. To start putting corrupt politicians and businessmen behind bars would go a long way in saving the Balkans. So far, no Balkan country has been successful in dealing with corrupt officials between 1990 and 2010. So why should not every Balkan boy and girl dream of public office? But, realistically, where to start, and when to stop in prosecuting misuse of state assets? If, for example, a former Ministry of Economy who is taken to justice for corrupt practices during privatization (now there you have some candidates in the Balkans where almost all privatization schemes were complete failures) and if he is sentenced to 20 years in jail, is bound to open his mouth and bring down with him another 30 corrupt officials and businessmen. If, in turn, these 30 persons are given their day in Court, and a stiff sentence, they will for sure spill the beans on another 30 corrupt individuals. The multiplier effect is be well on the way. Can the legal system cope with this onslaught of high level political cases? Can society and democracy cope with the pressure for revenge and justice, when finally after so many years of silence, the truth is let loose? Alexander Solzhenitsyn, the Russian dissident writer, ones said that a people who finally deals heads on with its history will loose an eye, while those who don’t will go completely blind. At this moment in time, there is a universal darkness in the Balkans, and there appears to be no urgency to turn on the light. For this you will need an enlightened despot (Turkey’s Aturk) to force corrective measure on society or an extremely strong grass root movement forcing change from below. Neither is anywhere to be seen in the Balkans today. Ten years ago, Madeleine Albright, former US secretary of state, described the situation in the Balkans: “Many people have yet to free themselves from the prejudices and hatreds of the past. The economy is plagued by underdevelopment and the ravenous parasite of corruption. And quite a few, especially the young, are pessimistic and eager to leave”. Little has changed for the better since then. However, there may be small glimmer of hope from unexpected places. Bulgaria’s new Minister of Interior, Tsvetan Tsvetanov, a FBI trained supporter of a hard-line approach against organized crime, has aired the necessity of special courts to take on corruption and organized crime cases, as the normal judicial system (corrupt in itself) is incapable and/or unwilling to sentence and punish blatant criminals. According to Tsvetanov there was little accountability among current judges. “It’s a problem because there is no official mechanism for cleaning up the judiciary and because so many judges are entangled in Corruption”. Clearly, as a EU member state, Bulgaria could expect support from Brussels in coordinating the establishment of a special Court against organized crime in the country, rather than just stamping such a move as a first step towards a police state. With rampant corruption demolishing any effort to build a law-abiding society, Bulgarians themselves are for the establishment of such a Court. This is a perfect opportunity for the EU to make a difference in the fight against organized crime, and statuate an example on how effectively deal with corruption and organized crime, once and for all.

Why corruption is Balkan’s curse
Corruption is the constant search for easy solutions that benefit myself in the short run. If everybody thinks the same way, well, then you get the Balkans. With such a predominant mentality, you cannot build a democratic state, strong economy or free society. There is simply no platform for any of it.


About Jakob Modéer

22 years of corporate and international investor experience as well as private sector development project management, consultancy in private sector policy and business advisory services, and direct consultancy to companies in South East Europe (and now a blogger on socio-economic issues)
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1 Response to Corruption – Destroyer of values

  1. Pingback: Now showing in Romania, next year in a Courthouse near you…hopefully! | Jakob Modéer's Balkan & Europe Blog

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