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The Path from Market Economy to Kleptocracy

Roland Hayes

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Published in Russia S Crony Capitalism: The Path From Market Economy To Kleptocracy

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The path from market economy to kleptocracy is a slippery slope, paved with corruption, cronyism, and the erosion of rule of law. A recent study by the International Monetary Fund (IMF) found that kleptocracy is a major obstacle to economic growth, reducing GDP per capita by an average of 1% per year. This article explores the causes and consequences of kleptocracy and provides some policy recommendations for combating it.

Russia's Crony Capitalism: The Path from Market Economy to Kleptocracy

by Anders Aslund

4.3 out of 5

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Causes of Kleptocracy

There are a number of factors that can contribute to the rise of kleptocracy, including:

Weak institutions: Kleptocracy is often associated with weak and corrupt institutions, such as the judiciary, the police, and the bureaucracy. These institutions may be underfunded, inefficient, or influenced by political patronage, making them ineffective at preventing and prosecuting corruption.
Lack of transparency: Kleptocracy thrives in secrecy. When government decisions are made behind closed doors, it can be difficult for citizens to hold their leaders accountable and prevent them from enriching themselves at the expense of the public.
Political instability: Kleptocracy is often a byproduct of political instability. In countries where the rule of law is weak and there is a lack of democratic accountability, corrupt politicians may be able to seize power and loot the state.

Consequences of Kleptocracy

Kleptocracy has a number of negative consequences for a country, including:

Economic harm: Kleptocracy distorts the economy, favoring the wealthy and connected at the expense of the poor. It can also lead to a decline in foreign investment, as investors are reluctant to invest in countries where there is a risk of their assets being stolen or expropriated.
Social inequality: Kleptocracy exacerbates social inequality, as the wealthy and powerful benefit disproportionately from corruption. This can lead to social unrest and conflict, as the poor and marginalized feel increasingly excluded from the benefits of economic growth.
Erosion of trust in government: Kleptocracy destroys trust in government, as citizens see their leaders enriching themselves at their expense. This can make it difficult for the government to implement policies and programs that are in the public interest.

Policy Recommendations for Combating Kleptocracy

There are a number of policy recommendations that can be made for combating kleptocracy, including:

Strengthening institutions: One of the most important steps to combating kleptocracy is to strengthen institutions, such as the judiciary, the police, and the bureaucracy. This can involve increasing funding, improving training, and reducing corruption.
Increasing transparency: Another important step is to increase transparency in government decision-making. This can involve requiring government officials to disclose their assets and income, making public records more accessible, and creating independent oversight bodies.
Promoting democratic accountability: Kleptocracy is less likely to flourish in countries with strong democratic institutions, such as free and fair elections, a free press, and an independent judiciary. These institutions can help to hold corrupt politicians accountable and prevent them from looting the state.

The path from market economy to kleptocracy is a slippery slope, but it can be reversed. By strengthening institutions, increasing transparency, and promoting democratic accountability, countries can help to combat kleptocracy and its negative consequences. This will not only improve economic growth and reduce social inequality, but it will also restore trust in government and strengthen the rule of law.

Russia's Crony Capitalism: The Path from Market Economy to Kleptocracy

by Anders Aslund

4.3 out of 5