Though the Soviet monopoly board was cleared over ten years ago, the game continues onward. Utilities, health care, and major political positions remain in the hands of former socialist key players, despite the push to bring Eastern Europe up to speed with the EU. Last week, Vladimir Putin fixed food prices in an attempt to maintain his high approval rating before the March elections. Days later Romanian farm minister Decebal Remes was caught fixing public tenders for bribes of sausage and plum brandy. The recent arrest of former Georgian defense minister, Irakly Okruashvili, on corruption charges (what else?) has sparked waves of protest that echo the rose revolution. Though all of these nations now boast unfettered markets- Romania simultaneously boasting membership to the EU- it seems as if the delicate balances of capitalism are perpetually offset by corruption.
The liberalization of Eastern European command economies has remained a volatile issue since the collapse of the USSR. In 1998, at the time of Russia’s greatest economic collapse, 40% of the total Russian population lived below the poverty line. Medicine was so expensive that it had to be rationed to hospital patients, and Russians again found themselves waiting in line for scarce goods as they had under Stalin. Savings accounts were frozen while banks became insolvent across the country. This economic catastrophe altered and continues to alter the lifestyle of the people, yet somehow the policies of the failing government remain unchanged. The International Monetary Fund (IMF) and the United States were quick to lend billions of dollars to Russia in the 90s, only forcing debt upon an economy that barely had the foundations of a free-market. It became evident that political corruption, a leftover of the communist regime, was often to blame in the failed liberalization of Russia’s economy and that of other eastern states. In order to have any hope of progress, it is clear that these nations must first step back and establish the political underpinnings required for a successful capitalist market. Investment and aid will only deteriorate the economy of a nation that cannot handle an influx of capital.
The constitutional and judiciary framework of former communist nations must be strengthened in order to promote capitalism. Political restructuring is the only way to prevent corruption- loosening the markets are not enough. After the collapse of the USSR, major eastern European industries were privatized and placed under the jurisdiction of a few political insiders. Today, the nations’ judiciary systems rarely audit the central banks, and Russian intelligence fails to track money-laundering. In 1999, the IMF set stipulations for a system of financial controls in Russia if the nation wished to pursue further loans. Members of the prominent Russian mafia, many of whom channeled 10 billion dollars worth of IMF loans to their international counterparts, were not prosecuted.
In addition to policy reform, international organizations such as the IMF, the United Nations, and the European Union must consider forms of assistance other than vast loans. It is clear that the strategy of the late 90s, massive loaning to the Russian government in lieu of establishing a strong capitalist system, is not enough to spark reform. International investor confidence (which plummeted by 60% in 1998 alone) will be reestablished only if corruption is fought head-on by the nations and their political allies.
Plum brandy and sausage do not even begin to demonstrate the corruption that continues in former Soviet states. The bottom line: you can’t build a house on sand. Opening the markets is not enough; there must be a constitutional overhaul and a general clean-house of Eastern European governments.