CORRUPTION AND THE SHAKEDOWN STATE MODEL
by Edward S. Herman
With the discovery of the massive laundering of Russian money-- some of it compliments of the IMF, and U.S. taxpayers--through the Bank of New York, the issue of Russian corruption is now "in." But it presents the establishment with a problem. After all, didn't we help put into power and encourage people who were the alleged "reformers," the good guys as opposed to the threatening communists? It is awkward that a rapidly enlarging number of the reformers and their allies have been charged with or are under investigation for stealing and laundering money. Serge Schmemann in the New York Times, raising the question "What Makes Nations Turn Corrupt?" (Aug. 28), runs through the usual litany of rationales, such as "the deep scars of Communism, or...an innate proclivity for corruption in certain cultures." But he never mentions the curious fact of steadfast Western support for the thieves in many egregious corruption cases. He cites World Bank opinion, assuring us that the Bank "has made control of corruption in client nations a top priority." He also cites economists, who, like World Bank officials, contend that corruption is "a symptom of a sick state, and therefore curable through reforms of incentives, institutions and monitoring mechanisms." Schmemann does not mention that the World Bank gave massive loans to Indonesia for decades although perfectly aware of very extensive corruption, and that the Bank only began to question that corruption with the collapse of the Suharto dictatorship.
This long-standing support of a seriously corrupt system, which actually involved considerable looting of World Bank monies, suggests that looting may not be intolerable to the Bank (and to the West), if associated with other considerations deemed more important, such as ready access to resources by international oil companies and similar largesse to other transnational corporate interests. This in turn suggests that a model explaining systemic corruption might be developed based on the western need to find joint venture partners in Third World (and more recently, Second World) states who will serve the West, as Suharto did by exterminating a left opposition and providing an open door to foreign investors.
During the Vietnam war, spokespersons for the National Liberation Front coined the phrase "country-selling governments," to describe the series of governments headed by former French mercenary officers like Marshal Ky and General Thieu, put in place by the United States, who were willing to participate in the destruction of their country on behalf of the United States in order to "save it" from communist control. In the case of Vietnam and other Southeast Asian and Latin American countries, and in the Philippines and Zaire, the United States had to settle for not only ruthless but also venal scoundrels in its search for people who meet its standard for service. Thus, in describing the pattern of selection of leaders in Vietnam, Malcolm Browne stated back in 1965 that "Unfortunately, most of the really intelligent, dedicated and patriotic men and women who formed the stuff of sound leadership stayed with the Vietminh." In short, the endemic corruption of "our" Vietnamese was linked to the fact that our requirements caused us to select from within a narrow set of denationalized and mercenary elites. As this selection process occurred widely, we don't need a model resting on "Asian nature," or any other kind of nature to explain systematic corruption. Noam Chomsky and I explained it with our mini-model of the "shakedown state" in The Washington Connection and Third World Fascism (pp. 61-66), where we reviewed a number of important cases and concluded that, with the U.S. system of client states "the support base of privilege and the entire network of arrangements, including the selection of leaders qualified to do the work to be done, makes corruption integral to the system."
This model applies well to the case of Russia. If Serge Schmemann failed to mention it or anything similar, perhaps this is because the model implies that corruption flows from Western choices, which conflicts with the ideological premise that the West is good and would by definition oppose corruption. In the case of Russia, the West helped bring into power and gave unstinting support to "reformers" who were clearly corrupt or linked to corrupt groups. With U.S. and other Western backing and pressure, the reformers pressed a massive privatization operation in an extremely unpropitious environment, lacking the minimal market institutions, knowledge, and political structures that would make such a radical restructuring honest, equitable, and socially useful. The West's preferred reformers were in fact the most opportunistic and denationalized of the old communist nomenklatura, who helped engineer the revolution from above in order to allow themselves to seize opportunities for gain precluded in the older order (a main theme of David Kotz's and Fred Weir's, Revolution from Above). And the abuses and corruption that they brought to the privatization process were evident very quickly. But it did not cause the slightest decline in Western support for the reformers or for rapid privatization. The 50 percent decline in Russian GDP, the immense capital flight, and the beggaring of a large majority of Russians also did not alter the Western commitment. World Bank and IMF aid kept flowing, as in the Suharto case, in the face of evident massive corruption as well as economic failure. In short, the reformers were doing what the West wanted done. In her recent analysis of Russia, Katrina Vanden Heuvel claims that that "the Clinton administration's Russia policy has failed...None of the administration's short- or long-term goals have been achieved." (Nation, Sept. 6/13, 1999). This conclusion is based on Vanden Heuvel's taking at face value the administration's claim of an interest in consolidating "democracy" in Russia. It is certainly true that democracy was not enhanced by administration policy, but rather than assuming that this resulted from error, we should recognize that democracy was no more the objective in Russia than it is in Saudi Arabia or that it was in Suharto's Indonesia. I think it is pretty clear that the primary Western policy objectives in Russia were to make the death of socialism irreversible, to reduce Russia's economic and political power, to facilitate western economic penetration, and even to transform that country into a Western client state. These objectives were advanced by very rapid privatization that built up a strong indigenous capitalist base, an openness to foreign investment, and by the degeneration of the Russian economy. As with Suharto's regime, the corruption and negative effects on the political order were acceptable spin-offs, and the decline of the economy, increased financial dependency on the West, and the ending of any Russian military threat, also point to the main Western objectives having been successfully accomplished. Obviously the Russian people have suffered greatly from these policies, and the long-term destabilizing effects of helping Yeltsin and company destroy Russia in order to save it may be very costly. But the western leadership thinks short-term, and in that frame of reference their policies have been strikingly successful. And while the chickens of corruption coming home to roost may create a puzzle for Serge Schmemann and others, they are familiar chickens that have a simple explanation: they are the acceptable costs of a shakedown state that has done its job well.
Published in Z Magazine
Edward S. Herman is Professor Emeritus at the Wharton School, University of Pennsylvania.
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