Alena V Ledeneva cached version 14/02/2019 14:38:21 en Alena V. Ledeneva <div class="field field-au-term"> <div class="field-label">Author:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Alena V Ledeneva </div> </div> </div> <div class="field field-au-firstname"> <div class="field-label">First name(s):&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Alena V. </div> </div> </div> <div class="field field-au-surname"> <div class="field-label">Surname:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Ledeneva </div> </div> </div> <p>Alena V. Ledeneva, author of <em><a href=";tag=opendemocra0e-21&amp;linkCode=as2&amp;camp=1634&amp;creative=19450&amp;creativeASIN=0521627435">Russia’s Economy of Favours</a></em> (CUP, 1998), teaches at the School of Slavonic and East European Studies, University College London. For a more detailed account of Russia’s informal economy, see her booklet <em><a href=";tag=opendemocra0e-21&amp;linkCode=as2&amp;camp=1634&amp;creative=19450&amp;creativeASIN=0801473527">How Russia Really Works</a></em>, Centre for European Reform, April 2001.</p><div class="field field-au-shortbio"> <div class="field-label">One-Line Biography:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Alena V. Ledeneva teaches at the School of Slavonic and East European Studies </div> </div> </div> Alena V Ledeneva Thu, 29 Apr 2010 14:39:41 +0000 Alena V Ledeneva 53962 at Is Russia’s judicial system reformable? <div class="field field-summary"> <div class="field-items"> <div class="field-item odd"> In this interview for oDRussia, Prof.Alena Ledeneva talks to Oliver Carroll about the prospects for judicial reform in Russia. Medvedev’s efforts amount to far more than rhetoric, argues Ledeneva. Her ongoing research into the subject suggests that they strike at the heart of Russia’s informal system of government. </div> </div> </div> <p class="BodyA"><strong>OC: A fairly prevalent approach today views the Russian judicial system as dysfunctional: unwieldy law and shadowy governmental interference. To what extent is this caricature justified? </strong></p> <p class="BodyA"><img src="" alt="Alena Ledeneva" width="133" height="181" /></p> <p class="BodyA">AL: Let&rsquo;s start with the positives. With respect to the basic legal code, the <a href="">Russian Constitution</a> is one of the most exemplary documents of its kind anywhere in the world. In general terms, too, much Russian legislation would pass any test of legal expertise. The problem is when we start talking about coherence and consistency. Alongside a lot of really good legislation you have overregulation &mdash; both in terms of high administrative barriers and old regulation that has yet to be annulled or taken out of circulation. You also see a patchy and unpredictable way of implementing legal norms or legal decisions.</p> <p class="BodyA">In other words, overregulation plus under-enforcement &mdash; that&rsquo;s the short formula.</p> <p class="BodyA">In terms of administrative pressure, the judicial system is clearly exposed to the broader set of informal practices, unwritten rules and loyalty bonds that dominate Russia&rsquo;s model of governance. These influences are what Russians collectively refer to as &ldquo;the system&rdquo;, <em>sistema</em>. Broadly speaking, the expert consensus is that while it would certainly be a caricature to suggest that every court case in Russia is decided according to directives from above, it is certainly possible to imagine a way <em>sistema</em> can produce &ldquo;correct&rdquo; judgments for the government.</p> <p class="BodyA"><strong>OC:How are such &ldquo;correct&rdquo; judgments delivered in practice? Is it simply a matter of a telephone call from Kremlin to judge? Or are indirect considerations &mdash; perhaps the prospect or otherwise of career growth &mdash; more important?</strong></p> <p class="BodyA">AL: Oral commands from above certainly play their part. This is the most literal manifestation of <em>telefonnoye pravo, </em>or &ldquo;telephone justice&rdquo;, a term you sometimes find in the media today. On the other hand, as you say, informal pressure does not have to be directly communicated. It can be the kind of pressure that reins you back from stepping outside the system. The dependence judges have on court chairmen, their managers. The self-censorship. The need to play by unwritten rules in order to function or prosper within the judicial system.</p> <p class="BodyA">These are the kinds of pressure I focus on in my research. Unfortunately, they are also the most difficult ones to get at, since people themselves have trouble identifying it. Insiders don&rsquo;t want to &ldquo;flag&rdquo; it. It is only really thanks to the whistleblowers who speak out that we have some knowledge of it. <a href="">Judge Olga Kudeshkina</a> is one good example, though she isn&rsquo;t alone: <a href="">Pashin</a><span>,</span> <a href="">Morshchakova</a>, and most recently <a href="">Yaroslavtsev</a><span> </span>and Kononov have all provided important information for the record.</p> <p class="BodyA">One thing that my informants consistently bring up is the central role of <a href=";lr=&amp;id=tjlCaTosIOoC&amp;oi=fnd&amp;pg=PA85&amp;dq=%2522The+genealogy+of+krugovaya+poruka%2522&amp;ots=Q9U_o0U-zQ&amp;sig=nxPQdHdSErW01Vtz6dPU66KZuqA%23v=onepage&amp;q=%2522The%2520genealogy%2520of%2520krugovaya%2520poruka%2522&amp;f=false"><em>krugovaya poruka</em></a>&nbsp; within this professional community. What they mean is a feeling of mutual accountability and control. In other words, judges feel corporate about what they do. They don&rsquo;t want to spill things out. Of course, all this makes disciplinary review by judicial committee very difficult. Judges understand that they too could find themselves under the same spotlight, and so they act accordingly. A 2001 reform tried to reduce some of these contradictions by introducing outside legal experts on to judicial qualification committees &mdash; the ones that decide on promotions, appointments and disciplinary proceedings. By all accounts, this was actually a progressive and successful reform.</p> <p class="BodyA"><strong>OC:The process of appointments is a crucial chapter in any story of dependence. Do we have any data on how judges are recruited? Who are they? What kind of areas are they recruited from? </strong></p> <p class="BodyA">AL: From the interviews that I have done with judges and other experts, it is clear that appointments are subject to clearance from government agencies and certain officials within the executive. Very often, that clearance test or series of interviews are informal negotiations or ways to communicate to the judge certain expected alliances and loyalties. As Judge Kudeshkina <a href="">said</a>, it is very difficult for an independent official to get appointed. If you don&rsquo;t play loyalty games, you&rsquo;re not even in the running.<em></em></p> <p class="BodyA">The situation with appointments generally is that there have been an enormous number of vacancies in the judicial system. This started with the 1990s reforms, which created jury trials and additional court tiers. In 2000, 8% of judges&rsquo; benches were vacant: there just weren&rsquo;t enough people with adequate qualifications. In the event, the vacancies were frequently filled by former clerks of the court, who were fast-tracked to appointment after completing evening courses.</p> <p class="BodyA">Unsurprisingly, many of the appointments were far from perfect. On the other hand, as the former deputy chairman of the Constitutional Court <a href="">Tamara Morshchakova</a> has argued, with weak appointments comes dependence. This is quite important. Even if you give inexperienced people all the independence you want, they will not know how to use it. They would be lost without a hint or tip-off from the court chairman.</p> <p class="BodyA"><strong>OC: So this would, perhaps, be an intentional policy?</strong></p> <p class="BodyA">AL: In part, it is the workings of <em>sistema. </em>If you want to have people who are compliant with the chairman of the court, you have to have them weak, defective and non-professional. Because then they are easy to guide. That is certainly part of the story. The other part is all the things we have talked about before: corporate responsibility, the threat of compromising disclosures and so on. Dmitry Medvedev is himself is to some extent a product of <em>sistema</em>. Putin chose him for the presidency both because of his personal loyalty and because of his lack of experience of public &mdash; as opposed to backroom &mdash; office.</p> <p class="BodyA"><strong>OC: And yet, despite being a product of <em>sistema</em>, Medvedev has somewhat turned his back on it. He has talked at great lengths about tackling government corruption, &lsquo;telephone justice&rsquo; and appointment nepotism. How much of this is actually genuine? Is any of it significant?</strong></p> <p>AL: I would argue that the rhetoric is actually hugely significant. It is the first time that systemic defects of this kind have been publicly acknowledged at the presidential level. Medvedev has even said they represent a <a href="">threat to national security</a>. The very fact of such acknowledgements counts.</p> <p>It would be wrong to say that Medvedev&rsquo;s actions have been limited to words. He has also put forward reforms that are, in essence, a profound challenge to the operations of <em>sistema</em>. His proposals for reforming the appointment system for top bureaucrat positions, for example, are quite radical. Today, these appointments largely rest on personal contacts and cash.</p> <p>Medvedev has suggested two basic reforms: first, the creation of a national database of governmental officials; and second, the introduction of a presidential quota for appointments. The first <a href=";articleid=a1235759366">hundred</a> nominees of this planned 1000-strong &ldquo;golden&rdquo; list of candidates were published in February last year; and a further 500 were announced very recently. Most of them are young, dynamic and successful. Of course, critics rightly point out the lack of transparency in the creation of the list &mdash; who chose the names and under what criteria? On the other hand, the database introduces many new faces who could help run against the principles of <em>sistema. </em></p> <p><strong>OC: Does Medvedev have sufficient power base within the Kremlin to tackle vested interests in the way you describe? </strong></p> <p>AL: We don&rsquo;t know. What is interesting is that Medvedev seems to be developing a rather different power base to Putin&rsquo;s. Whereas, in broad terms, Putin&rsquo;s constituency is the ex-military and ex-security men, the <em>siloviki, </em>Medvedev&rsquo;s natural constituency is with his former colleagues in the civil law department of the Leningrad State University, the &ldquo;<em>civiliki&rdquo;</em>. Where Putin signified a transfer of power from criminal gangs to <em>siloviki</em>, Medvedev may well yet herald a transition from <em>siloviki </em>to <em>civiliki. </em></p> <p>You do see that, under Medvedev, the legal elite is generally operating with increasing independence. Most famously, you have the 2008 Boyev vs Solovyov libel case, which brought together Valery Boyev, the head of the rewards department in the Kremlin, and Vladimir Solovyov, a prominent broadcaster who made statements alleging the Kremlin&rsquo;s control of the arbitration courts. This was a run-of-the-mill case that everyone expected Boyev to win, given his governmental seniority. That was until a dramatic <a href="">intervention</a> by Yelena Valyavina, the first deputy chair of the Supreme Arbitration Court, who made an extraordinary statement in support of Solovyev&rsquo;s claims.</p> <p><strong>OC: Stating that she had, in fact, been pressed by Boyev to return certain judgments ...</strong></p> <p>AL: Exactly. Her evidence was hugely decisive and Boyev withdrew the case. Indeed, the statement has since been used in British courtrooms as proof of governmental pressure in the Russian system.</p> <p class="BodyA">Valyavina&rsquo;s statement was quite unprecedented. While I can&rsquo;t be sure about the Soviet period, at no point during recent times has a senior woman judge taken to the witness box to make a statement of this sort. Moreover, one can certainly imagine that prior to making it she consulted with the head of the Supreme Arbitration Court, <a href="">Anton Ivanov</a>; and that Ivanov in turn consulted with his friend and co-author, Dmitry Medvedev.</p> <p class="BodyA">The Valyavina statement is as clear a signal as you can get that the president does not want bureaucrats interfering in the work of the courts.</p> <p class="BodyA"><strong>OC: Then again, some commentators have highlighted the fact that no action followed: no one has been prosecuted. Their suggestion is that the whole story amounted to little more than PR on Medvedev&rsquo;s part...</strong></p> <p class="BodyA">AL: Well, you need perspective. Let&rsquo;s just go back for to 2005 a moment. Then you had a case where a woman was prosecuted for making a prank call to the court. She had pretended she was the secretary of the chairman of the Supreme Arbitration Court; and because she had worked in the judiciary and knew all the small-talk, she wasn&rsquo;t identified immediately. When they realised it was a prank call, the woman was tracked down and a whole show case about <em>telefonnoye pravo</em> was instigated against her.</p> <p class="BodyA">That was a strange trial. It punished an outsider for an unsuccessful attempt to use <em>telefonnoye pravo</em>, while asking no questions of the system, which seemed to continue working for insiders.&nbsp;</p> <p class="BodyA">So, in that perspective, you have to say Valyavina&rsquo;s statement represents huge progress.</p> <p class="BodyA"><strong>OC: You mentioned the arbitration courts. These have attracted considerable attention in Russia, both for the links between Anton Ivanov and the president, but also for an increase in caseload: in Medvedev&rsquo;s first year, there were 36% more cases. Is there much variation between the different types of court?</strong></p> <p class="BodyA">AL: There are three main types of courts in Russia. You have courts of general jurisdiction, topped by a Supreme Court. You have the arbitration courts and the Supreme Arbitration Court. You have a Constitutional Court, consisting of nineteen judges, which defines the appointment procedure for all of those three. In terms of the Courts of General Jurisdiction you have an amazing number of court tiers &mdash; about five in total.</p> <p class="BodyA">Of all the courts, the arbitration courts, the courts that settle commercial disputes, do enjoy the best reputation. First, they are new, post-Soviet institutions: they did not exist as such in Soviet times, so the judges are newly trained and recruited. Second, these are courts that require real expertise, meaning judges tend to be better and more efficient at what they do. The US scholar <a href="">Kathryn Hendley</a> has done quite a lot of work on these courts. When she analysed the cases, she came to the conclusion that by and large their decisions were entirely professional. She could not find much that either contradicted the law or pointed to informal influence on judges&rsquo; decisions.</p> <p class="BodyA"><strong>OC: Hendley also has an interesting perspective on reform generally, saying that pressure from below will be as important in Russian judicial reform as any top-down effort. Does your research show that Russian public is in any way engaged in the judicial process? Is there any real consensus at the top? </strong></p> <p class="BodyA">AL: Kathryn Hendley would certainly feel there is a growing demand for law. Indeed, <a href="">her data</a> shows that as many as three in ten Russians revert to the courts whenever they face a problem. The same surveys also show that the courts are, in fact, the most trusted official institution in Russia &mdash; ahead of the police and so on.</p> <p class="BodyA">This is not, however, the same thing as saying there is any sort of sustained pressure from below. For that, you would need civil society to organise itself along the lines of housing associations, or motorist organisations. In the judicial sphere, you just don&rsquo;t have that kind of association. Sure, people who lose their cases do sometimes get together with other people who lose cases, but their situations are usually different. There is no foundation for protest, and certainly no civic movement. As is well known, human rights campaigners find it notoriously difficult to operate. They do what they can, but aren&rsquo;t in any position to change the system.</p> <p class="BodyA">As regards consensus at the top, what we can say is there is consensus on strategy. In terms of strategy, the entire government is for improving the investment climate, for deciding cases inside the country rather than in Strasbourg, for judicial reform and for the creation of an independent judiciary. That is not an issue. The issue is tactics, and there they certainly differ.</p> <p class="BodyA"><strong>OC: To finish with the crucial question, is it at all likely that Medvedev&rsquo;s reforms can succeed against <em>sistema</em>? <em></em></strong></p> <p class="BodyA">AL: In all probability, the reforms will only be partially successful. One problem is that elite-initiated, top-down efforts are very difficult to sustain. Being a legalist is not necessarily in Medvedev&rsquo;s favour here. He believes that it is possible to change the system by changing the law, whereas what actually needs to be changed is culture, institutional culture. Specifically, you need to combine mechanisms that increase risk for non-normative behaviour, but also create protection for those who want to go professional, like Olga Kudeshkina. That has proven, so far, to be very difficult to achieve.</p> <p class="BodyA">Second, any change in the formal rules introduces yet another constraint to be dealt with informally. If Medvedev really wants to make changes, ultimately he will be forced to work through <em>sistema</em>. He will, for example, have to use oral commands and make sure they are followed. One way of interpreting the Valyavina affair, indeed, is that it sent a new signal: one which instructs officials and businessmen not to interfere with the courts. The last time a formula such as this came into play was with Mikhail <a href="">Khodorkovsky</a>, who ignored an oral command not to meddle in politics and was sent to prison as a result. It will be interesting to see what &mdash; if any &mdash; sanctions will be applied in relation to those who break this latest settlement.</p> <p class="BodyA"><em><strong>Alena Ledeneva is Professor of Politics and Society at SSEES University College London</strong></em></p><fieldset class="fieldgroup group-sideboxs"><legend>Sideboxes</legend><div class="field field-read-on"> <div class="field-label"> 'Read On' Sidebox:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>Selected articles (available online) and books by Alena Ledeneva</p> <p><a href=";imgrefurl=;usg=__9iJgrMx_Za8dUgDDOCgxtytgD4E=&amp;h=300&amp;w=200&amp;sz=9&amp;hl=pl&amp;start=3&amp;um=1&amp;itbs=1&amp;tbnid=B6r-rJBdYLAI6M:&amp;tbnh=116&amp;tb">Medvedev’s crackdown on corrupt courts</a>. Russia Profile June 6</p> <p><a href=";imgrefurl=;usg=__9iJgrMx_Za8dUgDDOCgxtytgD4E=&amp;h=300&amp;w=200&amp;sz=9&amp;hl=pl&amp;start=3&amp;um=1&amp;itbs=1&amp;tbnid=B6r-rJBdYLAI6M:&amp;tbnh=116&amp;tb">Leadership and Corruption in Russia, 2000-2004.</a> Centre for the Study of Economic and Social Change in Europe: Working Papers series, 2005</p> <p><a href=";imgrefurl=;usg=__9iJgrMx_Za8dUgDDOCgxtytgD4E=&amp;h=300&amp;w=200&amp;sz=9&amp;hl=pl&amp;start=3&amp;um=1&amp;itbs=1&amp;tbnid=B6r-rJBdYLAI6M:&amp;tbnh=116&amp;tb">Ambiguity of Social Networks in Post-Communist Contexts.</a> Centre for the Study of Economic and Social Change in Europe: Working Papers series, 2004</p> <p><a href=";imgrefurl=;usg=__9iJgrMx_Za8dUgDDOCgxtytgD4E=&amp;h=300&amp;w=200&amp;sz=9&amp;hl=pl&amp;start=3&amp;um=1&amp;itbs=1&amp;tbnid=B6r-rJBdYLAI6M:&amp;tbnh=116&amp;tb">Informal Practices in Changing Societies: Comparing Chinese Guanxi and Russian Blat</a>. Centre for the Study of Economic and Social Change in Europe: Working Papers series, 2003</p> <p>How Russia Really Works: The Informal Practices That Shaped Post-soviet Politics and Business (Culture and Society After Socialism), by Alena V. Ledeneva, Cornell University Press, 2006, 270 pages</p> <p>Russia's Economy of Favours: Blat, Networking and Informal Exchange (Cambridge Russian, Soviet &amp; Post-Soviet Studies) (Cambridge Russian, Soviet and Post-Soviet Studies) by Alena Ledeneva, Cambridge University Press, 1998, 256 pages</p> <p>The complete list of recent and forthcoming publications of Professor Alena Ledeneva can be found <a href=";imgrefurl=;usg=__9iJgrMx_Za8dUgDDOCgxtytgD4E=&amp;h=300&amp;w=200&amp;sz=9&amp;hl=pl&amp;start=3&amp;um=1&amp;itbs=1&amp;tbnid=B6r-rJBdYLAI6M:&amp;tbnh=116&amp;tb">here</a></p> </div> </div> </div> <div class="field field-related-stories"> <div class="field-label">Related stories:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="/od-russia/olga-kudeshkina/tackling-russia%E2%80%99s-legal-nihilism">Tackling Russia’s legal nihilism</a> </div> <div class="field-item even"> <a href="/od-russia/sergei-guriev/tackling-corruption-in-russian-economy">Tackling corruption in the Russian economy</a> </div> <div class="field-item odd"> <a href="/node/253">How Russia really works</a> </div> <div class="field-item even"> <a href="/article/email/legal-nihilism-in-russia">Legal Nihilism in Russia</a> </div> </div> </div> </fieldset> <div class="field field-country"> <div class="field-label"> Country or region:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Russia </div> </div> </div> <div class="field field-topics"> <div class="field-label">Topics:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> Civil society </div> </div> </div> oD Russia oD Russia Russia Civil society postsoviet russia & eurasia russia Oliver Carroll Alena V Ledeneva Justice Internal Fri, 12 Mar 2010 10:48:10 +0000 Alena V Ledeneva and Oliver Carroll 50715 at How Russia really works <p>For Russia to achieve long-term success in the global economy, it will need transparent &#147;rules of the game&#148; to replace the dominance of &#147;unwritten rules&#148;. But to get from here to there, we must first understand how Russia works today.It&#146;s becoming a commonplace to say that &#147;in Russia, nothing is as strong as it seems, nor as weak&#148;. Just as the August 1998 crisis overturned expectations of a Russian boom, so the speed at which the Russian economy recovered post-1998 came as a surprise (GDP surged, from 3.2 per cent in 1999 to 7.7 per cent in 2000 and to around 5 per cent in 2001). </p><p> The need to understand how the Russian economy really works is urgent. Globalisation reveals the distinction between transparent and non-transparent economies. In her interview with <b>openDemocracy</b>, <a href="/articles/View.jsp?id=262">Maria Livanos Cattaui</a> of the International Chamber of Commerce rightly stressed the importance of rules and transparency to development. Global financial capital <i>avoids</i> non-transparent economies, which also do not comply with international standards in accounting or corporate governance. Russia is one of the least transparent economies in the world. </p><p> Non-transparent economies are not only unpredictable. They are often regarded as a threat to the world&#146;s financial stability. Russia appears on the IMF&#146;s blacklist on money laundering, the CIA&#146;s blacklist on nuclear proliferation and near the top of Transparency International&#146;s corruption index. Its nationals, like Cubans, Iraqis, Libyans and Iranians, are subject to more stringent processing by US and many European embassies. </p><p> <i>Transparency</i> may be vitally significant for the global economy. Yet it is not enough to say, with Cattaui, that we need rules and laws. We still know very little about how non-transparent economies work. We know even less about how to encourage policy-making that would create motivation for transparency at the grassroots level, rather than simply imposing control and punitive sanctions. </p><p> We need to understand Russia&#146;s economy on its own terms. Rather than looking only at what does not work, I want to concentrate on what does work and how. The ineffectiveness of the rule of law in Russia is one of the main obstacles to economic and political development. This not only deters much-needed foreign investment, it undermines efforts to curb capital flight, tax evasion, and corporate governance abuses. But if the rule of law does not work in Russia, then what does? </p><p> Popular wisdom offers one tentative answer: &#147;Russia is a country of unread laws and unwritten rules&#148;. Or, as they say, &#147;the imperfection of our laws is compensated for by their non-observance&#148; (<i>nesovershenstvo nashikh zakonov kompensiruetsya ikh nevypolneniem</i>). </p><p> It&#146;s not that the components of the rule of law are absent in Russia. Rather, the ability of the rule of law to function coherently has been diverted by a powerful set of practices that evolved organically in the post-Soviet milieu. Understanding how these <i>unwritten rules</i> work will help to make the rules of the game more transparent, and thereby subject to positive reform. </p><p> <b>The rules of the game</b> </p><p> Given the scale of the informal economy in Russia, there is no shortage of examples that illustrate how <i>unwritten rules</i> operate. Tax evasion and tax bargaining alone are an excellent introduction to the informal order of things. In the corporate sector, the practices most damaging to transparency are those based on the so-called <i>corporate identity split</i> and false reporting. </p><p> Firms insulate themselves with at least two front companies, and create various shell-firms or scam-firms, organized in sophisticated financial networks. Offshore companies are set up to channel profits for the insiders&#146; club of shareholders or managers. Unwritten rules also prevail, to regulate non-monetary exchanges and help fight business and political wars. </p><p> The focus of unwritten rules is not on constraints <i>per se</i>, but on the enabling aspects of those constraints. The unwritten rules are the know-how needed to <i>navigate</i> between formal and informal sets of constraints, and to manipulate their enforcement to one&#146;s own advantage. </p><p> Reliance upon unwritten rules is one outcome of the loopholes in legislation. The other is a lack of respect for formal rules, and the impossibility of their enforcement. Attitudes to the law are traditionally distant and sceptical. As long as such attitudes prevail, there is a limit to the extent to which the institutional framework essential for a market economy can operate. </p><p> Overcoming Russia&#146;s dependency on unwritten rules means breaking free from the following chain reaction: </p><div class="full_image"><p><img src="" alt="diagram" width="555" border="0" /><br /></p></div>Unfortunately, these attributes of the system seem not to have changed much during Russia&#146;s transition. Just as the planned economy was not really planned, but was actually run with help of <i>tolkachi</i> (pushers), <i>blat</i>(the informal exchange of favours) and other informal arrangements, the market economy today is not really a market economy. It relies on unwritten rules. <p> <b>Unwritten rules: an invisible hand</b> </p><p> Western aid programmes have funded ambitious macroeconomic reforms aimed at <i>shocking</i> Russia into a functioning market economy. Foreign investors have attempted to introduce and apply Western business practices. </p><p> But despite these external efforts and internal political will, changing the foundations of the system has turned out to be no easy task. Unwritten rules have long been a powerful invisible hand within Russian political culture: their presence is unlikely to melt away. </p><p> In the 1990s, these unwritten rules surfaced in the opportunistic manipulation of formal corporate constraints. To fulfil routine business tasks, companies are often compelled to secure a <i>krysha</i> (roof): to employ fixers and private security services companies skilled at navigating Russia&#146;s complex financial and legal spheres. </p><p> These private security service providers combine professional expertise in formal codes (the tax code, licensing requirements, insolvency law, accounting and banking procedures) with the know-how to manipulate these codes to advantage. </p><p> They also employ <i>informal</i> negotiating techniques, which include sophisticated intelligence-gathering capacities and the manipulative use of blackmail files (<i>kompromat</i>). Such files include copies of bank statements, currency transfers, business and real estate transactions, and other official documents; as well as general correspondence, personal information and unofficial transcripts of telephone conversations. </p><p> Rather than restricting their activities to <i>traditional</i> tasks such as physical protection and informational security, private security services in Russia have become the <i>de facto</i> administrative force of the economy. Their extra-legal activities lubricate Russia&#146;s imperfect institutional framework. &#145;Krysha&#146; agencies facilitate interactions with state bodies and other economic agents, including business competitors, organized crime groups, and protection agencies. </p><p> The transaction costs created by private security services, pervasive corruption and the high-risk environment undermine the solvency of small firms in competitive markets. They serve to maintain the unwritten rules, which benefit the entrenched informal order. </p><p> Will Russia be able to break free from its dependency on unwritten rules? There is no need to be pessimistic. But changing the formal constraints will not be enough to weaken the hold of unwritten rules on the economy, or to make it more responsive to market stimuli. The system of informal constraints will have to change. The ways in which they divert, redefine and enforce formal constraints must be targeted. Otherwise further attempts at reforms will be endlessly frustrated. </p><p> <b>Step by step across the tightrope</b> </p><p> If the functioning of the economy depends on unwritten rules, how can their significance be reduced without cutting off the branch on which one is sitting? </p><p> Some practical steps should be taken: </p><p> Formal constraints notoriously associated with extra-legal practices must be identified and revised (as was done with the tax code). Legislation which does not work must be abolished. Then, Russia needs a long-term commitment to impartial enforcement of the revised codes. </p><p> A public debate should begin on the role of informal constraints, which are tied up with the legacies of the command system and traditional patterns such as patronage. It needs to become clear to people that the rule of law is a more advanced form of social contract. Susan Richards has suggested that Russians are beginning to understand the value of more formal civil society infrastructures. </p><p> A framework which encourages motivation, professionalism and good management will bring a spontaneous change in unwritten rules. People in Russia are enormously ingenious, and this can be a source of positive change if synchronized with the interests of the economy as a whole. </p><p> Personal networks, which perform dozens of functions in Russia, including those of redistribution, survival (food, money, mutual help), security, business, rent-seeking and technology, must be <i>modernized</i>. Crucially, they need to change, to become open and inclusive. </p><p> Outside influences and organizations can play a substantial role in transforming the setting for the unwritten rules. On a company level, investors, lawyers and consultants can act as <i>role models</i> by introducing new practices and norms into the Russian economy. </p><p> In Russia, as in other economies, it is vital that we become aware of the unwritten rules. For the development of an effective, <i>transparent</i> market economy depends on our being able to transform them. </p> oD Russia Russia Economics Globalisation russia & eurasia russia Alena V Ledeneva Original Copyright Economy Wed, 16 Jan 2002 00:00:00 +0000 Alena V Ledeneva 253 at