Authoritarian Kleptocracy (AK)

AK defines a country ruled by a narrow elite that seeks self-enrichment as its primary goal. Business tycoons have always benefited from their ability to influence government to favor their interests. The center of gravity under AK shifts to political leaders. With the centralization of government powers, they can bend even Big Business to their whims. The consolidation of political and economic resources results in the most powerful politicians becoming the country’s wealthiest. Or the reverse.

The emergence of new entrepreneurs riding on the coattails of the top political leader is a second AK marker, facilitated by the dismantling of the system of divided powers that protects democratic governance. As the executive acquires dominance over the legislature and the courts, the government gains control over tax funds and revenue flows from franchises and rents. These provide the executive with wealth to dispense to family and friends and to construct a new set of loyal cronies.

We have long and extensive experience with one way of diverting public funds into private pockets: the common complex of illegal corrupt practices that every presidential candidate condemns. Actual implementation of anticorruption rhetoric generally fails to realize the promise. Still, the standard anticorruption measures sometimes manage to trap “big fish” in their nets. The safer strategy is to take funds right off the top.

Control of the legal and political system permits the appropriation of funds to support new offices—for instance, for additional deputy ministers and vice chairs; or to transfer them into discretionary expenditure items not subject to normal reporting and accounting requirements. Such as “intelligence funds.” Legislated budgetary measures to raise compensation or allowance levels of officials on a selective basis can also mask potential corruption. These schemes provide a legal cover for appropriating public funds for the private enrichment of those with political clout. But they essentially support a corrupt environment.

AK’S third characteristic follows from the other two: government powers centralized in the executive and the consolidation of political and economic resources in the same set of self-interested elites. Together, they weaken the check-and-balance framework of government. The oversight responsibility to hold the executive branch accountable for its actions rests on the legislature and the courts. Their abdication of this duty permits kleptocracy to flourish. AK applies Robert Klitgaard’s formula: Corruption = Monopoly + Discretion - Accountability.

The 47th anniversary of martial law last month reminded us that “kleptocracy” and “crony capitalism” entered our political vocabulary during the Marcos regime. Chris Miller’s review of Anders Aslund’s “Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy” (Yale University Press, 2019) supplied another prompt for this piece. Aslund updates the concept and practices of kleptocracy in Russia under President Vladimir Putin.

Filipinos do not know much about Russia. President Duterte’s second visit to Russia in three years should alert us to learn more. Aslund’s book offers useful information on the most influential cronies today and insights on how the government transacts business with them. Aslund identifies Gennady Timchenko, Arkady Rotenberg and Yuri Kovalchuk among those entrepreneurs who were neither notably prominent nor wealthy, until Putin became the dominant power. Like many of the old, established business elite, they have fallen in line to pledge loyalty to Putin. They have now amassed billions, according to Aslund, from “preferential state orders” from state-owned firms to “unique access” to licenses. Such relationships assure mutual advantages.

With his long service in government and his proclaimed concern over corruption, Mr. Duterte himself may not need any assistance from Aslund’s book. He would have learned already from his familiarity with the Marcos regime and his own experience as long-serving Davao chief executive how corruption works in our local context and how to control it. He does not need any lessons from Russia and what Putin does or does not do.

For government officials expected to implement agreements resulting from the visit, Aslund’s research should provide relevant reading. It is they who must ensure that whatever promised benefits come from Russia with love genuinely contribute to the country’s welfare.

Business Matters is a project of the Makati Business Club (makatibusinessclub@mbc.com.ph).