AN INSTITUTIONAL APPROACH TO THE ANALYSIS OF KLEPTOCRATIC ECONOMY IN THE CONTEXT OF EUROPEANIZATION

##plugins.themes.bootstrap3.article.main##

##plugins.themes.bootstrap3.article.sidebar##

PDF
Published: Oct 29, 2019
https://doi.org/10.30525/2256-0742/2019-5-4-203-211

  Robert Pustoviit

http://orcid.org/0000-0003-0188-2677

  Oleg Kuklin

http://orcid.org/0000-0001-6904-3496

  Mykhailo Kryvoruchko

http://orcid.org/0000-0001-6150-864X

Abstract

Relevance. Kleptocratic economy, as an institutional system, is oriented towards a key function that involves gaining wealth by the ruling elite through the introduction of non-market transaction costs for companies and households, which is based on administrative, bureaucratic, and political violence. For this purpose, the kleptocratic states create such systems of state institutional management that give the authorities the possibility of rent-oriented behaviour, which impedes the functioning of the real sector of the economy and encourages the shadow one. Under such circumstances, transaction costs are redirected to administrative intervention into the market mechanism, rather than aimed at increasing its efficiency; property rights are not clearly specified; the level of uncertainty about rules and norms of economic behaviour increases, and the motivational system of business activity is distorted. As a result, on the one hand, inefficient allocation of resources and slow economic growth (decline) are observed, and on the other hand, there is the redistribution of income in favour of the ruling elite and its excessive enrichment, that is detrimental to the welfare of the majority of the population. The aim of the article is to analyse the political-economic formation of a kleptocratic basis, which in the future transforms the state and its economy into kleptocratic formations; defining ways of counteraction and institutional capacity for transformations in the direction of Ukraine’s aspirations for European integration. Methodological basis. The methodological basis of the research is the work of domestic and foreign scientists in the field of institutionalism and kleptocratic economy. The models of the development of a kleptocratic state and the influence of kleptocratic factors on the socio-economic processes in the country have been studied with the application of the method of analysis, systematization, and generalization. Results. It is determined that in order to liquidate the grounds of kleptocratic economy, it is of primary necessity to eliminate institutional obstacles that interfere with the unification of the legal and shadow sectors of the economy and ensure their institutional formalization. This requires the introduction of effective ways of restraining the ruling elite in order to restrict corruption abuses of the government and its close reigning coalition with special privileges and bureaucracies and form an institutional structure, in which firms and households have clearly defined property rights and also have the possibility to protect contractual rights provided by formal institutes. Particular attention should be paid to the ways of civil society’s monitoring the state information policy and methods of adopting laws, which is, the institutional foundation that guarantees the openness of information as to the actions of government institutions. According to the results of the study, definite measures are proposed, the implementation of which will ensure the opportunities for Europeanization, particularly in Ukraine. The emphasis is placed on the fact that the important factors of counteracting the kleptocratic economy are the wage reform and the “transparent” selection of employees in the public administration sector on the basis of their professional qualities only.

How to Cite

Pustoviit, R., Kuklin, O., & Kryvoruchko, M. (2019). AN INSTITUTIONAL APPROACH TO THE ANALYSIS OF KLEPTOCRATIC ECONOMY IN THE CONTEXT OF EUROPEANIZATION. Baltic Journal of Economic Studies, 5(4), 203-211. https://doi.org/10.30525/2256-0742/2019-5-4-203-211
Article views: 914 | PDF Downloads: 286

##plugins.themes.bootstrap3.article.details##

Keywords

kleptocratic economy, corruption, institutional environment, formal and informal institutions, European integration process

References

Acemoglu, D., Robinson, J., & Verdier, T. (2004). Kleptocracy and Divide-and-Rule: A Model of Personal Rule. Journal of the European Economic Association, 2(2–3), 162–192.

Aliyev, H. (2014). The Effects of the Saakashvili Era Reforms on Informal Practices in the Republic of Georgia. Studies of Transition States and Societies, 6(1), 19–33.

Bazhan, A. I. (ed.) (2015). Evrointegratsiya Ukrainy: perspektivy, posledstviya i politika Rossii [European integration of Ukraine: perspectives, consequences and Russia’s policy]. Moskva: In-t Evropy RAN. (in Russian)

Вloom, B. (2014). Criminalizing Kleptocracy? The ICC as Viable Tool in the Fight Against Grand Corruptions. American University International Law Review, 29(3), 628–656.

Campos, J., & Pradhan, S. (2007). The Many Faces of Corruption. Washington: The International Bank of Reconstruction and Development, The World Bank.

Chen, X. (2010). Theory of Divide-and-Rule: Kleptocracy and Its Breakdown. University of Warwick Research Paper. Retrieved from: https://warwick.ac.uk/fac/soc/economics/intranet/manage/calendar/chen_jmp.pdf (accessed 30 October 2018).

Danylenko, L. I., & Polishhuk, I. V. (2013). Perspektyvy ta vyklyky jevrointeghracijnykh procesiv dlja Ukrajiny [Perspectives and challenges of European integration processes for Ukraine]. Kyiv: NADU. (in Ukrainian)

Darbishire, H. (2017). EU Anti-Corruption Report. Retrieved from: https://www.asktheeu.org/en/request/eu_anti_corruption_report (accessed 20 February 2019).

Dlughopoljsjkyj, O. V. (2012). Suchasni poghljady na korupciju ta minimizaciju jiji neghatyvnogho vplyvu na ekonomiku Ukrajiny [Modern views on corruption and minimization of its impact on Ukrainian economy]. Ekonomika Ukrajiny, 9, 13–24. (in Ukrainian)

Dolan, C. (2018). EU Anti-Corruption: Less is Less. Transparency International EU. Published on June 21, 2018. Retrieved from: https://transparency.eu/less-anticorruption (accessed 25 February 2019).

European Commission (2014). EU Anti-Corruption Report.

European External Action Service (2018). Assotsiatsiya ES – Ukraina: chto eto dast vam [The EU-Ukraine Association: how you benefit from it]. Retrieved from: http://www.eeas.europa.eu/archives/delegations/ukraine/documents/virtual_library/association_115x170_ru.pdf (accessed 25 October 2018). (in Russian)

European Parliamentary Research Service (2017). Corruption in the European Union: Prevalence of Corruption, and Anti-Corruption Efforts in Selected EU Member States. September 2017. Retrieved from: https://publications.europa.eu/en/publication-detail/-/publication/ccb3441e-d580-11e7-a5b9-01aa75ed71a1/language-en (accessed 22 February 2019).

Fomina, M. V., Prykhodjko, V. V., & Kapturenko, M. Gh. (2012). Korupcija i tinjova ekonomika: politekonomichnyj aspekt [Corruption and shadow economy: political-economic aspect]. Donetsk: DonNUET. (in Ukrainian)

Gelman, V. (2010). «Podryvnye instituty» i neformalnoe upravlenie v sovremennoy Rossii [«Subversive institutions» and informal management in the modern Russia]. Politiya, 2, 6–24. (in Russian)

Geveling, L. (2001). Kleptokratiya. Sotsialno-politicheskoe izmerenie korruptsii v negativnoy ekonomike [Kleptocracy. Social-political dimension of corruption in a negative economy]. Moscow: Izd-vo «Gumanitariy» Akademii gumanitarnykh issledovaniy. (in Russian)

Interfaks Ukraina (2015). Zarubezhnye eksperty schitayut osnovnymi prepyatstviyami na puti Ukrainy k chlenstvu v ES korruptsiyu i medlennye reformy – opros [Foreign experts considers corruption and slow reforms to be the main obstacles for Ukraine on its way to the EU membership – jury of opinion]. Retrieved from: https://interfax.com.ua/news/political/292307.html (accessed 25 October 2018). (in Russian)

KNOEMA. World Data Atlas: Ukraine. Retrieved from: https://knoema.com/atlas/Ukraine?origin=knoema.ru&_ga=2.140136565.717356440.1540653995-1601292816.1540653995 (accessed 27 October 2018).

Lambsdorff, J. G. (2007). The Institutional Economics of Corruption and Reform: Theory, Evidence and Policy. Саmbridge: Саmbridge University Press.

Lauth, H.-J. (2000). Informal Institutions and Democracy. Democratization, 7(4), 21–50.

Loginova, L. (2008). Mekhanizm institutsionalizatsii interesov [Mechanisms of the interests institutionalization]. Filosofiya i obshchestvo, 4, 146–157. (in Russian)

McCubbins, M., & Schwartz, Th. (1984). Congressional Oversight Overlooked: Police Patrols versus Fire Alarms. American Journal of Political Science, 28, 165–179.

Nielsen, N. (2017). EU Commission Drops Anti-Corruption Report. EU Observer. Published on February 02, 2017. Retrieved from: https://euobserver.com/institutional/136775 (accessed 05 February 2019).

Nisnevich, Yu. (2012). Mnogolikaya korruptsiya i ee izmereniya v issledovaniyakh mezhdunarodnykh organizatsiy i mezhdunarodnykh otnosheniy [Many-sided corruption and its dimensions in the studies conducted by international organizations and international relations]. Mirovaya ekonomika, 3, 83–90. (in Russian)

North, D., Wallis, D., & Weingast, B. (2011). Nasilie i sotsialnye poryadki. Kontseptualnye ramki dlya interpretatsii pismennoy istorii chelovechestva [Forcing and social order. Conceptual framework for interpretation of a scriptory history of humanity]. Moskva: Izdatelstvo Instituta Gaydara. (in Russian)

Rafaljsjkyj, I. (2011). Polityka jevrointeghraciji ta jiji rolj v procesi nacionaljnogho samovyznachennja [European integration policy and its role in the process of national self-identification]. Visnyk NTUU «KPI», 4(12), 67–72. (in Ukrainian)

Rouz-Ekerman, S. (2004). Korupcija ta urjaduvannja. Prychyny, naslidky ta zminy [Corruption and governance. Roots, causes, and changes]. Kyiv: «К.І.S.».

Predborsjkyj, V. A. (2005). Detinizacija ekonomiky v konteksti transformacijnykh procesiv. Pytannja teoriji ta metodologhiji [Unshadowing of economy in the context of transformational processes]. Kyiv: Kondor. (in Ukrainian)

The Greens / European Free Alliance (2019). The Cost of Corruption Across the EU. Published on December 7, 2018. Retrieved from: https://www.greens-efa.eu/files/doc/docs/e46449daadbfebc325a0b408bbf5ab1d.pdf (accessed 15 February 2019)

Yunin, О. Sevruk, V., & Pavlenko, S. (2018). Priorities of Economic Development of Ukraine in the Context of European Integration. Baltic Journal of Economic Studies, 4(3), 358–365. doi: 10.30525/2256-0742/2018-4-3-358-365

Zanuda, A. (2017). MVF podschital poteri ekonomiki Ukrainy [IMF estimated losses of Ukraine’s economy]. Retrieved from: https://www.bbc.com/ukrainian/features-russian-39512756 (accessed 30 October 2018). (in Russian)

Zaostrovtsev, A. (2009). Teorii grupp interesov [The groups of interests theories]. Finansy i biznes, 1, 6–24. (in Russian)

Issue
Vol. 5 No. 4 (2019): Baltic Journal of Economic Studies