Demands on bureaucracy rise in response to crises
Besides these widely mentioned factors, there is another, less obvious one. It is the increase in the effectiveness of the Russian bureaucracy over recent years. The thesis about the corruption and incompetence of the Russian bureaucracy has been based on theoretical models in multiple studies on the economy and politics and confirmed by empirical data. Its basis was fairly simple and reasonable arguments. The highly centralized governance model built in the 2000s assumed that all key decisions were made at the federal level, and local officials were expected to be diligent and politically loyal, meaning they must ensure the “right” results in parliamentary and presidential elections. For its part, the Kremlin was willing to turn a blind eye to rent extortion, corruption and incompetence at lower levels; money was thrown at the problems that arose as needed, since there were more than enough budget revenues during the oil boom of the mid-2000s to go around.
But the situation started to change already after the 2008-09 crisis, when half of the reserve fund was spent in one year and it became clear that the resources of the federal government were by no means unlimited. Regional governors began to be expected to create more favorable conditions for doing business, with pressure provided by the benchmarking of regions based on the National Investment Climate Ranking conducted by the Agency for Strategic Initiatives.
The mass political protests of 2011-12 brought a new pressure on the authorities. They were spurred by fraud in the Duma elections, yet the underlying cause of the discontent was the poor quality of public goods (health care, education, infrastructure, security). The Kremlin came to such a conclusion, which led the federal center to raise its demands with regard to the performance of local and regional authorities, as well as relevant federal agencies. The “May Decrees” of 2012 with concrete KPIs for regional authorities and federal ministries and strict control of their implementation was Important instrument of this policy.
Finally, the economic consequences of Crimea annexation followed by the conflict in Donbass raised questions about those in charge of industrial policy. Since the mid-2000s, significant resources had been directed toward industry (including the creation of the state corporations Rostec and Rosnano, state holdings in aircraft and shipbuilding, and the financing of various projects through VEB), but clear successes in terms of diversifying the economy and developing high-tech industries were lacking. Meanwhile, the first wave of international sanctions imposed on Russia in 2014 revealed the high dependence of the Russian economy on foreign technology and equipment. It was then that the Kremlin began to demand that agencies report results.
Since 2014, in addition to the carrot (in the form of access to additional federal budget resources and career advancement opportunities) the bureaucratic elites have also seen the stick in the form of criminal cases based on anticorruption investigations. Previously such cases were initiated mainly against middle-level officials, but now the highest officials, including regional governors and federal ministers, began to be targeted. In other words, as external and internal pressures increased, officials at all levels began to be expected to demonstrate not only loyalty but also competence – the ability to solve problems and achieve results in their area of responsibility based on available resources.
Improvements in governance
This resulted in certain improvements in the system of public administration. For example, my analysis of public procurement data in the 2010s didn’t reveal high levels of corruption in low-level contracts between ordinary government customers and small and medium-sized suppliers. This doesn’t change the fact that the biggest contracts are very often landed by people with connections. And since there is still a very high concentration of large government orders in the hands of a small number of the largest suppliers, the total losses from corruption in the economy have changed little. Nevertheless, it can be argued that at the lower levels of “ordinary public entities,” the existing system of procurement generally works, despite its rigidity and excessive regulation. One indirect confirmation: