1. Russian Law, Justice and Corruption
Update
Jon Hellevig
Russia Business Forum
Helsinki, 12.6.2012

2. "Hellevig is always
too optimistic
about Russia"

3. ”...But compared with the real results of the Russian economy my
optimism seems very modest, as can be seen from below graph...”
2,000
1,800
1,600
1,400
1,200
Russia
1,000
Finland
800 Sweden
600
400
200
0
GDP 2000 ($) GDP 2004 ($) GDP 2008 ($) GDP 2011 ($) BKT (dollareita)

4. BOOK: Why they, why not we?
“An Analysis of the Competitiveness of Finland
and Russia"

5. “an analysis of the
success factors of our
respective home
countries"

6. What year did Finnish law start?

7. What year did Russian law start?

8. 1991!

9. And what was the starting point?

10. ”You cannot seriously think that in 10 years after the 70 years of Communist
catastrophe you would just have thrown out that experience as a bad dream
and continued with orderly life as if nothing had happened!”

11. Law (justice) = social practices
• Law is the result of how people have learned
to regulate their mutual interactions through
historic times
• Provisions of written law are not self-
propelling things, like robots or software that
would carry a definite result once enacted

12. • In Russia people started in 1991 to build a totally new system of law
on the ruins of the Soviet Communist anti-law system
• Consider what would happen in Brazil if there were to be an order
to stop playing football and do ice hockey instead. How long would
it take for them to learn that new game, the new hockey culture?

13. • In Soviet Russia all ties with the old law and practices
where interrupted
• It was the stated aim of the Bolsheviks

14. • Following the teachings of
Marx the law was canceled
in Russia one sunny day in
November 1917!
” Proletarian
Communist Law”

15. ”One of the main architects of Soviet no-
law, Stuchka, proclaimed that the goal of the
socialist revolution is to abolish law and to
substitute it with the new socialist order”

16. And sure they were very successful in that
endeavor! As we have seen.

17. • Soviet law = Anti-law system
• Soviet Law = No-Law

18. • And now we have the question how Russian
law is developing
• Answer: It is developing by leaps and
bounds, in 20 years having come out from the
black hole of Soviet law!
• But the culture of law, the social practices of
law, are still young and need time to develop

19. • And what is the state of Russian law today?
• 10 more years of stability and the Russian
system of law will be the law of a Normal
Country

20. No law, no justice, what else was missing in
Soviet Russia?
• Independent judiciary?
• Democracy?
• Convertible currency?
• Private property?
• Freedom of choice?
• Civil society?
• Press freedom?

21. • And yet 10 years after the fall of USSR and emergence
of new Russia Western governments and press
invented the lie that Putin supposedly had destroyed
all those non-existing institutions and freedoms
• This propaganda lie contains the assumption that the
Soviet system in fact was quite beneficial and thanks to
some finetuning of Yeltsin in 10 years emerged
democracy, independent judiciary, civil society etc.
• And then, supposedly, came Putin and destroyed all
that

22. In reality in 1990’s
• Due to the mindless perestroika of
Gorbachev Russia was thrown into
a total anarchy
• The Soviet system was based on a
state planned economy enforced by
command. In what must be the
most idiotic policy ever, Gorbachev
removed the element of command
and control, but kept the state plan
(did not free the economy)
• Compare with China, which did it all
the other way around. – Yet nobody
has claimed that the Chinese rulers
overseeing the economic miracle
destroyed the democracy of Mao

23. Yeltsin
• Did his best
• And managed to turn the tide in decisive
factors of development of the nation
• But Yeltsin’s power reached only to
managing the most fundamental
functions of the state
• In practice full anarchy reigned in the
county. All that was left of statehood was
the presidency itself, a new national
hymn (without lyrics), and a flag which
most Russians didn’t even properly
recognize

24. Putin took over a troubled country
• The problem is that people don’t
understand, or do not want to
understand, or do not want others to
understand, that Putin became a
president of a country without a real
state, without any significant reach of
the Government
• Problem worse, cause this is
something that the president of
Russia can, of course, not speak of
much
• Critics say Putin has centralized
government, when in fact he has
created the rudiments of government
from nil
• And now 12 years later Russia is on
the threshold of becoming a Normal
Country

25. Murders per 100 000 people
35
30
25
20
15
10
5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

26. Cold Civil War
• The period prior to 2012 may be compared to that of a civil
war
• A cold civil war, which now have been won by the forces of
good
• But therefore Russia can only now start to conduct the
policies and political programs of a Normal Country

27. Thanks to corruption, Russia did not fall a part in
the anarchy of 1990’s!
• In the conditions of anarchy corruption was the only factor
keeping the country going
• Corruption fullfilled the vacuum of statehood in
Communist Russia and the Russia of Anarchy in 1990’s
• Those won that where foul enough to play the game

28. • Corruption became the norm of social behavior in
the Soviet economy of scarcity
• And Gorbachev converted it to the only possible way
of interaction

29. • As Putin has now established the fundaments of
Russian statehood and government, the fight
against corruption may start
• I am confident that we will see big improvements
in this respect in the near future
• Transparency International is wrong
• My own experience as a tax compliance lawyer
and director of an accounting firm provides me a
totally different view of Russian reality
• Should I trust the American media or my own
lying eyes?

30. • The so-called capital flight and corruption
• A surprising correlation

31. AND WHERE ARE WE TODAY?
• Law, justice
• Corruption
• Law enforcement, Police
• Bureaucracy
• Inflation – Economic Policy
• Taxation
• Customs
• Competence of workforce, intellectual
infrastructure, language skills
• More long-term horizon in everything; shareholder
value; sustainable development

32. MYTHS AND MISUNDERSTANDINGS ABOUT RUSSIA
• The size of the ”middle class”
• If admit of anything good, then: ”all only thanks to the
rise of price of oil”
• ”Why has the economy not been diversified from oil
and natural resource dependency?”
• ”To stabilize the budget, X price of oil is needed”
• ”Support for Putin has plummeted”
• ”Support for United Russia has plummeted”
• The protest movement
• Freedom of press, murder of journalists
• Etc., etc.,

33. We thank you!