
Why Russia Locks Up So Many Entrepreneurs - ytNumbers
http://www.bbc.co.uk/news/magazine-18706597
======
rdtsc
> Businessmen have complained for years that people have been able to frame
> commercial rivals

Corruption is like an infectious disease. It infects the body from the head to
the toes. Corruption is involved in every stage of a person's life. When a
person is born, in the hospital bribes need to be doled out to nurses, doctors
and staff if appropriate care is expected. In school starting from kindergaden
and all through highschool teachers and principles are bribed to ensure good
grades are assigned.

Then bribes are given to government officials. Say, if you take a driver's
exam (this happened to me) they will fail you on purpose expecting that you
will realize that you need to pay them a bribe in order to pass it. It is not
that are you good or not, it doesn't matter, because others pay, pay is
expected always and those that don't pay get failed until they pay.

There is a price you can pay to get away with murder. There is a price you pay
to the court DNA tester to either fabricate or deny a paternity test. There is
a price for every single piece of certificate or license issued for conducting
a business( and, not surprisingly the number of said certificates and licenses
never decreases ).

It is not just bribes. It is also nepotism. There is so much freakin'
incompetence because people who are not qualified are put in position just as
a result of being related to some higher-up.

This corruption is also transmitted to offspring. Children observe their
parents interact with the corrupt system and they learn to do the same, in the
process also become corrupt.

To get back to the article. I think a lot of businessmen get locked up because
they did not play by the un-official rules and thought, perhaps some thought,
they could function like they would do in the West or in America.

~~~
mootothemax
_To get back to the article. I think a lot of businessmen get locked up
because they did not play by the un-official rules and thought, perhaps some
thought, they could function like they would do in the West or in America._

Whilst the situation in Russia is undoubtedly horrific, let's not pretend that
corruption isn't endemic in the rest of the world; some counties have just
legalized it to some extent.

Crony capitalism is criticised but rarely has action taken against it, and
political campaign donations are seen as being perfectly acceptable. It
doesn't appear to matter whether it's giving money to US senators, or joining
"donor's clubs" that guarantee access to the UK's prime minister, e.g.:

<http://www.conservatives.com/donate/donor_clubs.aspx>

~~~
ajays
_Whilst the situation in Russia is undoubtedly horrific, let's not pretend
that corruption isn't endemic in the rest of the world; some counties have
just legalized it to some extent._

Every time there's a discussion of corruption, people make this statement, and
it bothers me (I'm originally from India, which has a lot of corruption too).
You cannot just equate the two. Corruption as described by the GP is like a
cancer which has metastasized all over the body; corruption in the West is
like an isolated blotch of melanoma on the skin.

So yes, there is corruption everywhere I guess ( perhaps even in Sweden and
Norway and Switzerland); but it's not at the same level as that in Somalia and
Russia.

The thing that draws entrepreneurs from all over the world to the US is that
it is almost trivial to register and start a business here; and even if you're
wildly successful, your "corruption overhead" is minimal (the occasional $35K
dinner for $PRESIDENTIAL_CANDIDATE notwithstanding). This may not be the case
in _ALL_ industries, but in general it's true.

Consider for example Google. Till a few years ago, despite revenue in the
billions, Google didn't even have a lobbying presence in DC.

This is not to say that we should not be alert. The way lobbying (i.e.
corruption) is playing out in DC is a troubling trend. If things are left
unchecked, there could come a time when, for example, instead of putting a
competitor in jail (as in the article), companies would just get laws passed
which kneecapped the competitor. We're not there yet (there might be
exceptions), but we have to be vigilant.

~~~
arthurrr
I think entrepreneurs are drawn to the US simply because it is the biggest
economy. The corruption overhead is just a cost of doing business, you don't
pay, your customers do, you just have to account for it when you create the
pricing structure.

I think Google is an exception, because it is a technology company. I would
say the amount of corruption depends on the age of the industry and the vested
interests, technology is so new it just isn't there yet. On the other hand,
you have the financial industry and the big New York banks. The SEC is bought
and paid for, they will never prosecute one of the big banks, and a judge will
never rule against them either.

One of the most interesting stories is Martin Armstrong (perhaps the only
person in the world who actually understands how the global economy works imo)
who was held in contempt of court in jail without trial for like 7 years
because the government wanted to silence him.

In the US you won't really see the corruption at the lower levels, but the
higher up you go, the more corruption you will find. The corruption is hidden
and more sophisticated. The real corruption occurs at the highest levels,
behind the curtain. Governments are simply tools used by those who are really
in power. It's more profitable to make your competitor (unknowingly) become
your economic slave than it is to put them in jail.

~~~
smsm42
As far as I can see, Armstrong was jailed not because government wanted to
silence him (which would be futile anyway since there's ample ways to
communicate from prison and many people do that) but because he refused to
turn over some materials after being indicted (and later convicted) for
financial fraud, which looks not entirely unlike what Madoff did. So it does
not look like any government conspiracy theory is required. Of course, if you
have data proving otherwise, it would be interesting to look at it.

The courts in US regularly rule against big banks in various cases, so it is
just plain wrong to claim judge will never rule against the bank. The SEC is
more problematic, since high knowledge requirements for regulating banks and
security industries leads very quickly to the situation when all SEC experts
are industry people, and thus defend the industry interests. This is
inevitable problem of state regulation - the only way to know what the
industry does is to work there, and finding somebody that is both impartial
and competent is next to impossible. Yet even SEC regularly issues rulings
against banks.

Of course, there's a lot of corruption is US, including the highest levels of
government - so, former House Ways and Means Committee chair Charles Rangel
was caught fraudulently evading taxes, getting huge donations from companies
directly benefiting from rules he was promoting, taking lavish Caribbean trips
paid by lobbyists, etc. He finally had to step down from the position and was
censured by the Congress ethics committee, but still was reelected. So I think
the problem here is the people that vote for corrupt officials as much as the
corrupt officials themselves. If the people would refuse to vote for
corruption, people like Rangel would not be able to persists in power for as
long as they do now.

------
guard-of-terra
You have in one article two kinds of businessmen mixed up:

First are the owners of small- (and medium-) scale businesses which they built
by themselves.

Second are the owners of companies which were previously state-owned during
USSR and then they were suddently privatized and "somehow" landed into a hands
of very select few.

I don't think it's correct to call the latter group "enterpreneurs". I think
it's bad for the former group to have both groups mixed together in one
article. What you really have is using some real and ugly problems of the
first group to pitch some ongoing cases featuring persons from the second
group.

Those cases being ugly too not makes this spin a good thing. My mother owns a
small cloth shop, she has quite a few problems as a small business owner, but
I doubt she wants to be used as a lever in the favour of Hodorkovsky or
Kozlov. She might sympathise them, she might not. She's NOT on the same field
anyway.

------
prostoalex
It's a natural progression of corrupt regimes where

1) An entrepreneur pays off someone in the position of power (police, local
government, tax collector) to facilitate quick problem resolution.

2) The aforementioned person in the position of power realizes that instead of
the paltry fee they could lay claim on a large share of the business or entire
100% stake.

------
maga
What I love about English-speaking communities is that articles like this one
receive real comments from real people. It might sound strange, but try to put
this kind of article somewhere in Russian and you're guarantied to receive
first 10 comments telling you that it's just America trying to destroy the
Mighty Russia with this kind of falsehood. And those comments are rarely from
common people, even though Cold War ideas are strong in their heads, mostly
they are written by paid pro-Kremlin activists or just simple bots.

~~~
obtu
Well, these astroturfers are a message in themselves. They do exist in the
English web as well, though.

------
aleyan
Are they really talking about "entrepreneurs"? I have hardly heard that word
in Russian media. Now if they talking about the people whom Russians call
"businessmen", I can believe it. "Businessmen" has become a generic term for
people involved in uncertain economic activity, often shady. It is not
uncommon to hear on the evening news of a few "businessmen" resolving their
differences with guns. Having so many "businessmen" locked up is not that
unusually, especially considering that many criminals simply refer to their
activities as business.

I am not making light of corruption in Russia, it is one the top three most
serious issues that Russia faces. However, the BBC article seems disingenuous
in translating an extremely loaded Russian word "businessman" into
entrepreneur and dropping its tremendous criminal baggage.

~~~
tlear
Russia is so corrupt that running a business without dealing with criminals is
not practically possible. Nobody is "clean" and if you are you will not be
running a business anymore or even better end up dead or in prison. That is
the cost of doing business there. My dad's university friend ran a small
company in Moscow, was too honest for his own good, they threw him out of the
balcony of his apartment. Competition in in mother russia is a bit more
cutthroat then what people NA can imagine.

------
marcuspovey
When I went to visit my then girlfriend's family in Russia a few years ago
there was what was known as the $100 rule - basically that nobody ever left
the house without $100 US in their pocket, because that amount would be enough
to get you out of pretty much any trouble.

Bribery of police is so endemic in Russia that the state's most effective
counter to this so far has been to simply bribe the police _more_ and reclaim
the losses from the perp - so for a traffic offence, the policeman would get a
bonus from the state for not taking the bribe and the offender would have his
car sold.

Paying police more in the first place might be a good start.

~~~
cousin_it
Russian person here. Why do you think paying the police more would reduce
corruption? Highly paid government officials in Russia are just as corrupt.

~~~
da02
I agree. Bank tellers are not that highly paid, but the local banks have no
problem with massive theft.

Here in the US, police are paid quite well and retire with a nice pension.
They also win a free-paid vacation if they kill an unarmed civilian. They call
it "suspended with pay".

Despite all that, they also taser the elderly and teens half their size:
[https://www.google.com/search?q=police+taser+elderly++&o...](https://www.google.com/search?q=police+taser+elderly++&oq=police+taser+elderly)
I read a blog for priv. prop. anarchists and they never run out of stories
like those.

~~~
mjwalshe
You would rather that some one being investigated went back to work and
potentially adjusted the evidence that is why when your investigated for a
serious offence at work you are suspended.

------
skrebbel
3 million people? i have a very hard time believing that Russia has locked up
2% of their population the last 10 years - oh, and those were only the
enterpreneurs, so the total figure is even higher.

~~~
rorrr
You're assuming at one time. Russia's overall incarceration rate is 0.522%.

You're right however, the 3 million figure seems very high.

Russia is a lost cause. Police/government can (and regularly do) take over any
business, especially any small business.

Russia is so corrupt, only a full scale revolution will have a chance at
fixing the country.

~~~
its_so_on
>Russia is so corrupt, only a full scale revolution will have a chance at
fixing the country.

So you're saying there's a violent class struggle between the populist system
and the oppressed business class - and that the only way the downtrodden
business owners can rise up and free themselves from their chains is through
full scale revolution?

This sounds like it's straight out of Monty Python - but hey, good luck with
that.

~~~
rdl
The corruption, like corruption in other countries (including the US), hurts
the poor and wage-earning directly and indirectly as well. It's not like it's
the populace vs. business owners, it's the powerful and capricious vs.
everyone (including other powerful people), using the state and security
apparatus as a tool.

Aside from a few people who made a lot of money a couple decades ago from
rapid deregulation, I don't think business owners in Russia are worried about
taxes, reasonable regulation, etc. hurting their businesses -- they're worried
about totally random extortion.

Very few businesses would rather operate in Equatorial Guinea or Somalia
instead of (heavily regulated country of choice: depending on context, could
be Germany, the US, Denmark, ...).

------
agentgt
I'm curious how "free" the news organizations are in Russia.

I recently was accused of something here in USA along with a ton of other
people (copyright troll... I share my internet connection w/ my tenets).

The local news found out about it rather quickly and wanted to do an
investigative report. I have to say I have never really liked local news but
I'm glad things like this attract their attention.

Is whistle blowing a cultural thing?

In other words can Whistle Blowing be a counter virus to the Corruption virus?

------
kalmsy
Makes me appreciate living in Scandinavia (Denmark). Corruption here is barely
measurable.

Found this: [http://blog.transparency.org/2011/12/07/what-makes-new-
zeala...](http://blog.transparency.org/2011/12/07/what-makes-new-zealand-
denmark-finland-sweden-and-others-“cleaner”-than-most-countries/)

~~~
tomjen3
Depends on how you count it. All those government IT contracts which goes over
budget because they keep getting awarded to the same incompetents can't be
pure stupidity.

The most important thing though is that people think bribery is _wrong_ which
means they won't hesitate to report and prosecute you.

------
debacle
> "You don't know him, you'll never see him again, and you get a financial
> reward - so why do you care?"

That sums up the ethical viewpoint of most of the Russians I know.

~~~
huhtenberg
You hang around with wrong Russians.

~~~
debacle
My wife tells me that all the time.

------
antithesis
> At the root of the problem is the criminal justice system itself.
> Statistically, once officially accused of a crime in Russia, there is little
> chance of proving your innocence.

Not to mention that it should be the other way around. People are innocent by
default, so it should be innocent until proven guilty.

------
sasoon
3 million per in 10 years is 300,000 per year, or 820(!) per day. I doubt they
lock up 820 entrepreneurs per day.

~~~
diminish
Can someone from Russian, please confirm the 3million number? It seems so
unbelievable.

~~~
shadchnev
In other sources Titov mentions 13,000 entrepreneurs who are currently in
jail. A quick search in Russian for "Titov entrepreneurs three million"
doesn't give any other results but the BBC article.

~~~
diminish
I am no Russian or friend with their current government , but this perpetual
flow of dubious information on ft, ftd or bbc is remarkable; I would really
like to profile, such dubious information based on author etc.. but have no
time..

------
kinleyd
Whoa, that is some statistic! Eventually the best entrepreneurs are going to
vote with their feet and that cannot be good for Russia. High time for Putin
to fix the broken legal/police system.

~~~
obtu
Indeed. According to the UN report on inclusive wealth (
<http://www.ihdp.unu.edu/article/iwr> via
<http://www.economist.com/node/21557732/> and
<https://news.ycombinator.com/item?id=4196895> ) Russia's wealth is all
natural resources, and decreasing mostly due to a fast drop in human capital.

------
skylan_q
agitprop

------
hastur
Now, compare that to Putin's pipe dreams of creating his own version of
Silicon Valley in Russia. Obviously, even he can't be that stupid. So it's all
PR, Putin doesn't want Russia to go anywhere, he just loves presiding over the
vast criminal empire of intelligence services, organized crime and oligarchs.

~~~
BadassFractal
What ever happened to that, by the way? So far the only big companies to come
out of Russia were basically local language counterparts of Yahoo, Facebook
and Norton.

~~~
krasin
Please, define "big"?

What's about Parascript (acquired for $50M in 2008)?
<http://www.crunchbase.com/company/parascript>

Abbyy? <http://www.crunchbase.com/company/abbyy>

Evernote? Badoo? Parallels?

~~~
krschultz
Your own link says that Parascript is now headquartered in Boulder, Colorado,
USA.

~~~
ajays
Parascript was a Russian company, but they moved en masse to Boulder in 1994
(IIRC). They are (were?) a group of very smart engineers, very strong in DSP.

