The video talk about Russian military handing out Million dollar contracts to companies registered weeks before the tender.

Well, guess what, the exact same thing happened in UK for PPE contracts:

"Within weeks of the company’s incorporation on 12 May 2020, PPE Medpro was awarded contracts worth £203m to supply millions of masks and gowns."

https://www.theguardian.com/politics/2022/jan/07/michelle-mo...

It's actually kind of disturbing how there are basically only a handful of countries on the planet without systematic corruption. Maybe there are none. Perhaps it's a human trait.

Some types corruption are worse than others.

With the typical Western "overpay for a modern tank/gun/piece of equipment by a factor of 2" style you still get a modern tank/gun/piece of equipment in the end.

From what I heard, for example, in Russia you do that but then the quartermaster goes and sells half of your equipment off on the black market and the grunts sell off the other half and replace it with something much inferior.

The first kind of corruption is bad and should be rooted out, but the second type is much more destructive as can be seen in Ukraine right now. Secrecy at all levels and for minor details, as well as "encouragement" from the highest levels of politics for this kind of theft are core ingredients.

> With the typical Western "overpay for a modern tank/gun/piece of equipment by a factor of 2" style you still get a modern tank/gun/piece of equipment in the end.

Many studies have been done and this isn't really a thing. The government isn't paying 2x (or 100-1000x as is often the rumor) for a given thing. What they're paying is the price of certification and guarantees. If the law requires that a procured item be guaranteed to NOT catch fire in an oxygen-rich environment (because it could be used in space) then the price of that product--no matter how seemingly mundane--is going to be more expensive than if you "just bought it from the store". Because someone had to setup a complicated bureaucracy and certification testing process to cover that product and actually carry out the testing.

There's also product availability guarantees that add to the price of government-procured things: A lot of stuff the government buys must continue to be manufactured for the effective life of the product in the government. This means that companies supplying stuff need to stock and maintain replacement parts for lifespans that would normally be vastly longer that a typical product cycle. They may even need to keep people trained at making and repairing these goods. That costs a lot of money!

If you're looking for corruption in Western governments it's in the form of paying political campaigns (or entire parties) to get specific laws passed or not passed. That's the big one that causes basically all the major problems in Western politics.

To a lesser extent there's also corruption involving decision-making bureaucrats getting hired by the industries they regulated after their time in office is over (this should be illegal) and politicians with insider information trading stocks. Taking direct bribes also does happen but it's rare because it's too easy to get caught and the consequences are high (high risk, low reward most of the time).

If you look at the required operating range (temperature and humidity) for most mudane item sold to the US military... it is INSANE. Plus, the amount of "QA" done on the final product ensures very low failure rates. All of this costs a LOT of money. I see the same issue with nuclear power plants built in highly industrialised countries with strong environmental protection laws.

100%, I’m originally from a really corrupt country. They steal the money, and then still refuse to do the work. Result: no money, nothing works.

Here in the West, there is much less corruption to begin with, but the work gets done for the most part. Result: things work

I would go as far as to say that a little bit of corruption is healthy. It adds flexibility.

For example: you don't want to register your neighbor's daughter for taxes just so that she can babysit your child once or twice. That is crazytalk. And yes, a lot of countries make sure that small payments don't require registration or taxes. This was just a quick example to make the point, sometimes the general law is just not applicable to a local event and it is better that everyone ignores it.

But this is like cholesterol. The right amount in your body makes everything better. Too much and you are in deep trouble.

Well for small payments we need a simple tax box, no country is doing that, all countries require a ton of paperwork for each new “employee”.

The problem is that the revenue leakage for babysitters and other under the table services is lower than the scaled grifts that an “easy box” would generate.

Why not just have one payment system to rule them all run by the government that is required by law for all payment of employee-driven services? Businesses could save a TON of money on payroll systems and HR.

A government-run system--presumably--would take care of withholding the correct amount of taxes and also making sure the business/person paying a salary never has to worry about running afoul of the law (having the IRS or equivalent) come after them.

In France there are more than a hundred mandatory numbers on the paysheet. Each class of worker has its own retirement/health/subhealth/old-age-health/unemployment/family benefits. Each has a different rate.

I realise that you are making an off the cuff example, and I agree with your basic point. However, in the places I have lived, the babysitter would be an independent contractor and thus responsible for her own taxes. Moreover, it is unlikely that she would be making enough money to exceed the personal exemption, and therefore, it is unlikely that she would owe taxes anyway. An argument could be made that she should collect and remit sales tax or VAT where applicable, but again, there are usually thresholds below which there is no obligation.

My point is that well run, non-corrupt, systems tend to have exemptions to make everything sane and reasonable. If these exemptions don't exist, you can believe that it is because the system is corrupt and not because they are trying to stop corruption.

> I would go as far as to say...

In the UK, it wasn't corruption. These people were paid money for products, they delivered those products, the price paid wasn't excessive.

The UK has an independent auditor that found no evidence of corruption, and that (where product was delivered incorrectly) it was due to problems with contract specs.

Afaik, there is only one case where a person was directly involved in politics and was related to a vendor, they went to great lengths to hide their connection to a vendor, repeatedly lied to civil servants who questioned them, and is now being charged criminally (for some reason, the person who made the original comment about the UK chose not to mention it, it was PPE Medpro).

The issue was that at the start of Covid, the govt called up all their suppliers asked for PPE, and they said they didn't have any. So the govt started using suppliers who often had other businesses that imported product from China (and had to set up new companies). The level of profit on the contract was normal, the price was higher but that was related to the pandemic (how quickly forgotten, in the UK there was literally no PPE for most of 2020, you couldn't buy masks at any price).

So the flexibility already exists...the UK is not corrupt, things happen naturally. Corruption is only necessary where there are supply-side bottlenecks due to politics (i.e. Qatar, Russia, India).

I think your argument boils down to don't assign to corruption what could more easily be assigned to incompetence.

Which I think is a fair point but does raise some questions about the competency of the civil servants and politicians we trust with a fairly large chunk of our income.

Yes, I think we should do that (there are massive issues with both the civil service and civil service procurement, Scotland has significant issues here...these are probably bigger than with politicians) but we have a system with robust checks and balances (for example, ministers don't make procurement decisions...if a firm was fast-tracked, they delivered something...that doesn't mean there were no issues, but ministers aren't writing cheques to people).

How does this rule work when people are both currupt and incompetent, life is the case with the Russian military? On the rare occasion anyone competent is involved, incompetence can be feigned.

Private Eye has covered this. The level of profit was not normal. Some of the companies were making 50%. And the government had two lists of companies when they were awarding contracts. The priority list was for the acquaintances of ministers and MPs.

It smells very bad.

50% what? And Private Eye has also covered the NAO report, which found no evidence of this, and the GLP court case which attempted to prove the price paid was excessive and failed to do so.

No, the priority list wasn't. To approve a vendor through the normal process would have taken years, the fast track process was created to get PPE quicker than normal. I believe all but one person was unrelated to the Tories, the only person who wasn't (as I have said) repeatedly lied about their connection to the vendor, and is now facing criminal charges.

Seriously? The high court found that the operation of the priority list was unlawful [1]. You can reasonably argue that they needed to move quickly, but that doesn't explain why some companies were getting special treatment.

And the 50% is profit. Obviously.

[1]: https://www.bbc.co.uk/news/uk-59968037

Obviously...profit margin, return on equity, return on capital, return on assets, return on investment, operating margin, gross margin, net margin...to be so ignorant that it is obvious.

The reason they got special treatment was because of the speed. That was what the priority list was for - "establishes that presence on the high priority lane did not confer any advantage at the decision-making stage of the process", what you have linked me is exactly what I was just told you. The award wasn't unlawful, the govt did not report on the detail of the contracts within the time period required...that was unlawful, but a function of the process (again, the contracts were awarded outside the usual process so all the information wasn't gathered...the NAO conducted a full audit of the contracts, iirc, before the contract details were reported in the public database).

What equity? What capital? What assets? What investment? These mostly weren't PPE manufacturers or even PPE suppliers. Often they were little more than drop shippers with a 50% profit margin. It is that simple.

And the fact that companies were treated the same when they were assessed doesn't alter the fact that being assessed sooner rather than later is a massive advantage.

Why are you so hard at work trying to come up with excuses for obvious sleazy dealing?

There are companies that made no upfront investment, ordering equipment from China without any understanding of what they are ordering, any relevant experience, and huge quantities fo PPE had to be destroyed because it was not fit for purpose and did not meet regulatory requirements. Most of the companies contracted had no experiece of dealing with medical equipment ever before. I personally know people who have experience in the industry and government passed them up for contracts in favour of the shitsters that were chosen.

I agree. Look at the map on this page. Plenty of orange and red!

https://en.wikipedia.org/wiki/Corruption_Perceptions_Index

> It's actually kind of disturbing how there are basically only a handful of countries on the planet without systematic corruption. Maybe there are none. Perhaps it's a human trait.

More disturbing (to me) is how easy it is to eliminate corruption in any given area - without any brutality or anything else extraordinary. Just setup the process correctly, incentivize workforce - and the same people who were building roadblocks to milk money will switch to earning money by helping you get your task done.

There was a “widely known in narrow circles” libertarian setup in Troitsk, Russia - of all places. The setup was related to the topic of the original post - registration of businesses. The post-Soviet business registration law was rather liberal. The amount of documents needed was not zero, but doable. But there was a catch - businesses should have been registered locally, and each locality was allowed to add their own requirements on top of federal ones.

You can imagine what followed. Our own city, the I was a counsel member was: just prove to us (“us” in reality means -a clerk) that your business will be useful to the city - and we will register you. But there was a small city named Troitsk, home to some physics scientific institutions, which elected a libertarian mayor, Gennady Lebedev. The city council decided not to ask for any additional documents and just register any business that complied with federal guidelines.

But - any clerk has any good intention in his own hands, right? Mayor said: register everyone? but I am too busy, come tomorrow, and by the way go to… uhm police station, do a background check on yourself for me, I feel a sudden need to be extra cautious in your case. Why not? Seen it everywhere, like you’ve said.

Here comes handy a proper construction of checks and balances:

1. Salary for registration office clerks was paid from a percentage of the (federally fixed) registration fee, nothing else, no safety cushion. If you delay an application- your salary will be delayed too. In the starving Russia that percentage created a - potentially - extremely well paying job.

2. The clerk will be fired if he asked - not just for any unnecessary documents, but just for asking any legally unnecessary question.

3. The clerk will be also fired if he accepts a registration that does not confirm to federal guidelines.

So clerks have the incentive to work fast, help people correct their documents to comply with the federal law and the opportunity for any additional “milking” was too risky and simply not worth it. In short time - small Troitsk had more businesses registered than any other small city in Russia, and comparable to Moscow. Imagine a tax base they’ve got?

First-hand account by Gennadi himself here (in Russian): http://www.sapov.ru/g_v_lebedev/texts/gvl1992_12_troitsk01.h...

>2. The clerk will be fired if he asked - not just for any unnecessary documents, but just for asking any legally unnecessary question.

>3. The clerk will be also fired if he accepts a registration that does not confirm to federal guidelines.

Fired by whom? Who is in charge of checking this? How do you ensure that the clerk isn't just accepting false businesses and giving a percentage to whoever's above? On its face this system doesn't seem to cure a culture of corruption to me

you can audit a small number and know. sure the clerk can risk one, but statistically they are caught with enough.

By "you" you mean a regular Russian citizen? Who is in charge of the clerks under this system, and what ensures that they aren't as corrupt as before?

I mean the mayor. You can also hire independent auditors. As a person just keep electing mayors unrelated to the last and hope they expose each other.

> How do you ensure that the clerk isn't just accepting false businesses and giving a percentage to whoever's above?

What do you mean by a “false business”? Here in the US they have not asked me anything except Articles of Incorporation (and $800 a year). Federal regulations in Russia required much more paperwork. But the libertarian city council in Troitsk just deliberately didn’t care to add anything to the pile. Bad documents - it was actually a problem for the business being registered. If federal regulators caught a discrepancy- the business will be in a huge trouble. So checking the documents- it was nothing more than a service provided by a city council to the company being registered. If the documents were inconsistent - the business will complain.

This setup really worked, as I said in the original post. It’s not a theoretical suggestion.

It is not a human trait. It is a property of money. Interest is a bribe to keep money in circulation. There is an incentive to pass this bribe onto someone else. Why is it a property of money? Because money has a liquidity premium versus any other asset and no holding costs. It is rational to ask to be compensated for giving up this liquidity for the face value of money. Money is a payment network that introduces costs for businesses that accept it. Businesses must be close to consumers and open whenever consumers want to spend their money. They must also have a variety of uniform products and if it has to store them it will have to pay for storage costs. Think about it like being an on call employee. You must be ready to respond at any moment and this flexibility is worth a certain amount of money.

Now, you could call the national money system to be a public service provided by the government (and indirectly by private businesses).

If you were to issue your own money what would it's liquidity premium be? It would be very low to be sure because barely anyone accepts it.

So, the holders of money effectively own a free subscription to this public service. If they lend out money, they will obviously charge a fee in proportion to the liquidity premium. This fee is included in the interest rate.

The borrower is now paying for the liquidity premium, the cost has been fully internalized and the problem is gone right?

The problem is that the liquidity premium that is part of the interest rate is erroneously calculated as the cost of capital. It is not, it is the cost of liquidity.

Now, things will get very strange. When the borrower spends his money, he will be obligated to pay the subscription fee, the cost of liquidity, even though he no longer has the money and he is no longer benefiting from the liquidity services. What this means is that the money system constantly screws over people who use money as a medium of exchange and rewards those who sabotage it. It will look as if those who "save" money will be rewarded for their frugality and "moral" behaviour and those who are in debt are being rightly punished for their unsustainable and and "sinful" behaviour.

Now imagine if private households all follow this strategy of selling more than they buy and saving and lending the rest. There must be another sector that earns less than they spend and accumulates debt though borrowing. The government is forced to avoid austerity at all costs. It must become the "immoral sinner" that spends in excess to shield the private sector.

If you want to solve the problem you would have to make buying and lending symmetric. Lending passes the cost of liquidity onto someone else which is in theory ok but only if buying also passes the cost of liquidity onto the seller so that no liquidity premium accrues to the lender. He will pay a liquidity premium and earn liquidity premium which then zeroes. The only one who then collects the liquidity premium is the central bank that issues the money.

The problem with this is that the interest rate on cash would be negative and paper technology isn't advanced enough to calculate and display a dynamically changing face value. It isn't some conspiracy by a cabal, it is actually an engineering problem that originates from our historical and cultural attachment to cash. Humans aren't evil bribe collecting monsters, they are just in a rationality trap that is difficult to escape.

> I am not really sure how you are supposed to stop corruption once it gets rooted in your society.

Well, assuming that all people are roughly the same as each other, the answer would be to adopt traditions and systems from countries that aren't corrupt. Attempt the sisyphean task of convincing people that giving power to the middle class is going to lead to a better future.

As your comment reveals, the instinct when confronted with corruption is ... centralise power and try to force it to be used for good. That doesn't work, so try to convince people to decentralise power. Political and bureaucratic elites are regularly revealed to be corrupt, so stop making them the bottleneck for handing out the "allowed to run a business!" stamp. Centralising power just gives corrupt people a target to aim for and increases the blast radius when they worm their way in to a position.

How you convince people to do the sensible thing and decentralise power is beyond me though. The instinct to push power to a single leader is remarkably strong in humans.

incredibly naive answer from someone who probably haven't lived in a corrupt country and deal with the process on a daily basis.

But the parent comment is right.

The knee jerk reaction against corruption is to centralize power: "X institutions are corrupt, we will give more power to this candidate who demonstrated to be a good person, so he will vanish those institutions and saves us fron corruption".

That's what Bolsonaro did in Brazil. In his campaign, he demonstrated to be a good christian and a person of faith. In Brazil, people strongly associate that with being a good person.

Guess what happened after.

> That's what Bolsonaro did in Brazil. In his campaign, he demonstrated to be a good christian and a person of faith. In Brazil, people strongly associate that with being a good person.

Wasn't Bolsonaro elected because the previous president and his main opponent (Lula?) was so corrupt that he even landed in jail, which is a rare event for a prominent politician?

> Guess what happened after.

Care to explain to non Brazilians?

In a nutshell, he decided that streamlining things by eliminating courts and elections would help him achieve his vision.

Ah, a good king! The ever-popular fairy-tale character.

I don't know if Lula committed corruption, but he apparently wasn't more corrupt than the judge who tried him, who became Bolsonaro's Minister of Justice. All the charges were dismissed eventually because of court bias. https://en.wikipedia.org/wiki/Luiz_Inácio_Lula_da_Silva

Thanks for the info. I don't follow Brazilian politics, but somehow the picture of a corrupt ex-president going to jail persisted in my head, since that was the news we were getting here back in the time.

I couldn't understand why our news in Germany was pretending that a guy convinced of corruption would be a saviour of Brazil against the evil Bolsonaro.

That highlights one of the main problems in our societies. We just accept information served to us by our governments without much checking. Either because we don't care about every topic, or because we don't have a means to actually check.

When the baseline of corruption is high enough and those who judge you are equally or more corrupt, convictions for "corruption" are a weapon from those who do not want a specific someone on the government rather than real intention of reducing corruption.

Simplifying, it's like this: If the road to presidency is corrupt, you either become also corrupt (on a varying degree) or stay as one of those parties with no more than 1% of the votes. But then, there's a pact of silence between cronies. And those who are accused of corruption are the ones that either went too far or went against powerful people in the government.

I take all those trials with a grain of salt.

This reminds me of why I hate when government agencies excuse an overly broad rule by saying they "won't prioritize enforcement" against favored/minor actors. Eg [1].

[1] https://www.axios.com/2022/09/13/us-treasury-department-torn...

Lula was condemned in 3 different courts. Not unanimously because the higher court judges disagreed about increasing his sentence by a small amount or a lrge amount.

Al the cases were dismissed because a new law was passed that created a new court and said every case like Lula's should be judged only on that new court.

I am a fan of the Singapore anti-corruption method of paying bureaucrats a lot of money. That way they don't have to have corruption side hustles and you can attract good talent to these positions. Somehow this is more unpopular than widespread political corruption.

I'd be sceptical given just how greedy corrupt bureaucrats can be.

There's not much to stop a crook being both officially well paid and totally corrupt.

Yes, but the position will be taken by a honest guy already.

Why?

Ah, you have a good heart to give them the benefit of the doubt but remember these aphorisms:

A fish rots from the head down.

and

Power corrupts and absolute power corrupts absolutely.

and

Nothing disinfects better than sun light.

IMHO they all apply when dealing with public servants in unchecked positions of power.

According to transparency international, Singapore is one of the least corrupt countries on earth. If a politician could make several million dollars a year just from his job, you could attract major corporation CEO caliber people. Otherwise, why would a highly talented person want to deal with untangling that mess?

This is the very famous in economics theory of Becker and Stigler. The high pay isn't so that they don't need side hustles, it is to make the (small) chance of being discovered and losing their job painful. You pay much above market wages, people will not risk losing their job.

Is it true? Well, maybe. From Van Rijckeghem and Weder (2001):

> ... we find evidence of a statistically and economically significant relationship between relative wages and corruption.... While economically significant, the relationship, nevertheless, implies that a large increase in wages is required to eradicate corruption solely by raising wages... The relationship between wages and corruption is not found in regressions with country-fixed effects which points to ineffectual wage policy in the short run...

I haven't found much better evidence than that, though there is Di Tella & Schargrodsky (2004) with a detailed study on a hospital.

It feels similar to the sometimes unintended consequence of having more legislation only serving to entrench the incumbents by making it hard for new players to enter. In a couple of African countries I am familiar with it is the same story. An endless series of papers and stamps and signatures that are supposed to stop corruption but really just serve as an opportunity to be corrupt. I am so paranoid now of not having the right paper I tend to store all papers issued by a government official.

This is a popular misconception. Paperwork is basically created as part of job being done by the government employee. This employee is hired due to connections and the paperwork created to justify the job. The pointlessness makes people exert the tiniest amount of power they have, like reddit mods. The monetary corruption is more related to salary which is related to well being of economy.

For example, during British Raj almost any British who could, got a job to move these papers in India. India inherited that machinery and hasn't moved to economical right yet. The current government is trying but you can read how it is a bad government in western media since it came to power. The corruption in government allows foreign interference so of course.

- unhappy Indian

Raj era ICS was much smaller, Congress and Nehru created a lot of the bureaucracy

Do you have any stuff I could read up on this?

You are, I am sorry to say, mistaken. The Raj era was huge. There is very old article (https://www.theatlantic.com/magazine/archive/1908/10/the-new...).

<blockquote>But the government is as complete a bureaucracy as that of Russia.</blockquote>

The British Raj kept creating more and more bureaucracy paid for taxes exacted by causing famines, increasing in frequency and intensity. This system was inherited by Nehru and Congress. They were socialists so they increased bureaucracy but they didn't increase corruption - independent India has not seen a famine caused by taxes even in the direst of times.

Perun has been making some of the best videos on Youtube since the start of the Ukraine invasion. Mostly on how military procurement works. It sounds like a dull topic, but when you start to understand the intricacies and the stakes involves it becomes fascinating. Absolutely recommend this channel.

@loudmax wasn't totally clear, but I understood what he was pointing to: Perun made a video about how corruption can destroy military procurement. And, possibly, why the Russians are doing so poorly in Ukraine. It was a terrific powerpoint slide video.

It is funny because it is the exact opposite of what you should do if you want to stop corruption.

Deregulation is the best cure for corruption, because it makes the gatekeepers obsolete. There would be no reason to bribe them because you don't need their approval in the first place.

The podcast "The Rest Is Politics" did an interesting interview with the Prime Minister of Albania recently, where he made the argument that the best way to deal with corruption is to get rid of the paperwork altogether, and basically make government services so easy to access that corruption and bribery wasn't necessary in the first place. So he'd been putting a lot of work into digitising as much as possible, making corruption effectively much more difficult, but also much less necessary in the first place.

This sort of thinking also prevents some kinds of scams. For instance there are web sites that masquerade as British government sites for paying road tax/vehicle tax and charge fees that the official site does not. Similar sites scam people out of money for making ESTA visa applications to visit the US

In Norway this road fund fee is collected automatically by the insurance company. This is obviously easier for the user (zero paperwork), less work for the state, and prevents scam artists from duping people.

And back on the subject of registering a company: in Norway this is done online and takes minutes.

Prescribed, not proscribed