Barsukova S.
Mechanism of “Political Investment” of Russian Business
The purpose of my talk today is to demonstrate that, apart from the
process of buying administrative services (corruption), there is also a process
of “political investment” whereby business uses shadow resources to buy a
position in a state institution.
We will consider two options for “political investment” – the funding of
election campaigns and the sponsoring of political parties.
The amount of “black cash” used in election campaign is normally
evaluated as the difference between the campaign’s real budget and its part
officially contributed to the election fund. According to the expert estimates,
election campaigns require a relatively small amount of official money – an
average of 30 to 50 % of the real budget.
But it would be a mistake to think that officially contributed funds are
separated from the shadow economy. The amount of the shadow money
involved in the electoral process is much bigger because there are many
methods for involve of “black money” to official budget.
Shadow funds
legal funds
Election campaign’s real budget
Campaign’s official budget (election
fund)
Contributions by Amounts
physical persons
transferred
from
accounts of legal
entities
Shadow funds
legal funds
Fig. 1. The ratio of shadow and legal finances used in the election campaigns of singlemandate deputies (the topmost brackets show the legal state of affairs, the bottom ones
demonstrate the real state).
There are three types of contribution to official budget of election
campaign:
- contributions by physical persons;
- money transferred from the accounts of legal firms;
- contributions from the party.
Contributions coming from physical persons almost entirely (99%)
present the “black” part of the election fund. As a rule, party activists and the
candidate’s inner circle are used for transferring shadow money to official
budget of election campaign as their personal (private) gift.
According to the money transferred from the accounts of legal firms,
very often interested persons who nevertheless prefer to remain in the shadow
give cash to the heads or owners of the organization whish has agreed to act as
official sponsor of the campaign and which transfers stipulated amount to the
election fund. Of course, shadow cash turned into respectable “noncash”
through various conversion mechanisms.
The main question is why political investors do not contribute money to
an election fund in a legal manner without such complicated schemes. First of
all due to these schemes it is very difficult to find the source of financing
political projects. Political investor may not want to be formally involved in
the political process.
Second, such transformations make it possible to save significant
amounts of money. Because profit after tax is legally supplied for electoral
purposes, but the schemes of conversion of shadow money is more cheaper.
“The party of power” is interested in such schemes least of all: it can use
its administrative resource to order enterprises to transfer legal funds (profit
after tax) to its election fund. In all other cases money provided by political
investors has shadow nature.
Contractor (campaign
leader)
cash
Political investor
(sponsor)
order
cash
cash
cash
noncash
Unofficial payments
(«black accounting»)
Conversion to
noncash scheme
Subordinate
structures
noncash
Campaign election fund
Fig. 2. Mechanism mobilizing funds for election campaigns of «independent» candidates
However, political activity between elections too requires quite
substantial funds. In accordance with the law, party budgets are made up of
private contributions, contributions by firms and membership fees. And we
have official reports of parties about their expenditures. We asked experts to
give their evaluations of the cost of party life. And these estimates make it
possible to state that the real budgets of the parties are much bigger than
official reports. The differences between real and official party budgets is
covered by “donations” from the shadow economy.
The conclusion focuses there is an inseparable link between the shadow
economy and shadow politics in present-day Russia. They reproduce each
other. Economic agents turn politics into shadow politics by buying posts in
the power hierarchy, supporting loyalists at elections and financing political
parties. For its part, politics creates a shadow economy by using it as a
financial source of political projects. It is not that the shadow economy merges
with shadow politics as two negative but autonomous phenomena. Rather they
are mutually conditioned. In Russia the shadow economy and shadow politics
do not exist separately; they represent two sides of the single process of
restoring the power hierarchy as the main principle of apportioning economic
opportunities.