Transition  Crime   

BULGARIA'S RED MAFIA

by MIKE NACHSHEN

Since the collapse of Communism, living conditions in Bulgaria have gone from bad to worse for the average Bulgarian. However, a small segment of the Bulgarian society has prospered from the resulting chaos.

These people, commonly known as the "Red Mafia," were the ruling elite during the Communist era. " Although the name "Mafia" implies that they are organized like the American Mafia, they aren't. "Red Mafia" is a commonly used term which encompasses all the corrupt politicians, former secret policemen, and factory managers who use their position for personal profit. They "have built fortunes by shamelessly stealing state property and making illegal deals on a grand scale."[1]

One method the Red Mafia uses to make money is to sell raw materials to state owned enterprises at high prices. They then buy the finished product cheaply, and sell it or export it at a high price. [2] Managers of state-owned enterprises managers will cut side deals with each other in order to sell high and buy low.

For example, the manager of a steel plant will agree to sell raw materials at a low cost to the manager of a company which makes cooking utensils. The manager of the cooking-ware plant tells the government he bought the steel at market cost. He then sells the finished goods at the market price. He and the manager of the steel plant then pocket the difference, and the government foots the bill. If there is a problem with a government investigator, they just bribe him.

Another way the Red Mafia makes a quick and easy profit is by funneling all the assets of the enterprise they manage into another company, and the buying that company cheaply. [3]

A third method used is to simply bribe government officials into "investing" government funds into their corporations. This keeps their enterprise afloat, and "in the black," so to speak. [4]

Although the last of these two methods of making money are unethical, they are not illegal. They fall into a "gray area," so to speak. No laws regulating this sort of conduct are in existence, so the Red Mafia operates without fear of prosecution. However, even in the first case, which is illegal, government officials are so corrupt that if they aren't directly involved in the process, they can be bought off. The few honest government officials are outnumbered and outranked by the crooked ones.

One result of the inherently corrupt system is that Bulgaria is the new "money-laundering capital of post-communist Europe." [5] This wild-west scenario has led to an influx of drug money. With drug money comes drugs. Bulgaria is rapidly becoming a distribution point for drugs throughout Europe.[6] The Red Mafia, although not necessarily participating in the distribution of drugs, helps smugglers by allowing them to operate with impunity.

One of the reasons the Red Mafia flourishes is because of Bulgaria's slow transition. Bulgaria has used the gradualist approach. The transition was and is chaotic, and the Red Mafia are merely taking advantage of the confusing situation.

Two things could have been done to lessen the power of the Red Mafia. The first was to speed up the transition, especially the privatization aspect of it. If the state-owned enterprises had been privatized more rapidly, the Red Mafia would have been robbed of a large power base. The other thing which should have been done was to pass tough laws against the sort of schemes which I discussed above, and to enforce it. If the Red Mafia knew that they ran the risk of being prosecuted for their crimes, many crooks would have thought twice.

Prospects for the future of Bulgaria are bleak. The newly elected Socialist government, which claims it is committed to reform, doesn't act like it is. They are only privatizing 500 large enterprises[7], and they aren't passing or enforcing anti-corruption laws. For the time being, it seems like Bulgaria's Red Mafia will retain it's hold on power.

  • [1] Stieger, Cyrill "Bulgaria's Balkan Woes." Swiss review of World Affairs, 2 AUG 94

  • [2] Staff "Bulgaria." The Chicago Tribune, 10 OCT 94

  • [3] ibid

  • [4] ibid

  • [5] ibid

  • [6] Hulnick, Arthur S., Professor of International Relation at Boston University, former CIA. "Lecture on 7 NOV 94." IR378 class

  • [7] Tsekova, Tanya "Parliament adopts privatization bills" BBC summary of world broadcasts, 16 JUN 94

ALL SOURCES, EXCEPT FOR #7, ARE AVAILABLE THROUGH NEXIS BY TYPING "BULGARIA AND PRIVATIZATION" AT THE PROMPT.

 

 

OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:

http://econc10.bu.edu/GENEC/Default.htm

Economic Systems:  

http://econc10.bu.edu/economic_systems/economics_system_frame.htm

Money and Banking:

http://econc10.bu.edu/Ec341_money/ec341_frame.htm

Past students:

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

Czech Republic

http://econc10.bu.edu/Czech_rep/czech_rep.htm

Kyn’s Publications

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

 American education

http://econc10.bu.edu/DECAMEDU/Decline/decline.htm

free hit counters
Nutrisystem Diet Coupons