Transition  Crime   

CRIME in Transition  of Russia

THE RUSSIAN MAFIA by James M. Tita

THE RUSSIAN HOCKEY FEDERATION  by  Brian Proctor

Crime as an Obstacle to Liberalization By BYUNG-WOO KIM

Mafia: Russia’s  First capitalists By Hong-Gee Kim  

THE RUSSIAN MAFIA

by James M. Tita

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The fall of the former Soviet Union has brought about sweeping changes throughout Eastern Europe. The effect of these changes was a policy shift from socialism toward the Western style free market economy. Transition has been very difficult for many countries, however, they have been able to overcome obstacles and are on their way toward free market economy.

This is not the case with Russia. The Russian mafia's criminal activities have undermined all attempts in moving forward. This is unprecedented among all the former Eastern Bloc countries. Why is it happening only in Russia? For centuries smugglers and thieves had dominated the Russian economy.

Under the tsarist governments, these gangs were a symbol of revolt against the oppression of the state. Later these gangs were used as a model for the formation of the Bolshevik Party under Lenin. Stalin went one step further, he surrounded himself with the gang leaders, incorporated them into his secret police, and institutionalizing the mafia in the government. This became especially important from the 1960's till the fall of the Soviet Union. The mafia gained control of the black markets. They had considerable influence over the production, consumption and trade of many goods. With this new control the mafia was centralized into a large organization which worked together with government officials to run the economy. The final push that strengthened this organization was Perestroika. Perestroika allowed the mafia to gain control of capital markets (through banks and stock markets) thus creating a dependent relationship between the mafia and the economy. The mafia was able to gain financial control of all facets of the Russian economy.

When the Soviet Union collapsed "the only institution to benefit was the mafia". The mafia basically controlled all of Russia's resources. Smuggling, the mafia's number one source of income, flourished. Large amounts of wealth were generated through this illegal trade. The mafia began investing in real estate, privatization vouchers, and financial institutions. That further increased the already vast influence of the mafia. The Russian Ministry of Internal Affairs has estimated that organized crime had control of more than 40% of goods and services in the economy. These figures have prompted Boris Yeltsin to publicly claim "the Russian mafia has acquired such scale and character that it threatens the future of the Russian state". Even though the strength of the mafia has been openly acknowledged, the political leaders seem unable to curb it.

After the fall of the Soviet Union, Russia began a rush towards capitalism with the hope that it will fix all that was wrong. The desire for free markets was so overwhelming that there was no concern for social welfare. Being blinded by free markets, officials did not realize the need for laws and their enforcement. For example, there is no contract law, no bankruptcy law, no laws preventing white collar crimes, no means of checking fraudulent firms, or bank accounts. Without such laws the mafia is able operate undisturbed and grow in leaps and bounds. Enforcement is also a major weakness in combating the mafia. The police is combating these giants with sticks and stones. The lack of funding and a failure of the judiciary system makes it unable to control the mafia The speed of mafia's growth can be seen from the reported 2.7 million crimes in 1993, which is a 33% increase over 1991.

The most detrimental economic effect of the mafia is that it prevents entrepreneurs from entering the free market. Competition makes the market function. By forcing entrepreneurs to pay for protection and sometimes driving them out of business the mafia restricts free entry and consequently competition. An example that comes to mind is that of a friend of mine, who lived in Moscow, started a cigarette business, and was able to accumulate a small wealth. One day the mafia gave him two options. Either give up your business and all your earnings and pay damages to the mafia or lose your life. Obviously he choose the first and fled the country. This type of behavior creates an atmosphere of fear impeding transition to a free market economy.

Russian government has started to take hard steps to combat the mafia. One method is to slow down reforms and give government power to regulate. But that would lead to a regulated instead of free market. Another approach has been to look to the West for more assistance. Previously the Western countries have not recognized the power of the Russian mafia. After the uranium smugglers, who had connections to the mafia, were caught this summer a new anti-mafia campaign has spread among many West European countries. To help Russia with its problems the West must focus not on cutting Russia's international debt but rather on helping to restructure the Russian economy from the scratch. It is needed to help create a functioning banking, commercial, judicial and regulatory systems. This would ultimately strengthen the Russian economy and allow Russia to contain the mafia's influence and to take care of it's international debt and.

In creating stability in the Russian economy, the Western world is not just helping Russia but also the rest of Eastern Europe. Even though Russia's influence over the Eastern Bloc has severely diminished, it is still the largest country with the largest economy in Eastern Europe. By stabilizing Russia and minimizing the mafia's power more stability will be brought to the region as a whole. Even though such countries as the Czech Republic, Poland, Slovakia, and "Eastern Germany" seem to be secure and are on the proper path toward free markets, some countries like Hungary, Romania, Armenia, and the states of the former Yugoslavia are still unstable. The Russian mafia can potential gain substantial influence in these unstable economies. That would undermine the move toward free markets, the major goal of these countries, and allow the Russian mafia to feed of the existing economic misdirection.

Even though the Russian mafia has become a driving force preventing Russia's transition towards a market economy, Western countries must take an active stance to prevent any further growth into Eastern Europe and at the same time destroy the networks and influence that the mafia has gained in Russia. In doing so stability and growth will flourish, allowing smoother transition to a market economy, ultimately generating faith and security for Russia's citizens. That will be beneficial to all European countries, but most importantly to those in transition.

  • Handleman, Stephan. "The Russian Mafiya", Foreign Affairs, March 1994.

  • Trimble, Jeff. "Nuclear Mafia", U.S. News & World Report, June 1994.

  • Stanglin, Douglas. "The Wreck of Russia", U.S. News & World Reports, December 1992.

  • I also used personal knowledge acquired through Russian friends of mine.

THE RUSSIAN HOCKEY FEDERATION

by  Brian Proctor

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Throughout history, tariff-free/ duty-free zones have been  an  extremely useful economic device in aiding the acquisition of foreign capital and technology. A good example of this is when the Taiwanese government established “EPZ” zones during their rebuilding period in the nineteen sixties. These special tariff-free/ duty free zones helped create an influx of foreign capital that  in turn helped Taiwan to transform its economy from light to heavy manufacturing. These zones were extremely valuable towards technological innovation through advances in research and development. The zones also allowed for a rapid diffusion of technology. In Taiwan’s case, these zones were established in remote areas of the country and the importing consisted of heavy capital and technology intense goods. The goods were imported for the sole purpose of spurring innovation and  heavy mechanization. The Taiwanese case demonstrated the immense power that tax exemption yields.

When the Soviet Union collapsed, the economy was in utter turmoil. The government no longer had the means to finance social institutions, and all funding for sports had virtually dried up. The future of Russian sports was in jeopardy. In an attempt to salvage Russian professional sports, the government granted a few franchises an import tax free status. It was believed that this status would allow the clubs to acquire the financing that they desperately needed, but the government did not realize the degree of capital accumulating power that they had just granted.  In the case of the Russian Hockey Federation, the tax free importing of goods did not take place in a remote portion of the country, instead the importing was able to take place directly in Moscow. Unlike Taiwan , the degree of goods that the Russian Hockey Federation could import was not limited, nor was it checked by the Russian government. Under the new system, the federation could import any number of goods at an unparalleled price, because there was no tax imposed on their importing of goods. This would allow the federation to gain an absolute cost advantage over their competition. If this system was allowed to go unchecked, the Russian Hockey Federation could seemingly gain one hundred percent of the market share on the importing of goods.

 I will now attempt to explain how this absolute monopoly could affect the economy. Chicago-school economists would agree that this extremely concentrated industry  could gain excess profits resulting from their sizable market share. These excess profits would serve only to attract market entry. New entry into the market would, in turn, drive down prices, increase competition, and decrease the degree of concentration in this specific industry. In the federation’s case,  there was an effective entry barrier that kept competition out, because the tax free status was only granted to a few firms. This new system created a legal monopoly that could exercise an absolute cost advantage. Reports in Moscow have stated that the hockey federation imported 4.2 million dollars worth of tobacco and twenty million dollars worth of liquor. The Russian Hockey Federation did not attract entry from other firms, but unfortunately it did attract the attention of organized crime.  

Although the Russian Hockey Federation was exploiting a government loophole, engaging in anti-competitive business, and stealing tax revenue from the government, it was a legitimate business, and an example of personal entrepreneurial benefits. It is unfortunate that personal entrepreneurialship, something that is desperately needed in reviving the Russian economy,  attracts organized crime and makes the entrepeneurial aspect unfavorable and dangerous. The second portion of this paper documents the severity of organized penetration into the Russian Hockey Federation.

 “Sport is not the most criminal area of life in modern Russia,” Ogonyuk magazine concluded. “But it reflects many of our countries present troubles in a deformed, concentrated way”.  Boasting eight Olympic hockey gold medals, the Russians were once the premier force on ice, a team rich in pride and tradition. Then came the break up of the Soviet Union which ushered in a wave of organized crime. The collapse of the Soviet Union marked the end of Russian dominance on the ice. This was not completely due to the fact that  the talented  Russian hockey players were now dispersed throughout the new independent states; Russia still boasted some of the best talent in ice hockey. What ultimately ruined Russian hockey was the infiltration of organized crime, which led to political feuding, the extortion of Russian NHL players, kidnappings of the families of hockey players, and the murders of top Russian hockey officials. Antrei Trefilov, a goalie for the Russian team and the Chicago Blackhawks, stated, “It was so bad, so bad.” In fact, it is estimated that eighty percent of Russian hockey players living in the West without their families are subject to make regular payments to the Russian mafia.  Countless athletes have become the victims of these gangland killings. Trained muscle men (boxers, wrestlers, and martial arts fighters) had their skills utilized by the mob in protection rackets, and because of this, the names of these men are prominent in Russian Obituaries.

On the date of April twenty-second, nineteen ninety-seven, Valentin Sych, the president of the Russian Ice Hockey Federation, was murdered while on his way to work It is believed that this murder was a contract killing. In Moscow, His car was sprayed with automatic gun fire from a passing vehicle in a gangland murder. Sych’s wife, who was traveling with him was wounded in the shooting. At the time, Sych was the third most influential man in the Russian sports hierarchy; he had been a fixture of Russian hockey since the early nineteen seventies. The murder happened during a time when Sych was preparing his Russian team for the nineteen ninety-eight winter Olympics in Helsinki. The winter games were supposed to have been the Russians’ symbolic stand to recapture the good times.

 Upon the event of Sych’s murder it seemed as if hockey in the former Soviet Union had hit rock bottom in it’s battle with organized crime. Just two weeks before the start of the Nagono Games, the president of the Moscow regional ice hockey federation was nearly kidnapped. Sports groups, including the Russian Hockey Federation, and other organizations were given special tax breaks. In 1993, the Russian Ice Hockey Federation was given tax-free import and export status by the government in an attempt to finance the organization because the government funding had dried up. These tax breaks became an attractive money maker for the Russian Mafia. The Mafia soon had taken over the federation and it used the federation to import items like tax free tobacco and liquor. Reports in Moscow have stated that the hockey federation imported 4.2 million dollars worth of tobacco and twenty million dollars worth of liquor. Organizations given the tax free import breaks soon became the prime targets of organized crime, because these organizations could be used in laundering money. Sych had ruthlessly exploited the tax breaks, which allowed his sports team to import duty free goods. Sych had turned the national hockey federation into a multi- million dollar importing business second only to the Kremlin’s own National Sports Fund. Russian media put the federation’s annual sales in the hundreds of millions.

In 1996, the tax status was revoked because of the organized crime infiltration, not just in hockey, but in all Russian sports. This was  not exactly aimed at ridding the Russian clubs of crime, and the measure did not effectively rid the franchises of crime; the damage had already been done. The crime bosses had their hooks in the clubs and were not about to let go. The measure was passed primarily because of the extreme amount of tax revenue that the government was losing. This prompted the government to close the tax free loop hole.  During the World Cup Hockey tournament,  some NHL players had asked for private security protection when they returned to Russia to prepare for the games. The team was torn apart by strife and politics, not only from external forces, but internally resulting from Russia’s chaotic times.

It is reported that Sych was murdered because he didn’t want to share the profits with certain individuals. Two months before his murder, Sych complained to reporters that Russian criminals were increasingly muscling in on organized sports, in an attempt to draw stars and other individuals into illegal activities. Sych had also claimed that players and managers were pressured into intentionally losing  games and that strong-arm tactics were used to take over sports clubs and organizations. There is evidence that Russian sports clubs had the power to influence the outcomes of matches. There were in fact decades-old speculation about match-fixing, which prompted the Russian league to set up a special panel to investigate corruption. The most striking case was when Dynamo Kiev was tossed from the European Champions’ League for trying to bribe a referee.  Just weeks before his murder, Sych told Reuters of his growing fear of crime that had driven out the country’s best talent. Sych explained, “Our hockey is now so corrupt, I don’t see how we can ever clean it up.”

Sych no longer held the power to reverse the departure of Russia’s hockey stars to North America, nor could he halt the decline in the performance of the national team, which had been unbeatable in the 1980’s. (perhaps this gave rise to the rent seeking)“It is one hundred percent Mafia” - Rene Fasel, president of the International Ice Hockey Federation. Detroit Red Wings’ center Slava Kozlov had remarked, “I knew him. He was a bad guy. He was corrupt. That’s why somebody killed him. It’s not a surprise to me.” Sych and veteran Russian hockey stars, including Slava Fetisov and Igor Larionov, have publicly fought over the years on a variety of issues.  Fetisov has accused Sych of mismanaging transfer fees sent to Russia from NHL teams. Upon Sych’s death Festisov quipped, “I have an alibi, but this is bad news.”

 It is quite possible that Sych quite simply became a patsy and a puppet for Russian organized crime. His passion was hockey; he had been a fixture in Russian sports since the 1970’s, and his record and talent was unsurpassed. Upon exploiting a tax break, Sych had received an enormous amount of money and power. Perhaps since he could not stop the massive exodus of Russia’s players to the west, he simply decided to focus on the revenue generating aspect of the federation. To the very end, Sych battled the organized crime infiltration. One of Sych’s most outspoken enemies was Slava Fetisov. Fetisov’s may have  ulterior motives for his harsh criticism of Sych.

The Red Wings defenseman Slava Fetisov has long-standing ties to a gangster known as “Russia’s John Gotti.” According to an article published in Details magazine. Fetisov helped the gangster Vyacheslav Ivankov, set up a shell company in New York for the sole purpose of laundering money from international criminal operations.  Ivankov used Fetisov to set up this dummy company because Fetisov had a clean name. The company, Slavic inc., still lists Fetisov as the chairman of the board. Despite his name and home address on both the incorporation and dissolution documents, Festisov continues to deny any knowledge of the dummy corporation. Freidman, quoting a confidential FBI  document states that Fetisov succumbed to the pressure of organized crime when he purchased a stolen Volvo in Sweden to bring back to Russian for Amiran Kvantrishvili, the head of a powerful Russian mob. But instead of giving the car to Kvantrishvili,  Festisov sold the car to another buyer for more money. For this, Kvantrishvili threatened Festisov’s father and this caused Fetisov to forge a complex tie to the mob. According to FBI documents quoted by investigative reporter Robert I. Freidman there existed detailed relationships between other Russian organized crime leaders and NHL players including Pavel Bure,  and Valeri  Kamensky. Senior FBI officials worry that the NHL is now so composed by Russian gangsters that the integrity of the game itself is in jeopardy.

In recent years, gangland murders have become prevalent in Russia.  The difficult transition to a free market economy has served to channel resources into private hands. This has led to a high number of contract killings of businessmen, bankers, and officials. The murder leaves Russia’s hockey system in great turmoil. In June of 1996, the general director of one Russian professional hockey club was shot and killed just outside of his home.  In another shooting one month later, a Red Army hockey team administrator in charge of the team’s finances was shot nine times outside the club’s Moscow offices. Russian hockey players are not safe even when they flee their crime ridden homeland. The families of the players are used as pawns in a game of extortion. In January 1996, the mother of Phoenix’s Oleg Tverdovsky was kidnapped by the player’s former coach in Russia in an attempt to extort money from Tverdovsky’s NHL contract. Vancouver’s Pavel Bure and Buffalo’s Alexei Zhitnik have been threatened by organized crime figures that demanded extortion payments.

It is fair to assume that it will be hard to fill the position that Sych had maintained.  Few would want to assume the presidency of a federation penetrated by extortion and organized crime, especially when the position was formerly filled by  a murdered man. Canadian Hockey president Murray Costello added, “After this happened, who would want his job? They have had a real hard time and now it will become even worse,” Even the head of the sports fund, which was the leader in the importing business, barely survived an assassination attempt. He blamed this attempt on President Boris Yeltsin’s closest aides.

Two months after the murder of Sych, on June 16th 1997, the woman who was the business brain  and leading executive behind Russia’s dominant soccer club, Spartak Moscow, was slain at her country home outside of Moscow. Larissa Nechayeva, director-general of the Moscow Spartak soccer club  was shot in the head and the chest. As Spartak’s director-general, she was responsible for the club’s finances and reported to the club president Oleg Romantsev. Her aide was also murdered and her driver was injured. She was set on turning Spartak, which had yielded four national tittles in the past five years, into a lucrative European “super club.” In doing  this, she attracted the criticism and hatred of many in the business. In fact she irritated others in the game by striking a separate, more prolific, deal on television and advertising rights with the main league sponsor. In doing this, she received many threats on her life.  Spartak had failed to live up to her ambitions. Like hockey, many star athletes matriculated to western clubs for money, and many left out of pure fear of extortion.  Hockey, Russia’s winter game, and soccer, Russia’s summer game had both fallen victim to the ills of organized crime. “Two murders in a row of prominent officials in hockey and football mean only one thing,” the Rabochaya Tribuna newspaper concluded. “There is now big money in Russian sport.”

 Russia’s mainstream sports were first affected in 1995 when Alexander Bragin,  the president of the top Ukranian soccer club  Shakhtar Donetsk was murdered along with his brother and four bodyguards. Earlier in nineteen ninety-four, an unsuccessful attempt was made on Bragin’s life.  Seven minutes into the match between Shakhtyor and the visiting Simferopol team, Tavria, a bomb exploded near the entrance of Bragin’s seating area, littering the stadium with the body parts of the five men. Alexander Bragin  was a prominent local businessman who was being investigated by police over his links with organized crime. Interior Ministry spokesman Viktor Krivorodko stated that Bragin  was a Donetsk crime boss. He also believed that all of the men killed were representatives of the city’s criminal structure. It is believed that organized crime, in this case and many others, got its foothold in organized sports often by sponsoring the franchises through more legitimate businesses.              

 On September 20, 1995, Ukrainian champions Dynamo Kiev were banned from European competitions for five years. Spanish referee Antonio Lopez Nieto revealed to the European Football Union’s control and disciplinary committee that Dynamo’s officials offered him a bribe during the Europeans Cup Champions’ League match in Kiev. One of the men that offered the bribe was the team’s vice president and general manager, the other was a board member. Both men were banned for life from European League activities.

The future of Russian sports in  great jeopardy, and will be for quite some time to come. Attempts to generate funding, only served to threaten the game’s survival by attracting the presence of organized crime. In these troubled times, the pursuit of the dollar can bring about grave consequences. The police can not simply keep the proliferation of crime in check.  It is sad that many athletes who would play for less money in their homeland, are forced out because their lives have been placed in danger. There is no clear answer on how to rid Russia, and other newly emerging market economies, of the social ills of crime. Hopefully these instances will decrease in frequency and the Russian government will learn how to better control  the influx of  organized crime, and in time these sad growing pains will usher in a time of economic prosperity.

Resources:

Ukrainian Pro Hockey Update by Ihor Stelmach

http://www.ukrweekly.com/Archive/1997/259720.shtml

Newsline

http://www.rferl.org/newsline/1997/04/220497.html

Russian sport grapples with violent crime

http://www.sportinggreen.com/SG/hko/nhl/news/reuters/970919.3051lby735.html

UEFA slams three-year ban on Dynamo Kiev

http://www.nando.net/newsroom/sports/oth/1995/oth/1995/oth/soc/feat/archive/092095/soc7507.html

Six killed in Ukraine stadium explosion

http://www.nando.net/newsroomap/oth/1995/oth/soc/feat/archive/101695/soc10900.html

Economic Crime as an Obstacle to Liberalization

By BYUNG-WOO KIM

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The most worrisome development in Russia in the 1990s has been the rise in crime, particularly murder, robbery, and corruption. A feeling of lawlessness has spread.  Crime in Russia has clearly been more intimidating than in eastern Europe. It has led to extremely high transaction cost and high thresholds for starting new business. Racketeers have often created local monopolies( for instance, in construction), leading to outrageous prices.  Crime has become a major obstacle to liberalization of the Russian economy.

The total reported crime rate rose by 27%in 1992, stagnated 1993, and fell by 6% in 1994.  Presumably, this was the result of people improving their personal security.  Most Russians do not go out as late as they once did and tend to stay away from dangerous areas.  Many have put bars on their windows, steel doors outside their apartments, and sturdy locks on their doors.(Aslund 167)  Yet these statistics suggest that the worst may be over, although crime has intensified in certain regions, notably Moscow.  This development corresponds to earlier trends in Eastern Europe, where crime rates first surged for a few years after communism.

Not only the sharp rise in serious crimes but also the nature of organized crime itself have evoked public apprehension.  Organized crime was said to control 40,000 Russian enterprises.  In large parts of the country, many believe that no enterprise could be run without settling its relations with crime syndicates, primarily by paying protection money.(Aslund 168)

There were numerous causes of the sharp rise in crime.  A basic precondition was the old communist contempt for law.  In the old days, virtually everyone stole from the state whenever possible.  Corruption had been widespread, even endemic in many places, and the party apparatus itself had often operated as a mafia.  But now the old party hierarchy had fallen apart, together with party norms and threats of terror, while all that was left was alienation and demoralization. Moreover, the new legislative framework in Russia was highly rudimentary.  The legal system was inadequate, and lawyers were scarce. And finally, in a market economy there is more wealth to steal; and anything can be bought for money.

Crime, criminal revenues, and corruption were exacerbated by the lingering inconsistent and discretionary regulatory system, which stimulated massive rent-seeking.  In 1992 and 1993, the principal source of corrupt revenues was through subsidized credits issued by CBR.  Banks still suffer form the inability of the legal system to exact payments from debtors.  Therefore, banks take recourse to using gangsters, who force people to pay under threat of physical harm.  A lasting source of illegal income has been protection money and extortion, which were reinforced by the licensing of enterprises.  The central bodies of government most prominently accused of corruption typically included the Ministry of Foreign Economic Relations, the Ministry of Fuel and Energy, the Ministry of the Economy, the Ministry of Agriculture, the Ministry of Defense, and the CBR, from which large rents could be exacted.

The transformation of the economic system fundamentally altered the preconditions for criminal activity.  As a result, the nature of such activity should also change.  Protection fees and extortion are important sources of criminal revenues.  A standard rate for protection or alternative security arrangements is 15 to 20 percent of their total turnover, which is already high.  Many enterprises are subject to extortion from competing gangs, who behave like robbers.

As a result, Russian entrepreneurs often find it impossible to collaborate with gangster syndicates.  However, as long as the Russian legal system is too weak to assure the collection of payments due, people in business need to resort to strong-arm methods to exact payments. 

In 1994, the government undertook numerous measures against crime. A number of new laws were adopted, including a federal program for fighting crime.  The budget for 1994 contained a large increase for law enforcement.  The police are no longer ill-equipped and underpaid.   On June 14, President Yeltsin signed a decree regarding the fight against organized crime.  The government's sense of urgency in taking effective measures was evident.  These measures are not likely to solve Russian crime problems, but they are indicative of crime's new political significance.

 To reduce the crimes in Russia, first of all, a much more radical liberalization was necessary.  In particular, the tax system must have been simplified so that it would become possible for  entrepreneurs to comply with it.  After all, Russia had a huge law enforcement apparatus; there were laws against corruption, even though loopholes existed. Although many officials were corrupt, others were not, and much could be done.  The share of crimes solved actually rose from 47% in 1992 to 60% in 1994.(Aslund 171)  The crucial missing factor was the will of Russian leaders to clamp down on top officials who were evidently corrupt.

Reference:

Aslund, Anders. How Russia Became a Market Economy; The Brookings Institution, Washington D.C.,1995.

Mafia: Russias  First capitalists

By Hong-Gee Kim

After the collapse of the Soviet Union, Russia is in economic chaos.  People do not know what to do.  But, there are some people who have been adapted to the new market economy well, Mafia.  What Mafia means in Russia is not clear, but those who use the word seem to have in mind the brash entrepreneurs, slick wheeler-dealers and aggressive businessmen who have emerged, seemingly out of nowhere, to take advantage of the hesitant movement toward a free enterprise economy.

The so-called mafia supplies and operates the myriad sidewalk kiosks and open-air markets that have mushroomed all over Moscow. They have opened bistros, cafes and restaurants, often for hard currency, and have started joint ventures that sell from diapers to computer software.  At higher levels, they deal in vouchers, shares, currency, real estate, and; at the top, in raw materials, armaments, oil and natural gas.

They throng expensive western-style hotels, whoop it up in casinos and nightclubs and jet in and out of Sheremetyevo Airport on foreign airlines, but not on Aeroflot if they can help it.

The charge against them are that they offer and take enormous bribes, run protection rackets, impose monopolies, provoke artificial shortages and distort the market in order to make profits out of all proportion to the costs they incur.  People think that the police and security forces as well as borough, city and even Government officials are being paid off so that the mafia can operate outside the law.  The mafia is overwhelmingly responsible for the steep rise in violent crime that has swept over the capital and other large cities and has made life so much more dangerous than before.

According to the former dissident Edward Kuznetsov, there were no organized criminal networks under the Soviet Union because “any dictatorship makes short shrift of organized crime”. Dictatorships of both the left and right, Mr. Kuznetsov wrote, regard organized crime as their own prerogative and cannot tolerate competition.  Therefore, even if the mafia exists and causes considerable damage, the existence of a mafia is an unmistakable barometer of the degree of democratization of a given society.

Works Cited

Jones, Sherry. “Killed by Russia” New York Times. 25 Nov. 1995: 23.

Leitzel, Jim. Mafiosi and Matrioshki: organized Crime and Russian

Reform Brooking Review. Winter 1995: 26-29.

Luttwak, Bdward N. “Has the Mafia Saved Russia?” World Press Review.

Oct. 1995: 48.

 

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