The system of reporting in the law enforcement agencies, which focuses on the percentage of criminal statistics vis-à-vis respective previous periods, only aggravates numerous pathologies, and replaces the task of combating crime.72 Similarly, numerous inspection agencies discover those violations of laws and state regulations that require the least effort to detect and prove. The introduction of the Unified State Exam (EGE), the mechanism of assessment of high school graduates in Russia (analyzed in detail in chapter 4), serves as a particularly notorious example of this approach. Soon after its introduction in 2009, the presidential administration included the proportion of school graduates who fail to pass the EGE into the list of criteria for assessment of the performance of the regional chief executives appointed by the Kremlin.73 This innovation encouraged regional and local officials (ranging from heads of education departments to school teachers) to minimize the number of failures on exams every year, causing numerous prominent scandals (such as the over-performance of school graduates in republics of the North Caucasus). At last, in 2014, the list of criteria changed again, and regional chief executives could no longer be punished for the failures of teenagers in the EGE. But due to these changes, the percentage of failures could greatly increase, resulting in schools’ performances worsening. As such, the requirements for passing the EGE were eased to such a degree that achieving minimally acceptable grades was not difficult for even the least capable pupils.74
Another case of policy reforms is the attempt to improve the business environment in Russia in accordance with Putin’s May 2012 decree. The key indicator chosen for implementing these changes was Russia reaching 20th place in the annual global report Doing Business, produced by the World Bank. This report is based on evaluating the conditions of small and medium businesses via analysis of regulatory frameworks and surveys of entrepreneurs. Although most analysts were skeptical about the chances of such progress (in 2012 Russia was in 120th place), in the 2018 annual report Russia reached 31st place out of 189, outperforming countries like France and Japan. This achievement, however, was possible because the World Bank experts (including Russia’s representatives) changed the methodology of their report and included more indicators of subnational regulations: the changing set of criteria alone elevated Russia’s rank by thirty places in comparison with the 2014 annual report.75 As state officials received a top-down signal to reach certain numbers at any cost, achieving better numbers turned into a goal in itself. In a way, such an approach to the quantitative indicators of governance (for improving a country’s positions in global rankings or for whatever other purposes) was not much different from the use of the state-sponsored doping program for the sake of Russia’s victory in the Sochi Olympics in 2014.76 In the end, in August 2020 the World Bank announced that it would stop publication of Doing Business reports because of the serious flaws and falsifications in the collection and use of the data.77 Regardless of Russia’s positions in rankings by World Bank reports, the problems for doing business as such were more serious: the impressive progress in quantitative indicators was achieved at a moment of stagnation in the Russian economy, record-high capital flight, and so forth.78 Needless to say, these approaches to policy reforms in various areas brought only partial and incomplete results at best, or even became limited to short campaigns that included the construction of Potemkin villages and contributed to the waste of resources.
Having said that, one should admit that Russia in the 2000s enabled at least partial implementation of policy reforms (analyzed in more detail in chapter 4), and in some policy areas socioeconomic reforms were far from a total failure.79 But reforming the formal institutional shell without changes in the informal institutional core of post-Soviet bad governance brought major positive effects only under certain circumstances. If and when policy adoption and implementation did not require the involvement of many layers and hallways of the power vertical, and reformers were insulated from numerous rent-seekers because of the priorities and sincere support of the top political leadership, then major advancements could be achieved. But when policy reformers employ alternative strategies for institutional changes, policy reforms in various areas often result in unexpected and undesired consequences.
“Borrowing” and “Cultivating” Institutions: Useless Recipes?
Most of the experts involved in the preparation and development of plans and programs of policy changes in Russia clearly understand the pernicious effects of the informal institutional core of bad governance on policy reforms. However, being hired by the authorities, they refrain from openly criticizing major obstacles to implementing the latter’s policy-making. Similarly, to many experts from international organizations who work in Third World countries,80 they use an Aesopian language full of euphemisms such as “poor quality of institutions” or “unfavorable institutional environment,” referring to numerous “legacies” and “institutional traps.” Since discussing major revisions of the foundational principles of bad governance (and hence the rejection of the entire politico-economic order) is a kind of taboo, the experts seek ways not to undermine these obstacles but to bypass or circumvent them. The key idea is not to demolish existing informal institutions but rather establish new and parallel formal institutions that are based on other principles than the institutional core of bad governance. It is expected that the new formal institutions will be more efficient, and for this reason they may become embedded over time. According to these ideas, parallel institution-building can gradually supplant the informal institutional core and pave the way for a further strengthening of “inclusive” economic institutions81 and in the distant future, toward a slow step-by-step adoption of inclusive political institutions. This approach perfectly fits the logic of narrow modernization and leaves reformers wide room for maneuver in institution-building.
In reality, two complementary strategies for institution-building, namely “borrowing” and “cultivating” institutions, have been proposed as possible solutions by a group of leading Russian experts from the Higher School of Economics.82 “Borrowing” implies transplanting those institutions that have proved their efficiency in various political and institutional contexts (not necessarily Western ones) and could be adopted in Russia for economic growth and development without a major risk to immediately undermining the informal institutional core. “Cultivating,” by contrast, assumes that new norms, rules, and mechanisms of governance in certain policy areas can be initially established as experimental innovations under deliberately designed favorable conditions and may later be applied to other policy areas. In theory, both strategies look reasonable and are often suggested by international experts in developing countries.83 But the practice of bad governance puts them into question because of their essential flaws.