Managing Conflict of Interest - Organisation for Economic Co ...

26 Managing Conflict of InterestRussia 17During the Soviet period, the personal goals of all citizens weresupposed to be aligned with the goals of the state. In practice, ofcourse, they were not, especially when the state failed to deliver onits promises. Under Stalin, citizens were forced into line or perishedin the gulag. In the later period, it was well known that CommunistParty leaders took advantage of their positions to advance theirown interests and those of their families.For employees of the state at lower levels, the position was moreambiguous. For the economy to work as well as it did, the formalrules and controls had to be selectively sidestepped by the managersof state businesses with the complicity of officials. In going alongwith these “informal practices,” officials were arguably acting in thepublic interest while also often benefiting personally by acceptingfavors in return. In these circumstances, concepts of public dutyand honesty became blurred, and most officials were in one way oranother conflicted. Most people were forced by the contradictorydemands of the system into breaking the rules for personal ends,though some were more greedy and less honest than others.The introduction of a market economy and a democraticallyelected government post-1989 might in theory have put an end tosuch conflicts. However, it did not, for several reasons. First, the neweconomic rules were often defective, and it was necessary for themanagers of newly privatized businesses to continue to use “informalpractices” if they were to survive. Moreover, the “informal norms”—i.e., codes of conduct and ethics—of the earlier period continuedto prevail, so that officials and managers saw nothing wrong withcontinuing with the old “informal practices,” though sometimes inmodified form. Thus, opportunities for officials to extract rents fromthe economy for their own personal benefit—particularly with thesale of state assets—increased enormously. And finally, the checksand balances outlined earlier were grossly inadequate. Essentially,there was no serious attempt by political leaders to control the17This section draws on Ledeneva, Alena. 2006. How Russia Really Works: TheInformal Practices that Shaped Post-Soviet Politics and Business. CornellUniversity Press; and Hellman, Joel, and Daniel Kaufman. 2001. Confrontingthe Challenge of State Capture in Transition Economies. Finance and Development38 (3; September).ADB/OECD Anti-Corruption Initiative for Asia and the Pacific