CORRUPTION AS A LAST RESORT CORRUPTION AS A LAST RESORT Adapting to the Market in Central Asia Kelly M. McMann CORNELL UNIVERSITY PRESS ITHACA AND LONDON Copyright © 2014 by Cornell University All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 2014 by Cornell University Press Printed in the United States of America Library of Congress Cataloging- in- Publication Data McMann, Kelly M., 1970– author. Corruption as a last resort : adapting to the market in Central Asia / Kelly M. McMann. pages cm Includes bibliographical references and index. ISBN 978- 0- 8014- 5327- 4 (cloth : alk. paper) 1. Corruption— Asia, Central. 2. Po liti cal corruption— Asia, Central. 3. Post- communism—Economic aspects— Asia, Central. 4. Asia, Central— Economic conditions—1991– 5. Asia, Central— Politics and government—1991– I. Title. HV6771.A783M36 2014 381.3—dc23 2014006949 Cornell University Press strives to use environmentally responsible suppliers and materials to the fullest extent possible in the publishing of its books. Such materials include vegetable- based, low- VOC inks and acid- free papers that are recycled, totally chlorine- free, or partly composed of nonwood fi bers. For further information, visit our website at www .cornellpress .cornell .edu . Cloth printing 10 9 8 7 6 5 4 3 2 1 Cover photograph: A money changer in a local market in Osh province, Kyrgyzstan, sets up currency rates for the day. October 2011. Photograph by Sue Anne Tay. To Gregory York N RUSSIA 0 500 Miles 0 1000 Kilometers KAZAKHSTAN Aral Sea Caspian UZBEKISTAN Sea KYRGYZSTAN TURKMENISTAN TAJIKISTAN CHINA AFGHANISTAN IRAN PAKISTAN INDIA NEPAL Map 1. Kazakhstan, Kyrgyzstan, and Uzbekistan Contents List of Tables ix Ac know ledg ments xi List of Acronyms xv Glossary xvii 1. An Absence of Alternatives: A New Framework for Understanding Corruption 1 2. Alternatives to Corruption and the Effect of Market Reform: The Arguments and Their Theoretical Implications 20 3. Bribery, Favoritism, and Clientelism: Evidence from Kazakhstan and Kyrgyzstan 35 4. Market Actors as an Unrealized Alternative: The Effect of Market Reforms 57 5. Islamic Institutions and Secular Charities: Obstacles to Providing Substitute Resources 103 6. Families: The Uneven Effect of Market Reforms 136 7. Reducing Corruption: Policy Recommendations 159 Appendix: Statistical Analysis 171 Index 177 Tables Table 1.1. Conditions and Causal Factor 9 Table 1.2. Socioeconomic Characteristics 10 Table 1.3. Summary of Evidence and Data 17 Table 3.1. Citizens’ Relationships with States in Kazakhstan and Kyrgyzstan: Arena of Competition, Guarantor, Social Contract 42 Table 3.2. Individuals and Institutions from Whom Citizens Have Sought Assistance in the Past Year in Kazakhstan and Kyrgyzstan 43 Table 3.3. Frequency of Seeking Assistance from State Actors in Kazakhstan and Kyrgyzstan 44 Table 3.4. Demographic Similarities of Those Who Seek and Do Not Seek Help from State Offi cials in Kazakhstan and Kyrgyzstan 45 Table 3.5. Types of Problems for Which Respondents Sought Assistance from State Offi cials in Kazakhstan and Kyrgyzstan 46 Table 3.6. State Offi cials from Whom People Sought Assistance in Kazakhstan and Kyrgyzstan 48 Table 4.1. Market Reforms in Kazakhstan and Kyrgyzstan 59 Table 4.2. Private Credit Bureau Coverage in Kazakhstan and Kyrgyzstan 60 Table 4.3. Market Actors from Whom Citizens Have Sought Assistance in the Past Year in Kazakhstan and Kyrgyzstan 69 Table 4.4. Infl ation Statistics from Kazakhstan and Kyrgyzstan 72 Table 4.5. Citizens’ Relationships with States: Guarantor, Arena of Competi- tion, Social Contract 79 Table 4.6. Market Reforms and Their Absence 80 Table 4.7. Market and Societal Actors and Institutions from Whom Citizens Have Sought Assistance in the Past Year 81 Table 4.8. State Regulation 84 Table 4.9. Po liti cal Rights and Civil Liberties Ratings 85 Table 4.10. Ethnic Composition 91 Table 4.11. Socioeconomic Characteristics 93 ix x TABLES Table 4.12. Number of Countries in Different Regions and with Different Income Levels 100 Table 4.13. Market Reform’s Effect on Corruption under Different Conditions for Countries of the World 101 Table 5.1. Societal Actors and Institutions from Whom Citizens Have Sought Assistance in the Past Year in Kazakhstan and Kyrgyzstan 122 Table 5.2. Other Societal Actors and Institutions from Whom Citizens Have Sought Assistance in the Past Year in Kazakhstan and Kyrgyzstan 126 Table 6.1. Family from Whom Citizens Have Sought Assistance in the Past Year with Comparisons to Other Actors in Kazakhstan and Kyrgyzstan 138 Table 6.2. Poverty and In e qual ity Statistics from Kazakhstan and Kyrgyzstan 139 Table 6.3. Members of Ethnic Groups Who Have Sought Assistance from House hold Members and Relatives in the Country in the Past Year in Kazakhstan and Kyrgyzstan 148 Table 6.4. Family and Personal Contacts from Whom Citizens Have Sought Assistance in the Past Year in Kazakhstan and Kyrgyzstan 151 Table A.1. Corruption Perceptions Index Regressed on Legacy, Market- enhancing Institutions, and Market Reform Variables for Countries of the World 171 Table A.2. Corruption Perceptions Index Regressed on Legacy and Market Reform Variables for Countries of the World 173 Table A.3. Corruption Perceptions Index Regressed on Market- enhancing (M-E) Institutions and Market Reform Variables for Countries of the World 173 Table A.4. Corruption Perceptions Index Regressed on Legacy, Market- enhancing Institutions, Market Reform, State Regulation, Poverty, and Natural Resource Endowment Variables for Countries of the World 175 Ac know ledg ments The idea for this book came from discussions at kitchen tables in the former Soviet Union. While conducting earlier research, I lived with families who regu- larly described the struggles they faced as a result of the demise of the Soviet welfare state and, in many countries, the smaller economic roles that their new, market- oriented governments played. No longer did their governments guaran- tee them employment, housing, higher education, and other necessities. While the families celebrated the po litical freedoms that the collapse of the Soviet Union brought, they lamented the loss of economic guarantees. After research- ing the po liti cal changes brought about by the collapse, I turned to an examina- tion of how people were coping with the economic transformation. I am grateful to these dear friends and welcoming families for sharing their daily experiences with me. I also extend my thanks to the 266 individuals who shared their experiences more formally through interviews and observational studies that I conducted, and to the 4,500 Central Asians who participated in mass surveys that a team and I completed. The coleader of that survey team was Pauline Jones Luong. I am grateful that she too was concerned about the paucity of data about Central Asia and enthusi- astic about conducting surveys to help rectify that. We both appreciate the as- sistance of the Kazakhstani research fi rm BRIF in administering the surveys. Two additional colleagues were instrumental in this project. Henry Hale sug- gested corruption as a frame when he read a conference paper I wrote early on. As the title of the book indicates, this was a recommendation that stuck. I am in- debted to Andrew Barnes for many suggestions about different parts of the proj- ect over time and for comments on an early version of the complete manuscript. I also appreciate suggestions from those who read parts of the book or the papers that preceded it: Laura Adams, Catherine Boone, Allen Hicken, Kathryn Hochstetler, Michael Johnston, Pauline Jones Luong, Marcus Kurtz, Joel Migdal, Jessica Pisano, Susan Stokes, Daniel Treisman; and colleagues at Case Western Reserve University, Karen Beckwith, Justin Buchler, Brian Gran, Samantha Hill, Kathryn Lavelle, Pete Moore, Elliot Posner, and Joseph White. Justin Buchler provided helpful statistical advice repeatedly and enthusiastically as well. I ap- preciate the useful suggestions that two anonymous reviewers and the Cornell University Press faculty Board of Editors provided in the fi nal stages. xi xii AC KNOW LEDG MENTS I also received valuable feedback when I presented my research at numerous institutions, including Cornell University; the Havighurst Center at Miami Uni- versity; Harvard University; Indiana University; the Kennan Institute; the Nor- wegian Institute of International Affairs; Ohio State University; University of Illinois, Urbana- Champaign; University of Wisconsin, Madison; Yale University; and conferences of the American Po liti cal Science Association; the Association for Slavic, East Eu ro pe an, and Eurasian Studies; and the Central Eurasian Stud- ies Society. Providing feedback, in addition to assisting with research and editing, were a talented set of Case undergraduates: Philip Kehres, Alexandra Klyachkina, Bhavani Raveendran, Sarah Tremont, Andrew Wolf, and— two students who provided many hours of assistance these past few years— Brandon Mordue and Andrew Slivka. This book would not have been possible without the generous support of the International Research & Exchanges Board, the National Council for Eurasian and East Eu ro pe an Research (NCEEER), the National Endowment for the Hu- manities, the Social Science Research Council, and Case Western Reserve Uni- versity. NCEEER’s support was particularly essential as it provided signifi cant funding to complete the mass surveys. None of these organizations is responsible for the views expressed here. I also thank SAGE Publications for permission to reproduce information from my article “Market Reform as a Stimulus to Par- ticularistic Politics,” Comparative Po liti cal Studies 42, no. 7 (2009): 971– 94. This book would also not have been possible without the support of Cornell University Press Executive Editor Roger Haydon. I am grateful for the interest he took in the manuscript and the time he devoted to reading it carefully and mak- ing numerous helpful suggestions.