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. Last Updated: 07/27/2016

The Vices of Bureaucracy

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I noticed a fantastic quotation from a "source in a major oil company" in a recent issue of Vedomosti. "[Former Energy Minister Alexander] Gavrin turned his ministry into a real bazaar. He lost control of all matters related to production-sharing agreements and the distribution of export quotas. He was not a professional and had no idea how to properly run a ministry, which means that he didn't know how to impress his superiors. Now it is even possible that the whole ministry will disappear from the face of the earth."

It seems to me that this quotation has it all — the vices of bureaucracy, the principles of interaction between business and bureaucrats and a complete mish-mash of views.

What exactly does this "source in a major oil company" consider to be the essence of Gavrin's bureaucratic unprofessionalism? The fact that he was not able to hold on to his functions. Why is this so important? Because the utility or lack of utility of any bureaucrat (and therefore the necessity of investing more taxpayer money into his office) is determined not by the effectiveness of his actions but by how many functions he is able to take over. The more functions a bureaucrat controls, the more important he is (the greater his usefulness) in the eyes of related organizations, both state and private. The greater his boss's dependence on him and the greater his market value. On the other hand, if a bureaucrat is unable or unwilling to collect functions, he loses.

And it just doesn't matter whether the bureaucrat handles his responsibilities. Our bureaucratic agencies simply don't have a mechanism (comparable to the profitability of a commercial enterprise) for properly gauging the effectiveness of a state official.

Moreover, we also do not understand which functions in reality, already de facto, are controlled by the market and which really need to be managed by the state. When functions that are actually controlled by the market find themselves in the hands of a bureaucrat, the result is corruption — payment for services distributed to market players in the absence of competition for those services.

When a bureaucrat loses his functions, he ceases to be a desirable target for investment from business and, naturally, loses its support. When this happens, he inevitably becomes a candidate for dismissal. This is a clear demonstration of the intermingling of business and government.

And here is another vice of bureaucracy. Bureaucrats do not interfere in the market simply in order to increase their status, but also to gain political advantage in the internal struggle with other bureaucrats. And the result is that bureaucrats have no rational motives at all for working in the interests of society (the same society that pays his salary, however miserly it may be). His survival depends on his ability to privatize as many functions as possible and to sell them as profitably as he can, both to other government agents and to private business interests close to the state. There is no place for the interests of society in this trade.

And finally, this "source in a major oil company" complains that the Energy Ministry might disappear altogether. One might expect that such a development would thrill him. After all, at present the ministry is nothing more than an additional management structure over the oil, gas and coal industries.

Clearly the existence of one more management structure is nothing but a burden for private companies in the energy sector. The management and transactional costs of energy companies are increased and their profits are correspondingly reduced.

So why is the "source" upset? For two possible reasons. Either his additional management costs are compensated by the preferences that his company receives by avoiding market mechanisms (that is, the total cost of the bribes he pays is less than the profits generated by the privileges he receives and which, naturally, are denied to his competitors).

Or, if it turns out that this "source in a major oil company" is pure as the driven snow, that must mean that he doesn't belong in business at all. He doesn't understand the desirability of limited (both in terms of size and function) government. Most likely, he is just another Soviet-era bureaucrat who managed to capitalize on his official post and get a better-paid job in an oil company. He left his heart, though, back in the bureaucracy.

Yevgenia Albats is an independent, Moscow-based journalist.