Russian Mafia
Protectionism in the New Capitalist Russia The Russian Mafia has
always
exercised an important role in the Russian economy. The contemporary
mafiosi are
descendents of the seventeenth Century highwaymen and Cossack
robbers. These men
occasionally murdered families prior to raids preventing
them from being
captured. The Russia mafiosi made a point to remain aloof
from the state. Mob
men were actually spurned when returning home from
fighting in the Great
Patriotic War. The gangs begin to dominate markets
such as car sales, spare
parts, cigarettes, food distribution, and other
markets that the Communist Party
failed to provide under the Bolsheviks
(Remnick196). Since the collapse of
Communism and the dawn of Capitalism,
the Russian people have been troubled with
innumerable obstacles. There are
more than 3,000 gangs known generally as the
Russian Mafia. They have
proven to be a significant force in delaying the reform
process (Goldman 58).
The new Russian Mafia has involved themselves in every
imaginable kind of
criminal activity from drug trafficking and money laundering
to
protectionism, which penetrates into every area of society. Under the laws
of
the Soviet Union, the regulations were strong and external. Now the
external
regulators have disappeared allowing the Russian Mafia to
exceedingly enlarge
its strength and influence especially with the
accelerated speed of
privatization without legal safeguards. The Russian
Mafia’s effect on the
Russian economy through protectionism can be viewed
through the different scopes
of academia, the United States Press, and the
Russian Press. Protectionism is a
preferred activity of the Russian Mafia.
When a new private business opens, the
mafia ensures that it will get a share
of the profits. The mob offers the new
operation protection. If the business
refuses to purchase protection, the mafia
uses violence against them or their
property (Gustatson 105). Most entrepreneurs
purchase the protection. Then
the new company pays unofficial taxes to crime
groups. This guarantees that
nearly all new businesses will have an affiliation
with the mafia. Gustatson
estimates that payments can are approximately twenty
percent of the profit
(105). This is a major form of taxation on top of what the
government already
commands leading many companies to tax evasion or concealing
their exact
value. These acts forfeit what little protection the authorities
might be
able to render. The mafia demands a cut of the earnings but in turn
furnish
more than adequate security. The mafiosi provides protection
from
unaffiliated criminals and rival gangs. They ensure that property is not
damaged
or stolen. If entrepreneurs are visited by another organization, they
must only
summon their own mafia group. The two gangs will settle the matter
themselves (Gustatson
105). This security is an asset that the State
seemingly fails to provide. The
Russian Mafia has more men and weapons
than the Russian law enforcement. The
police force is an intently corrupt
place as is much of the Russian government.
Both army officers and law
enforcers are frantic for cash and willing to sell
weapons such as guns,
grenades, and rocket launchers (Remnick 109). The Russian
Mafia is able
to easily locate weaponry to carry out its duties as protectorate;
while, the
authorities lack money and personnel. A few days before the union
dissolved
the biggest Russian Mafia leaders held a summit meeting at a dacha
just
outside Moscow with the three main Italian crime organizations from
Sicily,
Naples, and Calabria. They understood that it would bring turmoil
and
uncertainty; yet, the Vori v Zakonye or thieves in the law saw
possibility in
the disintegration of the Soviet Union. The organizational
leaders assembled to
discuss the selling of nuclear materials, and drug-money
laundering (108). The
mafiosi would use their influence to access
bureaucratic power. They began
anticipating the collapse by becoming private
businessmen: consultants and
rainmakers (197). As Consultants and Rainmakers,
they would assert their
authority through protection. Academia states that
protectionism is having a
trenchant effect on the Russian economy. It helps
create massive inflation to
the already weak economy. The twenty percent of
the gross earnings extorted from
the business as protection raises the price
of the goods and services
tremendously for the Russian people monthly. The
Russian consumer ultimately
pays the protection bill (Goldman 58). It is
estimated that in 1996 about eighty
percent of all private businesses made
regular payments to a mafia organization
for protection and a substantial
amount of that money ends up in other
countries. (Gustatsun 104). Thus the
underworld is taking a vast amount of
wealth out of Russia. With the Russian
Mafia handling so much money, it is
little wonder that they were able to buy
so many governmental officials.
Scholars tend to take an objective
approach. The Russian Mafia demands a cut of
the profits, but does render a
service that the authorities can not provide.
This is having plundering
effect on the economy as a whole. It is causing
massive inflation and sinking
the already weak economy. This has lead to a trend
towards nationalism and
separatism in Russia. The United States press
understands that the Russian
mafia had a definite place in society at one time.
It grew because of the
buying and selling of smuggled or stolen goods. It
satisfied the Soviet
consumer with products that the State failed to provide.
These items were
both consumer and illegal goods. It filled this role for
decades under Soviet
rule. The mafia was established and equipped to amplify its
business during
market reforms. It was more in touch with consumer demand
(Tanner C2). Russia
suffers the most due to mafiosi activities. It seems that
gangs are
threatening to take over the nation’s economy. Bombings contract
killings,
and robberies are a common occurrence. Russia is a very different
place from
the early developing economy of the United States. The robber barons
of the
United States can be described as vicious. They made their fortunes
by
building and preventing others from doing just that. Yet, Russian wealth
is
achieved and held through violence, theft, and manipulation. Many Russians
came
to believe that this distorted form of mafia control is the normal
free-
enterprise system. This sentiment is reinforced when they see
Western
businesspeople and investors fail to complain and then comply with
paying
protection money (Washington Post C2). The Puget Sound Business
Journal reported"the Russian mafia is the most Western-like negotiating
experience you’ll
have in Russia...unlike the slow-moving and fractured
government the Russian
mafia is businesslike and helpful" (18). The Russian
syndicates seem far more
organized than the legitimate government. The
gangsters have a systematic method
of retrieving "taxes" from their
businesses under their protection. They use
force. This is how they sustain
control. The Atlanta Journal and Constitution
reported an antidote about
protectionism. There was a small store in Moscow
selling groceries and other
items, Vso Dlyah Vas or everything for you. It was
one of the many new stores
springing up in the new Russia. The store’s front
windows were smashed; yet,
nothing was stolen. A few days later the store was
closed; the owners left
town (1B). They had failed to pay the appropriate
people. This is just one
example of mobsters smashing private businesses for
failure to comply with
their protectionism mandates. Democracy in Russian has
turned out to be a
free-for-all of profiteering. For many, it brought increased
poverty and
despair. Krisha, in Russian, means protection money. It is surmised
that
seventy-five percent of the businesses in Moscow pay a percentage of
its
profits to its organized crime associations. Actually, the mafia has a
higher
collection rate than the Russian government (Washington Post C2).
This
infiltration of the economy has had dire consequences. There is no way
to
determine how much money is involved. However, it is estimated that
anywhere
from 50-100 billion of state and communist currency and gold have
been privately
appropriated and transferred out of the country (C2). That is
on top of the
tremendous inflation due in part to protectionism. In 1992, the
prices rose
twenty-six percent. The inflation rate was eighteen percent a
month in 1995.
Needless to say, any adjustment to salaries tarried far
behind the constant
escalation of prices. Things are beginning to change in
Russia. Companies are
building up their own security forces. They are
obtaining security from the mob
and their protection schemes for themselves.
They are employing armed guards,
which is reasonably inexpensive in Russia.
Many companies are also introducing
closed-circuit television and
scrutinizing visitors even photocopying
identification papers for future
reference (Economist 60). This is begining to
put most creditable businesses
beyond the grasp of the most primary variety of
Russian gangster.
Protectionism might be slowly coming to an end. The Russian
press reports
that fifty-two percent of the country believe that the mafia is
running the
country. The Majority also believed that Russia’s rich got wealthy
through
stealing, plundering, bribery, or some other form of corruption
(Fifty-two
Percent Believe 11). Yet the Russian Internal Affairs minister,
Sergei
Stepashin, stated that the Russian Mafia is but a myth during an
address
reporting on the Russian criminal world at a European Union meeting.
He said,
"Fear of the Russian Mafia stems from a lack of understanding
the processes
that are occurring today in Russia" (Sukhova 20). He also
reported that there
is a myth of a Russian mafia that should be dispelled.
Protectionism is not
really occurring.. The Russian mafia controls almost
every aspect of the Russian
market. They determine who can open a business,
stay in business, and who must
close their business. The mafia makes these
determinations, often times, on who
is compensating them for their security
services. Most Russians report that they
are directly or indirectly
intimidated or extorted by at least one of the
organizations within the
Russian mafia. The syndicates seem to arrange an
organization for business
that is not yet available from the government or
professional arena. If one
business has a problem with labor or another
business, the business owner
merely contacts his mafia link. The matter is
immediately, quietly, and
efficiently resolved. (Crime in Russia14). The Russian
mafia is involved in
every aspect of Russian life. They provide a code of
conduct for business not
yet provided by the professional elite or the
government. The mafia has a
detrimental effect on the Russian economy. It not
only creates massive
inflation, it deters companies from other countries from
investing in the
Russian economy. Foreign investors operating at the retail
level where hard
cash is a fundamental part of business are particularly
susceptible. They are
not excluded from the gangster’s tactics of"offering" protectionism (Fifty-two
Percent Believe 11). In some cases, the
mafia has succeeded in expelling the
foreign owner. Specifically this has
happened to a Canadian-owned wholesale
electronic good franchise, and Italian
merchant of leather goods, and an
Estee Lauder shop (Washington Post C2). Russia
has taken several steps to
stop crime such as protectionism and the Russian
mafia. Yeltsin has granted
the police various powers to confront these dilemmas.
The decree Yeltsin
issued permits police to detain organized crime suspects for
thirty days
without cause, search offices and homes without a warrant, and
inspect the
finances of suspects. Uncorroborated testimony is now permissible in
court,
and witnesses that decline to testify can be punished (Fifty-two
Percent
11). Yet, these measures seem to have done little to stop
organized crime’s
growth. Unfortunately, Russian organized crime has
prospered in the new economic
system, and has migrated well beyond the
Russian boundaries. Much of the private
business activity lies in a gray
region somewhere between legality and
illegality. The law has yet to fully
catch up with privatization. Academia, the
United States Press, and the
Russian press all paint a devastatingly bleak
picture of the Russian economy;
yet, there is hope for change. Many small
companies do not have the luxury of
making drastic changes; yet, efforts are
being made to stop the mafia or at
least cease the growth of it on the side of
the government and larger
businesses. Enterprise are creating their own company
security and stopping
protection payments. Things will not change overnight, but
Russia can and
slowly is moving toward normalcy.
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