Andrei Yakovlev: Incentives in public administration – Why Russia has not achieved what USSR did till the late 1960's or China has been doing since 1980's?

 

 

Under President Putin and especially after 2003 Russia started to move to some model of state capitalism characterized by very limited political competition, weak NGO sector and independent mass media as well as absence of independent courts. As a result since mid 2000s Russian model of governance from formal point of view became much closer to Chinese one (especially taking into account trends to centralization of fiscal revenues and development of redistribution policy in China since late 1990s). One of expected outcomes for both countries is connected with high level of corruption which is typical for state capitalism models. Nevertheless even after global financial crisis 2008-2009 China could support high economic growth but Russia clearly failed to meet this challenge.

We assume that these differences are explained by the design of incentive system in public administration in both countries. We consider previous theories (including fiscal federalism under political centralization, U-form vs. M-form of governance structure etc.) and propose new one based on analysis of composition of executive and control functions at different levels in administrative hierarchy in China in Russia as well as in the USSR. We argue that in China (like in the USSR) party secretaries at every level have not only control authority toward executive branch, but they are also responsible for final outcomes (measured by economic indicators). Contrary to this point in Russia control authority is concentrated mostly in presidential vertical and representatives of this ‘power vertical’ at middle and lower levels do not have any responsibility for economic and social development in the regions. We show that this imbalance between control authority and responsibilities for final outcomes can distort incentives and limit initiative at middle and lower level of government.