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Looking back, it's now clear that the world crossed an ethical
watershed on August 17.
Two extraordinary things happened that day. In the United States,
President Clinton went public with admissions of guilt in the
Monica Lewinsky scandal. In Russia, President Boris Yeltsin withdrew
support for the ruble. In the U.S. media, Yeltsin's problems were
all but eclipsed by Clinton's perils. For the global business
community, however, the events in Russia were far more significant.
The free fall of the ruble, following a $4.8 billion infusion
from the International Monetary Fund (IMF) and linked to Yeltsin's
firing of his reformist prime minister and cabinet, precipitated
the current downturn in global markets. Yes, Japan's markets were
already on the edge, and Indonesia's economy had already come
apart. But it was Russia that sparked the famous 512-point one-day
drop in the Dow.
Looking around Russia these days--as I did during a two-week
visit in mid-September--the effects of economic collapse are evident.
Victim of a haggard harvest and a slump in industrial production,
Russia's economic activity is now based 70 percent on barter.
Mail is piling up in airports because the post office has failed
to pay its air carriers. More than 90 percent of the nation's
railway cars are said to be unaccounted for. In some regional
cities, electricity and water come and go. Meanwhile, as winter
approaches, imports of food are shrinking for lack of foreign
currency.
What has brought this spirited nation so abruptly to its knees?
I put that question to Grigory Yavlinsky during a meeting in
Moscow. As head of Yabloko, the liberal opposition party in the
Duma, it was he who suggested the name of Yevgeny Primakov as
candidate for prime minister -- a compromise accepted by both
Yeltsin and the Duma. A key political figure, Yavlinsky is also
a remarkably clear-headed analyst.
He traces the current crisis to 1992, when Russia accepted Western
economic advice, and 1993, when a rewriting of the constitution
gave Yeltsin "extremely authoritarian" power. While
Yavlinsky is not ducking responsibility--he insists that the economic
failure is "all our own"--he faults international lenders
on two ethical grounds. First, their economic advice came with
no political warnings that Russia's legal system couldn't support
a Western market structure. Second, more damningly, the IMF, when
it made its loans, silently ignored corruption in the Russian
financial system.
That's a serious charge. Explaining it, Yavlinsky points to
the oligarchy of fabulously rich Russians who were allowed to
buy state-owned industries, salting away huge windfalls in the
West instead of reinvesting in Russia. Western observers, he says,
shrug off this kind of activity as "crony capitalism."
Rejecting that expression as far too "soft," Yavlinsky
points to utterly destructive patterns of monopoly building and
"the incest between money and power." Corruption, he
says, was "the main reason our system in August was destroyed."
The IMF, in his view, should have said, " `We are not willing
to deal with a corrupt government.' But instead, we heard silence."
That very silence, he concludes, has led to a situation in which
Russia is now "at a crossroads between open markets and a
criminal state."
That view was echoed last week when Boris Fyodorov, the reformist
tax chief who was dismissed September 28 from Primakov's cabinet,
went public with his concerns. Asked by journalists how the Western
nations could help Russia, he reportedly called on them to "demand
from Russia drastic economic reforms. Giving us drugs in the form
of more money does not help Russia."
If there's any silver lining here, it lies in the fact that,
with the Russian example, the world now has an all-but-irrefutable
case study of the devastating impact of corruption. Until now,
multinational executives could too easily downplay corruption--the
use of public position for private gain--as a kind of hidden tax,
a cost of doing business, an annoying but tolerable nuisance.
It can now be seen for what it is: a fatal ethical flaw that can
destroy an entire national economy and threaten to drag the whole
world into recession.
To their credit, multinational lenders are finally putting corruption
high on their agendas. And the 29 member states of the Organization
for Economic Cooperation and Development (OECD), along with five
other nations in Eastern Europe and Latin America, are now considering
a treaty--akin to the 1977 Foreign Corrupt Practices Act in the
United States--that would make it a crime for multinational executives
to bribe foreign officials.
But there's still a lot of resistance to factoring ethics into
international finance. Fortunately, Russia's watershed example
makes it easier to refute the once-fashionable view that ethics
is merely optional for sound management. August has made it clear
that any multinational that thinks it can survive the 21st century
with the bribery and corruption of the 20th century had better
think again.
*The Institute for Global Ethics (http://www.globalethics.org)
is a nonpolitical, nonprofit organization promoting ethics through
public discourse and practical action. The Institute, with offices
in Camden,
Maine; Toronto, Canada; and London, England was founded in 1990
and is supported by members throughout the world. It publishes
a weekly online newsletter, Ethics Newsline (http://www.globalethics.org/newsline)
and occasional reports; consults with corporations and educational
institutions in the United States and overseas; and conducts frequent
ethics seminars.
See the original at:
http://www.globalethics.org/newsline/members/issue.tmpl?articleid=12069915270117
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