Is Russia’s Sochi project more corrupt than the U.S. military?

Newspapers are filled with stories (example) about how Russia’s Sochi Olympics construction has cost a lot of money due to “corruption.” I asked my in-apartment Russian experts what this might mean. It turns out that cronies of the government are getting paid more-than-standard-commercial rates to build stuff. So taxpayer funds are being transferred to the politically connected.

I’m wondering how this is different than the U.S. military, which is ridiculously expensive but not typically labeled “corrupt.” TIME reports that the cost of a USAF Boeing 757 (C-32A) is about $43,000 per hour to the taxpayers; Conklin & De Decker says that $12,000 per hour is about what an airline would spend to fly one extra hour in the same airplane. In December, I wrote about how the U.S. Army is planning to do primary helicopter training in $6 million Eurocopters (foreign militaries and private flight schools get this done in aircraft that cost about 1/20th as much).

Why is Russia’s government “corrupt” when it spends more than necessary to build some Olympics venues but the U.S. government is not corrupt when it spends more than market rates to buy military hardware from contractors, pay federal employees (source), and do construction?

[For a Boston example of federal construction, look at the $22 billion spent on the Big Dig (source), partly by paying contractors on a "cost plus" basis (this site notes that "The Big Dig cost almost three times that of building the Panama Canal, in current dollars").]

This article says that Russian taxpayers got soaked for between 1.5 and 2.5 the normal price for construction on various venues. Yet that is not very different than the 1.75X ratio that the Cato Institute found separating federal worker pay from private worker pay. And it is much lower than the ratio between what the U.S. military spends on buying and flying an aircraft compared to what private airlines and flight schools spend (see the 3.6X ratio above for the B757).

Do we consider ourselves superior to the Russians because the profits from higher-than-market-rate government spending are more broadly distributed here?

11 Comments

  1. bgibson

    February 3, 2014 @ 12:16 am

    1

    You may recall a lot of talk about the wastefulness of the us military in the eighties, $400 toilet seats and screwdrivers and all that. Then we had some of the most lopsided military victories in history, starting with desert storm, continuing in the Balkans and the Balkans, and only ending with the quagmire in Iraq, and the toys helped make that much less of a disaster than Vietnam. Not that those victories make$400 toilet seats less wasteful, but they seemed to give the military a pass

  2. SK

    February 3, 2014 @ 5:09 am

    2

    The difference it that in Russia all these companies most likely paid substantial kickbacks (like 25% of price) to government officials in charge of said contracts. Of course US has revolving doors and east coast governors, but in Russian corruption is much more direct, shameless and rampant.

  3. David

    February 3, 2014 @ 5:46 am

    3

    There is a difference between inefficiency and corruption. In Russia, officials profit from awarding swollen contracts, either through kick-backs or by awarding them to people they have personal connections with. Do you think that kind of thing accounts for much of the inefficiency in the US?

    Concerning federal employees: In Russia, the salaries of state employees are usually lower than a similarly-qualified person might get in the private sector. Yet some of them have lavish lifestyles conspicuously out of proportion to their official income.

    Inefficiency is bad, but inefficiency due to corruption is particularly pernicious.

  4. chug

    February 3, 2014 @ 12:53 pm

    4

    that kind of thing accounts for much of the inefficiency in the US

    Yes. Why do so many congress critters, Hill staffers, and military procurement officials end up in lobbying and working for defense and government contractors?

    This is part of the great DC revolving door. Come to DC, work in government, er, “public service”, for a while, then go to work in the “private sector”.

    Timothy Carney writes numerous articles about this kind of Beltway-crony capitalism, and Cato also covers it extensively, as does Dan Mitchell.

  5. David

    February 3, 2014 @ 1:27 pm

    5

    As others have pointed out, the difference is between inefficiency and corruption. Although perhaps it might actually be better to simply have a few corrupt people who can be fired / hung / stoned after taken a few million dollars once, rather than have a few million dollars in inefficient contracts go out to defence contractors ad infinitum.

  6. Cat Typist

    February 3, 2014 @ 4:41 pm

    6

    THEY are corrupt;
    OUR FRIENDS AND ALLIES might be inefficient ,but well-meaning;
    WE take good care of our people.
    :-)

  7. David Walker

    February 4, 2014 @ 4:17 am

    7

    Speaking as a non-US citizen, it really is important to keep corruption down. And it really is a problem for Russia. See this:
    http://www.zerohedge.com/news/2014-02-03/greece-officially-most-corrupt-european-nation

    Government in democratic nations is complicated. Bad decisions get made. In decent regimes, that is more likely to be bad management practices than outright corruption. The difference matters.

    Bad practices are a First World Problem, in every sense of the word. Corruption is a Third World Problem that will keep Russia from thriving for years to come.

    Meanwhile, one version of the toilet seat story is that the “toilet seat” was a molded plastic shroud specifically designed to fit the P-3C Orion anti-submarine aircraft, and that 54 shrouds cost the Pentagon $34,560.

    I have no idea whether this is actually true, but corruption and idiocy are not the only explanations for results like this.

  8. ASDS

    February 4, 2014 @ 4:33 am

    8

    The “inefficiency” card wont work here. The contractors know full well what their projects will cost, it’s not like there are stupid people in control of those companies. Of course it is corruption, leeching public money for private profit.

    Wars are for (immense) profits, and money is the reason to go to war and for these military contractors to lobby through politicians connected to the companies that there are “threats” to be dealt with in country x. There is simply no denying that, facts speak for themselves.

    In the US the corruption is just different.

  9. Eric Shun

    February 4, 2014 @ 7:45 pm

    9

    When high school grad firefighters collect $100K pensions at age 45 for life, is that corruption?

  10. Eric Shun

    February 5, 2014 @ 11:56 am

    10

    NYT, 2/4/14 – Fraud in Army Recruiting Bonus Program May Cost Nearly $100 Million.
    http://www.nytimes.com/2014/02/05/us/politics/wide-reaching-army-recruiting-fraud-described-by-investigators.html?ref=todayspaper&_r=0

    An Army program meant to increase the number of recruits during the Iraq and Afghanistan wars devolved into an illegal free-for-all that could cost taxpayers close to $100 million…a long-running scheme among National Guard recruiters that went undetected for years…a huge criminal endeavor that has implicated more than 1,200 people — 200 of them officers — including two generals and dozens of colonels…soldiers, civilians and National Guard recruiters had used the program as a “bounty” from which they could illegally collect money for recruiting soldiers they had not recruited…

  11. Jim Howard

    February 10, 2014 @ 4:22 pm

    11

    How is the military different than the government people who created in the incredibly expense non-functional Obamacare web sites?

    The U.S. uniformed military is, IMHO, reasonably free of Russian and Asian style of corruption.

    The high prices are a result of government people in procurement being prohibited from using common sense by public law.

    Where ‘common sense’ means “you didn’t pick me, so I’m filing a protest that will stop your program for months, maybe years”.

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