Russian Mafia Essay, Research Paper

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.

872

?Biz in Russia.? Puget Sound Business Journal. 7 March 1995: 18.

?Comrade Godfather; In Russia, the Mafia Seizes the Commanding Heights of the

Economy.? The Washington Post 12 Feb. 1995: C2. ?Crime in Russia.? Current

Digest of the Post-Soviet Press 15 Feb. 1995: 14. ?Fifty-two Percent Believe

Mafia is Running the Country.? Current Digest of the Post-Soviet Press 8 Oct.

1997: 11 Goldman, Minton. Russia, The Eurasian Republics, and Central/Eastern

Europe. Connecticut: McGraw-Hill, 1999. 58-60. Gustatfson, Thane, and Daniel

Yergin. Russia 2010: And What It Means For the World. New York: Random House,

1993. 105-106. Holmes, Charles. ?In Russia, Repression Gives Way to

Corruption.? The Atlanta Journal and Constitution 7 Sept. 1997: B1. Lloyd,

John. ?The Russian Devolution.? New York Times 15 Aug 1999: A8. Remnick,

David. Resurrection. New York: Random House, 1998. 108- 110, 196-199. Sukhova,

Suctlana. ?Head of Russian Internal Affairs Ministry Believes The Russian

Mafia is a Myth.? Current Digest of the Post-Soviet Press 9 Dec. 1998: 20.

Tanner, Adam. ?Russia?s Notorious Mafia Spreads Tentacles of Crime Around

the World.? Christian Science Monitor 11 Jan. 1995: C2. ?The Russian Mafia

Means Business.? Economist 4 July1998: 60.