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The Transition to a Market Economy and the Growth of Corruption



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The Transition to a Market Economy and the Growth of Corruption


Several studies argue that the political, social, and economic transformaiton of a country is typically accompanied by the uncontrollable growth of corruption (McMullan, 1961; Weiskopf, 1992; Kaufmannand Siegelbaum, 1996; Varese, 1997; Stiglitz, 2002; Botalova, 2011). Since the breakup of the Soviet Union and during the transition from socialism to capitalism, corruption has been studied and documented in all FSU countries including Kazakhstan.
The disintegration of the Soviet Union and rapid transition negatively affected the welfare, collective and individual economic security, and certainty about the future in Kazakhstan. The 1990s was the hardest decade with inflation growing from 1381% in 1992 to 1892% in 1994 (Cukierman
et al., 2002). Inflation wiped out the savings, accumulated during the Soviet period. Meanwhile, the official GDP in 1995 fell to a low point of 61.4% of the 1990 level. Living standards declined catastrophically in the early transition years: personal consumption fell even further than GDP (World Bank, 1996; Hare and Naumov, 2008; World Bank, 2005a). The dramatic loss of jobs and incomes, and the quick growth of inequality and poverty were accompanied by highly visible enrichment of people concentrated in high-ranking government positions, which made people mistrustful of the evolving capitalist reforms. Eshpanova & Nasynbayeva (2011) provide data on the self-reported wellbeing of Kazakhstani people during the transition period, which shows that the majority of the population perceived themselves as poor. The data was collected by surveying 1200 randomly selected respondents from two highly populated regions of Kazakhstan and two major cities. Chart 3 below depicts the economic situation of these people in 2009, 14 years after President Nazarbayev promised market prosperity and democracy for all. The respondents were asked to select one out of seven descriptions of their family wellbeing.
Chart 3. The well-being of the population in Kazakhstan

In 2009, 62.5% of population reported themselves as being poor, while only 21.9 % felt they had enough money for food and clothes and more, and 5.6 % did not know how to define their situations. Only 4.1% of respondents reported benefitting from market reforms. The majority of the population in Kazakhstan has lost from reforms even though the hardest times with inflation reaching 1892% were in the past. From this brief introduction of the individual perceptions of the welfare results of the market reforms, I will discuss the perceptions of the fairness of the market reforms.

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