The high participation of government in big construction projects leads to construction being one of the most corrupt industries.
Corruption and Construction at the Sochi Olympics
By James Surowiecki, The New Yorker
Whatever happens on the ice and snow of Sochi in the next couple of weeks, one thing is certain: this Winter Olympics is the greatest financial boondoggle in the history of the Games. Back in 2007, Vladimir Putin said that Russia would spend twelve billion dollars on the Games. The actual amount is more than fifty billion. (By comparison, Vancouver’s Games, in 2010, cost seven billion dollars.) Exhaustive investigations by the opposition figures Boris Nemtsov, Leonid Martynyuk, and Alexei Navalny reveal dubious cost overruns and outright embezzlement. And all this lavish spending (largely paid for by Russian taxpayers) has been, as Nemtsov and Martynyuk write, “controlled largely by businesspeople and companies close to Putin.”
Sochi is emblematic of Russia’s economy: conflicts of interest and cronyism are endemic. But the link between corruption and construction is a problem across the globe. Transparency International has long cited the construction industry as the world’s most corrupt, pointing to the prevalence of bribery, bid rigging, and bill padding. And, while the sheer scale of graft in Sochi is unusual, the practice of politicians using construction contracts to line their pockets and dole out favors isn’t. In the past year alone, Quebec learned about systematic kickbacks and Mob influence in the awarding of city construction contracts. In Turkey, Prime Minister Recep Tayyip Erdo?an has become embroiled in a vast scandal involving friendly construction tycoons who were given cheap loans and no-bid contracts. And a recent report from the accounting firm Grant Thornton estimated that, by 2025, the cost of fraud in the industry worldwide will have reached $1.5 trillion.
What makes construction so prone to shady dealings? One reason is simply that governments are such huge players in the industry.
Keep reading James Surowiecki: Corruption and Construction at the Sochi Olympics : The New Yorker.
