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?