‘State Capture’ as a Key Cause of
Misgovernance and Corruption: The Case of
intention is to analyze corruption in
essential to understand the structural causes and agents of corruption
because they are interwoven in the very functioning of the social
system. For this reason, some authors call the ‘“state capture”
approach a study of the “political economy of misgovernance and
Thus, rather than studying the activities
of petty bureaucrats who are taking 200-500 Euros under the table for
services, we need to take a broader theoretical and historical approach
that will allow us to trace the profoundly destructive mechanisms of
elite seizure of state functions and their fatal impact on public
goods, ethical conduct, and economic and democratic development of the
country. At the same time, this “grand” approach must be situated in
the particular circumstances of
necessary to expose the processes by which elites in
of ‘state capture’ in
main mechanisms of the ‘captured state’ and the most influential capturing
agents are not the same in all the countries suffering from this
phenomenon. In the case of
other hand, the parties are a crucial link between business tycoons and
the government. The tycoons probably finance all the major parties.
After elections, when the parties take over government, the tycoons
dictate to the government (and consequently to the parliament) which
laws are not to be passed because they are not in their interests (such
as the law on investment funds, antimonopoly regulations, the law on
bankruptcy, the law on the restitution of nationalized property etc.),
or where to leave “holes” in already passed laws for the same reason –
to protect their private interests. Under the same influence the
government manipulates the supposedly independent institutions
(commercial courts, enterprise registries, the stock market, the media,
agencies that control the free access to information etc.),
compromising their ability to control corruption. The most-recent such
case was the undermining of the credibility of the National Bank of
The consequences of state capture are seriously damaging. Neither the government nor the parties or enterprises (state and private) are able to perform their social roles: leadership positions are not accountable to the public; there is no real judicial independence; and officials/parties use public offices for private interests rather than the representation of constituents’ interests and pursuit of public good.
This powerful “unequal” influence throughout the social system is based on a very peculiar structure: state authority and all other public goods, services and enterprises are divided up into pieces which are distributed among the different parties of the ruling coalition. At the national level, the strongest party in the coalition governs the ministries for internal affairs (police, security forces, and intelligence) and justice exclusively and independently. The second largest party rules in the same manner over financial branches, controlling money circulation, the National bank, taxes, etc. Other ministries are divided among other smaller parties in the coalition. State functions, public services and utilities are also divided up in the same way at sub-national levels, in the cities and municipalities, according to party results in the last local elections. The principle is always the same: each party governs its “piece” of power without interfering in the other’s “business.”
main aim of the project is twofold: to reveal the mechanisms and
consequences of ‘state capture’ responsible for the systemic corruption
In order to achieve this aim, I set up the following objectives:
(1) to reveal the structural mechanisms used by political parties to ‘capture’ the distribution and occupation of positions in public bodies, especially favorable positions for ‘political cronies’ in public enterprises, utilities, local and city governments and to accumulate and mingle party and state functions;
(2) to survey public opinion reactions and attitudes about desirable public office recruitment and their perception of practices in reality, and investigate public opinion of the role of parties in state corruption, the level of intolerance to such practice and the concerns about it;
(3) to investigate progress on the economic governance reform as a condition to curb oligarchic structures and the condition for the EU integrations;
(4) to write a 20 page policy paper on how to combat the ‘capture state’ and improve government transparency and accountability, in coordination with the group advisor, for the presidents of the five biggest political parties, the President of Serbia, the President of the Serbian People’s Assembly (National Parliament), mayors of Serbia’s biggest cities, the Standing Conference of Cities and Municipalities (it is a non-governmental organization), the Center for the Development of the Non-Profit Sector (the NGO distributing information to all NGOs) and bigger local and national non-governmental organizations.
The Research Plan
order to apply the theoretical framework of state capture to the
Serbian case and investigate the specificities of this phenomenon
through political party domination in
1. For the first objective, the following research activities are selected:
1.1 Chart the link between party gains in the last elections (2003) at the national level by cross checking with the pieces of “the state cake” distributed to parties such as ministries, public enterprises, membership in the Executive boards, public services, and regulatory institutions, and to discover the formula (its quantitative and qualitative elements) for public “treasure” partitioning based on the “coalition agreement”. This part of the research will show how party cronies are distributed and connected throughout ministries, regulatory bodies, government branches, and public enterprises and services.
the link between party gains and the turnover of executive and
financial positions in public utilities, enterprises and services.
This aspect of the project will use the case study of the city of
1. 3 Map the accumulation of functions – or the simultaneous performance of party, government, business, other public roles: This part of the study will map the accumulation of functions by officials in the central government of Serbia and among representatives (MPs) of the four ruling parties in the Serbian National Parliament; the MPs will be checked for involvement in executive boards in the enterprises, executive roles and other public functions. Special attention will be given to the mapping the parties functionaries in the public enterprises’ executive boards and director positions for suspected financing of parties and their campaigns. These maps will provide an empirical reference to the accumulation of power, conflict of interest and the eradication of borders between subsystems of politics, economy, services etc.
1.4 To investigate available materials and data on parties financing and election campaign spending with special attention given to the possibilities of looping.
2. The second objective - survey public opinion reactions and attitudes about desirable public office recruitment and their perception of practices in reality, and investigate public perception of the spread of corruption among various occupation groups, state institutions and political parties, including ranking of public concern about political (and other) sources of corruption as well as the level of public intolerance to corruption.
It will include preparation of 10-13 questions to be included in a survey conducted using a national representative sample by the well known opinion pool agency Strategic Marketing and data analyses, interpretation and recommendations.
3. For the third objective, the following activities are chosen:
Based on the interviews with experts, it will be assessed the situation in Serbia related to the EU- compliant legislation in the area of economic governance, including reform of the public sector, regulatory polices in the customs service, competition policy, disconnection of the financial system both from government and domestic monopolistic power, and other regulatory authorities in the public services and other executive branches of the government.
Based on the above research, the project will produce a research and policy paper that will propose legislative reform to block the accumulation of functions and other mechanisms of state capture and introduce external checks by ethics boards and other civic institutions. These policy recommendations will aim at reducing the unchecked influence of party elites over state functions and increasing the watch dog functions of the NGO sector and the presence of public debate.
For writing the policy paper and recommendations,
the project will analyze some laws such as
the Law on Financing Political Parties, the Law on Public
Administration, the Law on Immunity of MP’s and the
Law on Conflict of Interest, and to analyze opposition to the “missing
laws”, and suggest new needed laws and regulations to combat capture
state and corruption. Recommendations will be presented to the leaders
of the biggest parties, to the President of Serbia, and to other
above-mentioned instances that can help build a more transparent and
accountable public sector in
Expected results in practice:
The project hopes to increase awareness of the phenomenon of state capture, its damaging impact on the production and delivery of public goods and services and the corrosive effects on the ethical conduct of political life and public affairs. This increased awareness, coupled with concrete policy recommendations, should produce public pressure for legislative reform and increased civic responsibility for good governance.
 See: Seize the State, Seize the Day: State Capture, Corruption and Influence in Transition, by J. Hellman, G. Jones, and D. Kaufmann (2000)
 In Serbia, Vladimir Gligorov was the first to use the concept ‘capture state’ to explain some forms of corruption connected with wide discretional decisions by the government - in this case, he demonstrated government capturing of the biggest media house - Radio Television of Serbia. See, daily paper Danas, September 7, 2005
 Daniel Kaufmann, “Rethinking Governance Empirical Lessons Challenge Orthodoxy”, The World Bank Institute, Discussion Draft, March, 2003. IT address: http://www.worldbank.org/wbi/governance/pdf/rethink_gov_stanford.pdf, also The Inequality of Influence by Joel Hellman and Daniel Kaufmann, at http://www.worldbank.org/wbi/governance/pdf/inequality_influence.pdf
A telling story about political influence in business is the case of
Bogoljub Karic, one of the richest man in