The Impact of State Capture
By Mark Webster, Lawyer and Project Coordinator at State Capture
In her previous blogpost, Emily Patterson – Co-Founder of State Capture: Research and Action – explored the question “what is state capture?” Emily noted the various concrete manifestations of the phenomenon, including hampered economic development, the erosion of political opposition, and, ultimately, the potential for violence and human rights abuses. This follow-up piece explores this comparatively underdeveloped area of research in more detail under three headings: the economic, political, and social (or human) impact of state capture.
1. Economic: state capture impedes economic development
In captured states, economic development tends to be skewed in favour of sectors that can be more easily controlled – most often resources and commodities – to the detriment of a more balanced economy that is more resistant to the economic shocks of the “boom and bust” cycle. In addition to this sectoral bias, state (and private) assets will often be distributed to a discrete group of elites and their patrons, thereby further embedding an already unequal distribution of economic power.
Corporate actors that are not politically connected or otherwise willing or able to engage with a corrupt public procurement system will generally fail to win lucrative state contracts. As a result, many such businesses – which should be a driving factor in sustainable economic growth and development – will fail, new private investment will be deterred, and those that “win” the contracts have little incentive to provide goods and services of high quality.
Ultimately, state capture “rewards connections over competence and influence over innovation,” with the inevitable result that new corporate entrants often make the strategic choice to engage in corruption and other state capture tactics, ensuring the continuation of a vicious circle.
South African Reserve Bank economist David Fowkes estimated that the economic impact of state capture in South Africa amounted to 4% of GDP growth, noting that “this is the evidence of what state capture looks like […] where you have major investment and no growth.”
2. Political: state capture undermines public services and erodes political opposition
The groups that obtain and consolidate economic power can, thereafter, more readily influence the political landscape, ensuring their ability to shape law and policy to further their own interests, and thereby further solidify their dominance in a “self-perpetuating dynamic.” In Texas, for instance, the fallout from energy blackouts during a historic winter storm in 2021 included legislative proposals apparently influenced by the energy industry, via elected representatives with vested interests in the energy sector. Similarly, the US financial industry has played a key role in weakening its own regulatory environment.
In a state exhibiting symptoms of capture, clientelism and nepotism pervade not only politics, but also public services. With political and public appointments based on loyalty rather than merit, captors enjoy control over both the design and implementation of policy. At the same time the effectiveness of the civil service and the quality of public services suffer as talented people are disincentivised from pursuing such careers.
The patronage network that is established is characterized by a dependency on the state and the ruling elite, which serves to reinforce the loyalty enjoyed by those in power. At the same time, the political elite become dependent on using state resources to appease their supporters. The impunity attached to political positions, meanwhile, further entrenches the “necessity” of maintaining the status quo: in another perpetual cycle. The longer that a state is captured, and the greater degree of criminality employed to achieve it, the more important it becomes for those at the top of the political pyramid to hold on to their positions.
Those holding political power therefore often use public resources to control the media, ensuring the established narrative goes largely unchallenged. At the same time, policies can be implemented to restrict the ability of opposition groups to raise the money necessary to form a functioning and effective opposition.
3. Social (human): state capture stratifies societies and leads to human rights violations
In the face of minimal socio-economic mobility, opportunities dependent on connections rather than merit, and poor public services, captured states can experience a “brain drain”, with future political leaders and economic innovators seeking opportunities abroad. While the reasons for emigrating are often multi-faceted and personal, in the Western Balkans, for example, the effects of state capture are regularly cited as a primary driver behind the region’s staggering rates of net emigration.
Minority and marginalized groups are at greater risk of harm in captured states. Disadvantaged and vulnerable groups are often more reliant on public services, and are naturally therefore most affected by any degradation in the quality of public administration and service provision that accompanies the political capture of a state.
Such effects will be compounded by a captured judiciary and weak rule of law, which prevents citizens from effectively challenging decisions or inaction by public officials. A weak rule of law will generally most acutely impact minority and marginalized groups that often lack access to the effective representation necessary to litigate their rights.
State captors will often utilise the military and/or law enforcement forces to secure their grip on power and suppress any opposition, via the threat and use of violence. Human rights abuses therefore also often accompany state capture. In Cambodia, for instance, systemic corruption and patronage underpin forced evictions as the ruling elite reward patrons with land, while those that protest or resist have been jailed and killed.
With state capture having such wide-ranging, harmful and long-term impact, the need to counter its malign and insidious manifestations is self-evident.
