What is state capture
by Emily Patterson, Co-Founder of State Capture: Research and Action
The term ‘state capture’, first coined in 2000, has gradually evolved over the past two decades. Originally focused on the undue influence exerted by new industrialists over state institutions in post-Soviet countries, the term has acquired a broader meaning to reflect the complex and varied interplay between economic elites and state infrastructure.
Joel S. Hellman, Geraint Jones, and Daniel Kaufmann first set out a theory of state capture in a 2000 World Bank paper entitled, “Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition.” The authors focused on new market entrants during the waves of privatization that followed the collapse of the Soviet Union. These new “industrialists” were concerned about their ability to compete as new firms operating in legacy/state-controlled industries, and many sought to fortify their position through “illicit and non-transparent private payments to public officials” with the goal of “influencing the formation of laws, rules, regulations, or decrees by state institutions.” The owners of these captor firms got rich and succeeded at exerting considerable control over state institutions so that they could more easily protect their assets and personal interests.
Subsequent analysis of state capture looks beyond the business sector and state authorities to explain a variety of potential capture relationships between the state and an unaccountable elite. In cases of political capture, elected officials foster close relationships with political donors (typically business entities) “in exchange for future access to public funds and law-making.” “Black economy capture” involves organized crime groups that “capture state institutions (typically the judiciary, but also the executive) in order to secure systematic violations of the law and regulations for conducting black sector activities (on a large scale) and launder the profits.” Some have identified a pattern of institutional capture, in which “state institutions and/or political networks/parties” capture the private sector, ensuring “kickbacks after being provided with contract assignments (procurement or other) by institutional actors.”
Theories of state capture have also expanded to incorporate a more diverse set of motivations. Beyond ensuring economic advantages or enabling kleptocracy to solidify political power, captors may also be motivated to “lock in the privilege of impunity—since if they or their allies were ousted, they would become far more exposed to prosecution.”
Additionally, the definition of state capture has broadened to include different ways captors seek to control the state. On top of seeking to improperly influence the formation of laws and policy, would-be captors also work to direct “the implementation of policy” by influencing appointments, budgets, the civil service, and regulatory entities. Captors may also attempt to manipulate the “accountability ecosystem,” including the judiciary, oversight bodies, civil society, and the media.
Further, it is generally agreed that any state can be held captive by unaccountable private interests, and research into state capture has expanded beyond Eastern Europe and the former Soviet Union to include countries around the world, regardless of their degree of “development” or “democratization.” Recent research has considered the extent to which individual US states are captured by the industries that dominate them, such as the entertainment industry in California and oil and gas in Texas. The practice of “budgeting corruption” in Kenya has been analyzed through a state capture lens. As has the way Sri Lankan elites have manipulated the constitution-making process to solidify their position of power. South Africa created a Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State (also called the Zondo Commission) to investigate “allegations of state capture, corruption and fraud in the public sector including organs of state.”
In addition to hampering economic development, this redirection of public resources towards unaccountable elites contributes to income inequality. Marginalised groups are often the first to suffer, and they typically experience far greater harm. The power of political opposition is eroded due to difficulties in raising funds and winning elections, contributing to a vicious cycle of opposition failures. Eventually “it may become more difficult to recruit skilled people into opposition politics because the chances of success are slim, meaning that the individuals choosing to enter politics are more likely to be motivated by personal greed than by serving the public interest.” People emigrate when they realize that their exclusion from powerful elite groups poses a significant obstacle to socio-economic mobility. And the potential for violence cannot be overlooked: “where elites use the military as an instrument of their corruption, or threaten to do so, state capture can become violent and enable severe repression of the population.”
State Capture: Research and Action views state capture as a system in which states fail to serve their people. For it to be overcome, it is critical to understand all elements of that system and how they interact with each other. Academic research has shed light on how state capture happens, where it happens, why it happens, and its negative impacts. Legal and development practitioners, investigators, civil society actors, and others have long worked to address discrete issues linked to state capture such as institution-building, anti-corruption, legal reform, electoral reform, media freedom, money laundering, and environmental destruction. Our approach is to bring all of these elements together to build a strong knowledge base on state capture that will underpin strategic action to counter it.
