State capture

State capture is a type of systemic political corruption in which private interests significantly influence a state's decision-making processes to their own advantage.

The term "state capture" was first used by the World Bank, around the year 2000, to describe the situation in certain central Asian countries making the transition from Soviet communism. Specifically, it was applied to situations where small corrupt groups used their influence over government officials to appropriate government decision-making in order to strengthen their own economic positions; these groups' members would later become known as oligarchs.[1]

Allegations of state capture have led to protests against the government in Bulgaria in 2013–2014 and Romania in 2017,[2] and have caused an ongoing controversy in South Africa beginning in 2016.

Defining state capture

The classical definition of state capture refers to the way formal procedures (such as laws and social norms) and government bureaucracy are manipulated by private individuals and firms so as to influence state policies and laws in their favor. State capture seeks to influence the formation of laws, in order to protect and promote influential private interests. In this way it differs from most other forms of corruption which instead seek selective enforcement of already existing laws.[3]

State capture may not be illegal, depending on determination by the captured state itself,[4] and might be attempted through private lobbying and influence. The influence may be through a range of state institutions, including the legislature, executive, ministries and the judiciary, or through a corrupt electoral process. It is similar to regulatory capture but differs in the scale and variety of influenced areas and, unlike regulatory capture, the private influence is never overt.[5] The private influences cannot be discovered by lawful processes, since the legislative process, judiciary, electoral process, and/or executive powers have been subverted.

A distinguishing factor from corruption is that, while in cases of corruption the outcome (of policy or regulatory decision) is not certain, in cases of state capture the outcome is known and is highly likely to be beneficial to the captors of the state. In 2017 a group of South African academics further developed the concept in a report on state capture in South Africa[6] Betrayal of the Promise Report. The analysis emphasised the political character of state capture arguing that in South Africa a power elite violated the Constitution and broke the law in the service of a political project, which they believed unachievable in the existing constitutional/ legal framework.

Further, in cases of corruption (even rampant) there is plurality and competition of corruptors to influence the outcome of the policy or distribution of resources. However, in state capture, decision-makers are usually more in a position of agents to the principals, i.e., the captors, who function either in monopolistic or oligopolistic (non-competitive) fashion.

Examples by country

Bulgaria

Main articles: 2014 Bulgarian Protests and 2020 Bulgarian protests

Protests in Bulgaria in 2013–14 against the Oresharski cabinet were prompted by allegations that it came to power due to the actions of an oligarchic structure (formerly allied to Boyko Borisov) which used underhand maneuvers to discredit the GERB party.[7] Conversely, in 2020 large anti-GERB protests broke out, accusing Borisov and his party of once again allying themselves with oligarchic organizations, permitting corruption and undermining political opposition.[8]

Hungary

The state capture of Hungary began after 2010 when the former main opposition party, Fidesz–KDNP, won the requisite two-thirds of the vote in the parliamentary election. This made manipulation of the constitutional law and the Constitutional Court possible. Parliamentary election laws were later changed to benefit the new governmental party. Step by step, the different institutional applications, competitions, and tenders have been won almost exclusively by organizations and individuals loyal to the government. The winners have frequently been relatives of the governmental staff or otherwise connected with them. The management of different institutions has been filled with persons loyal to the government. Independent applicants have been rejected without explanation or by formal causes. The incomes of the government-independent media evaporated and their fortunes fell.[9][10]

The grants and advertising expenditures of the state-owned and government-loyal companies have been directed to the purpose of the widely accessible propagandistic state media and to the government-loyal press. The majority of the Hungarian population can only access government-influenced radio stations. Only a single government-independent television channel has been tolerated as a source of unfiltered news. The propaganda applies classical Machiavellian cunning, regularly using war terms and touts two ostensible public enemies: "migrants" and "George Soros".[11] Altogether, these proceedings provided additional two-thirds victories for the governmental party in 2014 and 2018, and more unrestricted possibilities for the administration.[12]

Latin American countries

Instances where politics have been ostensibly deformed by the power of drug barons in Colombia and Mexico are also considered as examples of state capture.[1]

South Africa

Main article: Gupta family

Further information: The Judicial Commission of Inquiry into Allegations of State Capture

The pattern [of state capture] is a simple one. "You remove management, and put in compliant management. You remove boards, and put in boards that are compliant. The rest is very easy. That has been the scenario at state-owned enterprises.

- Mcebisi Jonas, former Deputy Finance Minister; explaining the process of state capture.[13]

In 2016 there were allegations of an overly close and potentially corrupt relationship between the wealthy Gupta family and the South African president Jacob Zuma, his family and leading members of the African National Congress (ANC).[14][15][16][17] South African Opposition parties have made claims of "State Capture" following allegations that the Guptas, said to be close to President Jacob Zuma, his family and other ANC leaders, had insinuated themselves into a position where they could offer Cabinet positions and influence the running of government.[18] These allegations were made in light of revelations by former ANC MP Vytjie Mentor and Deputy Finance Minister Mcebisi Jonas that they had been offered Cabinet positions by the Guptas at the family's home in Saxonwold, Johannesburg.[19]

A COSATU protester in Cape Town holding a protest placard calling for the prosecution of "all people involved in the state capture activities." The protest was against government corruption and state capture in the administration of South African President Jacob Zuma.[20]

Mentor claimed that in 2010 the Guptas had offered her the position of Minister of Public Enterprises, provided that she arranged for South African Airways to drop their India route, allowing a Gupta linked company (Jet Airways) to take on the route.[21][22] She said she declined the offer, which occurred at the Guptas' Saxonwold residence, while President Zuma was in another room. This came a few days before a cabinet reshuffle in which minister Barbara Hogan (then Minister of Public Enterprises) was dismissed by Zuma. The Gupta family denied that the meeting took place and also denied offering Mentor a ministerial position.[23] President Zuma claimed that he had no recollection of Vytjie Mentor.[24]

Deputy Finance Minister Mcebisi Jonas said he had been offered a ministerial position by the Guptas shortly before the dismissal of Finance Minister Nhlanhla Nene in December 2015, but had rejected the offer as "it makes a mockery of our hard-earned democracy‚ the trust of our people and no one apart from the President of the Republic appoints ministers".[25] The Gupta family denied offering Jonas the job of Finance Minister.[26] In 2016, Paul O'Sullivan's 'Forensics for Justice' published a report, which alleged that South Africa's criminal justice system had been 'captured' by the underworld.[27]

Following a formal complaint submitted in March 2016 by a catholic priest, Father Stanslaus Muyebe,[28] the Guptas' alleged "state capture" was investigated by Public Protector Thuli Madonsela. President Zuma and Minister Des van Rooyen applied for a court order to prevent the publication of the report on 14 October 2016, Madonsela's last day in office.[29] Van Rooyen's application was dismissed, and the President withdrew his application, leading to the release of the report on 2 November 2016. On 25 November 2016, Zuma announced that the Presidency would be reviewing the contents of the state capture report.[30] He said it "was done in a funny way" with "no fairness at all," and argued he was not given enough time to respond to the public protector.[31]

Zuma and Van Rooyen denied any wrongdoing[32] whilst the Guptas disputed evidence in the report and also denied being involved in corrupt activities.[33][34][35][36] In an exclusive interview with ANN7 (belonging to the Gupta Family), South African President Jacob Zuma said 'State Capture' was a fancy word used by media houses for propaganda proliferation. He said that a real state capture would include seizure of the three arms of the constitution - Legislative, Executive and Judiciary - which has never been the case in South Africa.[37]

The report recommended establishment of a judicial commission of inquiry into the issues identified,[38] including a full probe of Zuma's dealings with the Guptas, with findings to be published within 180 days. In May 2017, Jacob Zuma denied the allegation of blocking an attempt to set up a commission of inquiry to probe state capture.[39] The report led to the establishment of the Zondo Commission of Inquiry in 2018, set up to investigate allegations of state capture in South Africa.

In May 2017 a group of academics convened by Mark Swilling and including Ivor Chipkin, Lumkile Mondi, Haroon Bhorat and others, published the Betrayal of the Promise report, the first major study of state capture in South Africa. It helped galvanise civil-society opposition to the unconstitutional developments in South Africa Civil-Society Response. The analysis was further developed in the book Shadow State: the Politics of State Capture written by Ivor Chipkin and Mark Swilling [40]

The 2017 book How to Steal a City details state capture within the Nelson Mandela Bay Metropolitan Municipality in South Africa during the Zuma government.

Economic impact

On 11 September 2017 the former Finance Minister, Pravin Gordhan, estimated the cost of state capture at 250 billion Rand, in a presentation at the University of Cape Town Graduate School of Business.[41] The South African news publication The Daily Maverick estimated that state capture cost the country roughly R1.5 trillion (roughly US$100 billion) in the four years preceding 2019.[42] South African Reserve Bank economist, David Fowkes, stated that the negative impact of state capture on the country's economy was worse than expected, stating that it likely reduced GDP growth by an estimated 4% a year.[43]

United States

Donald Trump and his administration have faced allegations of attempting state capture and colluding with foreign powers (see Links between Trump associates and Russian officials) to increase the political and financial gain of individuals in the administration.

Donald Trump has differed from historic presidential precedent by not placing his assets into a blind trust,[44] thus resulting in a conflict of private and public interests.

See also

• Regulatory capture

References

1. Crabtree, John; Durand, Francisco (2017). It was developed further by a group of South African scholars in the Betrayal of the Promise report who emphasised the political aspects of the phenomenon(see below). hl=en&lr=&id=wJDhDgAAQBAJ&oi=fnd&pg=PT8&dq=%22state+capture%22&ots=8kplIzdID1&sig=JcVONGmjfhSwfJXI2PkaCN3_ha0#v=onepage&q=%22state%20capture%22&f=false Peru: Elite Power and Political Capture Check |url= value (help). London, United Kingdom: Zed Books Ltd. p. 1. ISBN 978-1-78360-904-8.
2. "Romanian Democracy at Grave Danger".
3. Edwards, Duane C. (1 May 2017). "Corruption and State Capture under two Regimes in Guyana" (PDF). ResearchGate. University of the West Indies. Retrieved 23 May 2017.
4. Kaufmann, Daniel; Vicente, Pedro C. "Legal Corruption (October 2005)" (PDF). Retrieved 7 April 2017.
5. World Bank (2000). Anticorruption in Transition: Contribution to the Policy Debate. World Bank Publications. ISBN 9780821348024.
6. State Capacity Research Group, 2017, Betrayal of the Promise, Johannesburg: Public Affairs Research Institute
7. "Политическата криза и дневният ред на промяната (pp.1–2)" (PDF) (in Bulgarian). iris.bg. 17 June 2013. Archived from the original (PDF) on 27 June 2013. Retrieved 2 March 2014.
8. "Bulgarian PM reshuffles government in bid to quell protests". Reuters. 2020-07-23. Retrieved 2020-07-23.
9. "Hungary's largest paper Nepszabadsag shuts, alleging pressure". BBC. 11 October 2016. Retrieved 8 August 2018.
10. "Major Hungarian opposition newspaper to close after Orban victory". Reuters. 10 April 2018. Retrieved 8 August 2018.
11. "George Soros and his network are doing everything possible to overthrow governments that are resisting immigration". kormany.hu Cabinet Office of the Prime Minister. 10 March 2018. Retrieved 8 August 2018.
12. "Our testimony about the state of the Hungarian media before the LIBE committee of the European Parliament". 444.hu. 7 November 2019. Retrieved 7 November 2019.
13. Cairns, Patrick (12 October 2017). "Jonas: All institutions in SA are under threat". Moneyweb.co.za. Retrieved 2017-10-12.
14. "Zuma allies 'break ranks' with him over Guptas". Rand Daily Mail. 1 February 2016. Retrieved 9 February 2016.
15. Wild, Franz (17 December 2015). "Gupta family seen as symbol of Zuma's failing rule". Sunday Times. Retrieved 9 February 2016.
16. "Who are the Guptas?". BBC. 14 May 2013. Retrieved 7 February 2016.
17. Munusamy, Ranjeni (1 February 2016). "Keeping Up with the Guptas: What's behind the anti-Saxonwold revolt". Daily Maverick. Retrieved 9 February 2016.
18. "Parliament must deal with 'state capture' – DA". News24.com. 27 March 2016. Retrieved 30 March 2016.
19. "Zuma defends relationship with Guptas – report". News24.com. 23 March 2016. Retrieved 30 March 2016.
20. "Cosatu Protest: Future of the alliance on the line | Daily Maverick". www.dailymaverick.co.za. Retrieved 2017-09-27.
21. "Vytjie Mentor: I can prove Zuma was with me in the Gupta house". Rand Daily Mail. 17 March 2016. Retrieved 10 April 2016.
22. "'Zuma said it's OK Ntombazana,' says former ANC MP Vytjie Mentor". Times Live. 18 March 2016.
23. Khoza, Amanda (15 March 2016). "Gupta family denies offering former ANC MP top job". news24. Retrieved 24 June 2016.
24. Khoza, Amanda; Tandwa, Lizeka (15 March 2016). "Zuma has 'no recollection' of Mentor - Presidency". news24. Retrieved 24 June 2016.
25. "Full statement by Deputy Finance Minister Mcebisi Jonas on Gupta job offer". The Sowetan. 16 March 2016.
26. "Gupta family denies offering Jonas South Africa's finance minister role". Reuters. 16 March 2016. Retrieved 24 June 2016.
27. "Joining the dots: Capture of the criminal justice system". Forensics for Justice. Paul O'Sullivan. Retrieved 12 February 2019.
28. "State Capture Report 2016". Scribd. Retrieved 7 May 2019.
29. "Zuma halts Madonsela's state capture report". eNCA. 13 October 2016.
30. "Zuma to take state capture report on review". CityPress. Retrieved 2016-12-08.
31. Williams, Denise. "Zuma to launch a review on Madonsela's state capture report". The Citizen. Retrieved 2016-12-08.
32. Parkinson, Joe; Steinhauser, Gabriele (6 November 2016). "South Africa report cites 'worrying' signs of government corruption". Wall Street Journal. Retrieved 1 December 2016.
33. "#StateCapture report: Molefe-Gupta ties revealed | IOL". Retrieved 2016-12-25.
34. Editorial, Reuters. "South Africa's Guptas to challenge influence-peddling report at inquiry". Reuters India. Retrieved 2016-12-25.
35. Macharia, James (3 Nov 2016). "South Africa's Guptas to challenge state capture report at inquiry". CNBC Africa. Retrieved 1 December 2016.
36. Dzonzi, Mike Cohen, Thembisile Augustine. "Gupta bombshell: Zuma on the ropes after Gordhan's gloves come off". The M&G Online. Retrieved 2016-12-25.
37. Africa News Network 7 TV (2017-11-13), #StraightTalk: ANN7 exclusive interview with Pres Jacob Zuma, retrieved 2017-11-21
38. "State Capture Report: What John Cena Wants Inquiry to Probe". EWN. 3 November 2016.
39. "Zuma denies blocking state capture probe | IOL News". Retrieved 2017-10-16.
40. Chipkin, I and Swilling, M et al, 2018, Shadow State: The Politics of State Capture, Johannesburg: Wits University Press
41. reporter, Citizen. "R250bn lost to state capture in the last three years, says Gordhan". The Citizen. Retrieved 2017-11-29.
42. Merten, Marianne. "ANALYSIS: State Capture wipes out third of SA's R4.9-trillion GDP – never mind lost trust, confidence, opportunity". Daily Maverick. Retrieved 2019-06-09.
43. Maguban, Khulekani (2019-06-06). "Damage from state capture 'worse than suspected' - SARB". Fin24. Retrieved 2019-07-29.
44. https://www.forbes.com/sites/jenniferwang/2016/11/15/why-trump-wont-use-a-blind-trust-and-what-his-predecessors-did-with-their-assets/#18077c2229c0

Further reading

• The State of Capture - Report by the South African Public Protector.

• ‘No Room To Hide: A President Caught in the Act’ Report by South African Organisation Undoing Tax Abuse
• State Capture Portfolio Organisation Undoing Tax Abuse State Capture Portfolio