The term 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.
Allegations of state capture have led to protests against the government in Bulgaria in 2013–2014 and in 2020-2021 and Romania in 2017, 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 government officials, state-backed companies, private companies and/or private individuals, so as to influence state policies and laws in their favour. private individuals and firms so as to influence state policies and laws in their favour.
State capture seeks to influence the formation of laws, in order to protect and promote influential actors and their interests. In this way it differs from most other forms of corruption which instead seek selective enforcement of already existing laws.
State capture is not necessarily illegal, depending on determination by the captured state itself, and may 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.
A distinguishing factor from corruption is that, though 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, titled "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.
Examples by country
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. 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. Press freedom in Bulgaria diminished to the point it was rated worst in the EU; one oligarch controls close to 80% of the newspaper distribution market. Bulgaria’s exposure to oligarchic networks has had a negative impact, most significantly in the area of energy policy. The close proximity between Bulgarian and Russian elites is largely underpinned by Russia’s significant economic presence in Bulgaria, with Gazprom being Bulgaria’s sole natural gas provider and Rosatom having a dominant position in the country’s nuclear sector. As Russia has increased influence over Bulgaria’s economy, it has used dominant positions in strategic sectors to strengthen relationships and cultivate new ones with corrupt businessmen and local oligarchs. This has allowed for access to prominent politicians, over which they are able to exert considerable control.
Hungary's state capture began in 2010, when the former opposition party, Fidesz–KDNP, won the requisite two-thirds of the vote in the parliamentary election. This gave the party the power to manipulate the country's constitutional law and influence the Constitutional Court. Eventually, parliamentary election laws were changed to benefit the new governing party and keep them in power. Fidesz quickly instituted a system of clientelism: different government contracts and top positions in state institutions have almost exclusively been granted to organizations and individuals with connections and loyalty to the government. Funding for independent media has been cut, while state-owned and pro-government press have received grants and advertising expenditures. The pro-government media organization, the Central European Press and Media Foundation (KESMA in Hungarian) largely dominates the media landscape, and as a result most Hungarian people can only access government-controlled media.
Government propaganda applies classical Machiavellian cunning, regularly using war terms and touts three ostensible public enemies: "Brussels", "migrants" and "George Soros". Altogether, these proceedings led to electoral victories by a two-thirds majority for Fidesz in 2014 and again in 2018, resulting in increasingly unrestricted possibilities for the administration.[clarification needed]
Finally, while a large number of central and eastern European states seek to minimize energy dependence on Russia, Hungary has moved in the opposite direction, entering into a nuclear energy deal with Rosatom in 2014. Let down in part by the European Commission, who potentially assisted Hungary in identifying loopholes to green-light construction, Hungary has allowed Russian influence to grow. Russian influence-seeking activities are clearly identifiable, with the Kremlin aiming to increase Russian involvement in the Paks II project at every opportunity. One primary example involves Russian businesses who were active in pushing Hungarian businesses and/or businesspeople out of companies that were linked to the project. At the state level, Hungarian Prime Minister Viktor Orbán has been a keen advocate of Russia, taking a stance on subjects such as Ukraine that seemingly follow the Russian narrative. Meanwhile, a lack of transparency is a key concern, with contracts relating to Paks II having been won by Hungarian business elites and companies owned by their families. Furthermore, Orbán’s government has made certain aspects of the Paks II contracts confidential. This has led to uncertainty in terms of Russian retaliation, should Hungary decide to back away from the project. However, it is likely that the Paks II project will gain approval from the Hungarian Atomic Energy Authority in 2021, allowing for the deepening of bilateral relations and increased risk of serving Russian interests through the creation or alternation of Hungarian policy surrounding the project.
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. Both Argentina and Bolivia have been the subject of Russian strategic corruption efforts. While the Kremlin has used similar strategies in Argentina and Bolivia, it has adopted strategies that suit local conditions. In Argentina, political decision-making is more dispersed, while transfers of power are more frequent, making large-scale, long-term projects more difficult to implement. Therefore, in Argentina, Putin has used trade as a bargaining chip. In 2015 Argentina the television license for RT, to which the Kremlin retaliated by threatening to ban Argentine beef exports and suspend investment projects; several weeks later, RT was officially allowed to continue operating. In Bolivia, power is concentrated, allowing Russian state-owned companies deeper traction, pushing through projets with no significant resistance. Therefore, the Kremlin strategy in Bolivia has been to maximise influence by focusing on strategic markets and long-term infrastructure deals.
Former President Donald Trump and his administration have faced allegations of attempting state capture and colluding with foreign powers (including Russian officials) to increase the political and financial gain of individuals in the administration. Attempted state capture under Donald Trump's administration has been referred to as "thugocracy," due to his connections with organized crime. An increasing amount of evidence has linked Donald Trump, the Trump Organization and its associates to criminal enterprises; according to Nancy Ries, "these [connections] exemplify the core nature of Trump's business practices and projects and help characterize Trump's political aims."Trump has differed from historic presidential precedent by not placing his assets into a blind trust, thus resulting in a conflict of private and public interests.
For instance, through clientelist networks and loyalty-based appointments, the ruling party of Serbia, the Serbian Progressive Party, has effectively captured the state, resulting in the country losing its status as a 'free' country according to the Freedom House Index.
- Mcebisi Jonas, former Deputy Finance Minister; explaining the process of state capture.
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).
South African opposition parties have made claims of "state capture" following allegations that the Guptas had inserted themselves into a position where they could offer Cabinet positions and influence the running of government. 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, a suburb in Johannesburg.
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. She said that 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 Vytjie Mentor a ministerial position, while President Zuma claimed that he had no recollection of Mentor.
Deputy Finance Minister Jonas said that 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." The Gupta family denied offering Jonas the job of Finance Minister. 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.
Following a formal complaint submitted in March 2016 by a catholic priest, Father Stanslaus Muyebe, 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. 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. 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.
Zuma and Van Rooyen denied any wrongdoing whilst the Guptas disputed evidence in the report and also denied being involved in corrupt activities. In an exclusive interview with ANN7 (belonging to the Gupta Family), President Zuma said that '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.
The report recommended establishment of a judicial commission of inquiry into the issues identified, 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. 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 African civil-society responses. The analysis was further developed in the book Shadow State: The Politics of State Capture written by Chipkin and Swilling.
On 11 September 2017, former Finance Minister Pravin Gordhan estimated the cost of state capture at 250 billion rand (almost $17 billion USD), in a presentation at the University of Cape Town Graduate School of Business. The Daily Maverick, a South African news publication, estimated that state capture cost the country roughly R1.5 trillion (roughly US$100 billion) in the four years preceding 2019. 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.
Russian involvement in SA state capture
Allegations of state capture were also known to have increased as the relationship between South Africa and Russia grew, resulting in a partnership that increasingly impacted upon the decision-making process of the African state. Soon after President Zuma took office, Moscow attempted to make inroads into Africa, all the while capitalizing on a South African leader who had extensive Soviet Bloc connections. The transactional nature of the relationship began when President Zuma pushed to be included in the BRIC grouping during the financial crisis, receiving important backing from the Kremlin which ultimately led to President Zuma attending his first BRICS meeting in 2011. The Kremlin also worked to establish ties between the two states’ security services, with some suggesting that President Zuma had sought to implement state surveillance capabilities with Russia’s help. Finally, amid countrywide debate surrounding the future electrical need of South Africa, the Russian state nuclear cooperation, Rosatom, offered to provide up to eight nuclear reactors by 2023, despite it making it little economic sense for the Russian company to intervene. The most troubling aspects were the enormous costs, the likely disregard for legal and administrative norms and the likelihood that President Zuma and associates would be the main beneficiaries. The Rosatom deal and growing partnership between President Zuma and Russia, led to South Africa seemingly abandoning traditional principles. For example, South Africa condemned a US-led intervention in Libya, despite voting in favour of a no-fly zone at the UN weeks earlier. The questionable ethical aspects of the Rosatom nuclear deal, alongside the lack of transparency, ultimately mobilised South African civil society and Zuma’s opponents into ensuring the deal failed, much to the detriment of Russia’s geopolitical ambitions.
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