Confronting the challenge of state capture in transition economies.

Abstract

In transition economies state capture is increasingly being recognized as the most pernicious and intractable form of grand corruption in the political economy. While most types of corruption are directed toward changing how existing laws rules or regulations are implemented with respect to the bribe payer state capture refers to corrupt efforts to influence how those laws rules and regulations are formed. To measure and analyze state capture the Business Environment and Enterprise Performance Survey was conducted among 22 transition countries by the World Bank and the European Bank for Reconstruction and Development. Findings note that because firms use their influence to block any policy reforms that eliminate the advantages that supposedly are to be enjoyed by the state state capture has become not merely a symptom but also a fundamental cause of poor governance. The capture economy is trapped in a vicious circle in which such reforms are undermined by collusion between powerful firms and state officials. Consequently tackling the problem of state capture is a prerequisite for reforms to improve governance and strengthen the legal judiciary and regulatory environment. A recognition of the challenge of state capture is to prioritize the reform agenda more effectively by developing a clearer sense of the factors that prevent further institutional factors.

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