Comparative Political Studies Volume 41 Number 4/5 April/May … · 2017. 1. 23. · Grzymala-Busse...

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Beyond ClientelismIncumbent State Captureand State FormationAnna Grzymala-BusseUniversity of Michigan, Ann Arbor

In choosing strategies of state capture (the extraction of private benefits byincumbent officeholders from the state), rulers choose whether to share rentswith popular constituencies and whether to tolerate competition. These choicesare conditioned by existing organizational endowments, the costs of buyingsupport, and the trade-off between the cost and probability of exit from office.In turn, both rent distribution and competition result in distinct configurations ofstate capture: clientelism, predation, fusion, exploitation, and the formationof specific state institutions and capacities.

Keywords: state capture strategies; rent distribution; competition

Incumbent elites capture private benefits from the public offices they hold.Both policy makers and scholars have focused on the corrosive effects of

these practices (Ades & Di Tella, 1999; Keefer, 2002; Knack & Keefer,1995; Persson, Tabellini, & Trebbi, 2001). Yet such extraction of stateassets also forms state institutions and capacities. In choosing strategies ofstate capture, elites face two fundamental considerations. First, they mustdecide whether to share rents with potential constituencies in exchange fortheir support. Second, they must decide whether to allow competition,because contestation affects the levels of rent seeking. These two choicesresult in four distinct strategies of state capture, and the building of stateinstitutions that further perpetuate the particular forms of capture.

The most familiar examples of state capture are clientelism and preda-tion (Chandra, 2004; Ichino, 2006; Kitschelt, 2000; Kitschelt & Wilkinson,2006; Magaloni, 2006; Piattoni, 2001; Robinson & Verdier, 2002; Scheiner,2006; Stokes, 2005). Clientelism consists of the contingent and targeted

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Author’s Note: I would like to thank Jim Caporaso, Cristina Corduneanu-Huci, JonathanHartlyn, Herbert Kitschelt, Lenka Siroka, Dan Slater, Erik Wibbels, and Steven Wilkinson, andthe participants of the “Frontiers of Comparative Politics” Conference held at DukeUniversity, April 2007, for their very helpful comments.

Grzymala-Busse / Beyond Clientelism 639

distribution of selective goods to supporters in exchange for their loyalty.These exchanges give clientelist organizations a strong advantage in politi-cal competition.1 In contrast, predatory rulers extract resources without sys-tematic targeting or delivering of goods to citizens, and opposition—muchless democratic competition—is not tolerated. This dichotomy reflects amore basic proposition frequently found in the literature—that democracyitself is a redistributive regime, whereas authoritarian regimes tend to redis-tribute far less (Acemoglu & Robinson, 2006).

Yet if clientelism and predation are distinguished by the degree of rent dis-tribution (sharing benefits with supporters) and their compatibility with com-petition, two other logical possibilities exist, as summarized in Table 1:redistribution without democratic competition and the capture of state assetsunder competitive conditions. As we will see, party-state fusion regimesheavily distribute rents in the absence of democratic competition, whereasexploitation abnegates redistribution despite a commitment to competition. Inshort, we cannot read political regimes off distributive practices.

All these strategies involve the formation of distinct state institutions andcapacities. State seizure does not simply corrode the state. Although extrac-tive rulers seek to maximize their discretion by weakening regulation andoversight, they also construct rules and durable practices of redistribution,budgeting, and authority. It is not simply the case that “clientelism thriveswhen government institutions are weak” (Manzetti & Wilson, 2007, p. 955),but rather, that specific institutions are built to serve the extractive goals ofrulers, sometimes with unintended consequences (Tilly, 1992). For example,fusion strategies substitute party structures for the state’s, becoming the keyagents of administration, distribution, and regulation and “hollowing out” ofstate institutions as the party takes over administrative roles. Clientelist rulersexpand the structures of the welfare state. Predatory rulers deliberatelyweaken state institutions and in the process increase their own costs of exit.Exploitative political parties opportunistically reconstruct independent stateinstitutions that offer access for the capture of state assets.

This article first examines the different configurations of rent distribu-tion and competition in extractive regimes followed by an analysis of howand why rent distribution and competition arise. The article concludes byshowing the impact on state capture and formation.

Characteristics of Extractive Regimes

I assume that in all cases of state capture (the elite extraction of stateresources for private gain), rulers have direct access to state resources and the

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state is porous enough to allow such access (i.e., it is not the archetype of theWeberian legal–rational state). The rulers can be individuals, oligarchies, fac-tions, or parties (Levi, 1988). In many of the cases examined here, they are atleast nominally political parties. Rulers are both opportunistic and risk averse,using all feasible and available means at their disposal to maintain power andlower their expected costs of exit. To maximize their returns, they can varytheir targets, diversify their portfolio of extractive techniques, and try to altertheir institutional environments (Levi, 1988; North & Weingast, 1989).

The state is the set of formal institutions that administers citizen obliga-tions (e.g., taxes, military service), enforces legal sanctions, and regulatespublic provisions (e.g., infrastructure, rule of law, welfare, defense, etc.). Itcomprises both public finances and the channels of their distribution. Theseinstitutions provide the resources that generate popular support or compli-ance for rulers: housing, jobs, education, government services, and otherprovisions. Because the state also enforces property rights, the institutionsof contract enforcement, property protection, oversight, and regulation canaid state capture directly and by punishing potential opponents.

Elite state capture is the appropriation of state resources by politicalactors for their own ends: either private or political benefit. State capture wasfirst conceptualized as “manipulating policy formation and even shaping theemerging rules of the game to their own, very substantial advantage” byeconomic agents (Hellman & Kauffman, 2001). In this analysis, the focusis on agents within the state. Extraction by the state, or the capture ofresources held by society, is critical in building costly state institutions(Levi, 1988; North & Weingast, 1989; Tilly, 1992). It can result in a mutualcontract between the rulers and society; taxes and military service areexchanged for security and the provision of public goods, such as educationand infrastructure. Extraction from the state, in contrast, is the capture ofresources that have already been accumulated by the state (Mann, 1988).Although some rulers will extract purely for themselves, others will obtainstate resources for the sake of their political party or organization and maychoose to share some of these gains with their supporters. State capturerefers to this elite extraction from the state.

Table 1Party Strategies of Extracting Resources from the State

Compatible with Competition Incompatible with Competition

Rent distribution Clientelism Fusion of party and stateNo rent distribution Exploitation Predation

The distribution of these gains and competition for office are two majorconsiderations for potential rulers. The provision of public and privategoods is a fundamental link to supporters. Similarly, competition for officeand power is a fundamental relationship with other potential ruling elites.As a result, in the process of obtaining and maintaining power, rulers facetwo dilemmas. First, distribution of selective goods generates loyalty andcompliance among supporters—but it cuts into the private gains the rulercan keep. Second, institutionalized competition decreases the costs ofmaintaining power and of exit from office—but it increases the probabilityof exit. Distribution and competition, in turn, rest on basic organizationalinvestments and democratic commitments of rulers, without which neitherdistribution nor competition can succeed (Grzymala-Busse, 2007).

The cases examined in this article vary on both dimensions. First, Table 2shows the rankings for political rights and civil liberties. These are imper-fect and rough indicators, but they show that the potential for competitionwas far higher in the exploitative cases than in either fusion or predation,which scored very poorly on these dimensions. Clientelist cases includehigh scorers (Italy and Japan) and a relatively low scorer (Mexico).

Second, the cases differ in the degree of rent sharing observed. Althoughcomparable measures of such distribution are notoriously difficult to obtain,the scholarly consensus is that we see relatively little rent distribution inNigeria, Indonesia, Philippines, or the postcommunist East-Central Europeancases. In contrast, extensive targeted and contingent rent distribution pre-vailed in Italy, Japan, Mexico, Russia, Singapore, and communist East-CentralEurope, with a larger proportion of state employment and greater redistribu-tive spending and allocation of resources, such as housing or developmentprograms (Chandra, 2004; Grzymala-Busse, 2007; Hicken, 2006; Magaloni,2006; Scheiner, 2006; World Bank, 1997). At the same time, these differencesare not a simple function of the levels of economic development: Mexico’sGDP per capita is lower than Italy’s or Japan’s, and yet all share clientelistfeatures. The GDP of Singapore is far higher than that of either Russia or thecommunist East-Central Europe, and yet all are cases of party–state fusion.These patterns suggest that economic development alone is not responsiblefor generating the variation in state capture strategies.

Different configurations of rent distribution and contestation producedistinct state capture strategies. Clientelism combines distribution andcontestation, exchanging supporter loyalty for rent sharing, as targeted andcontingent goods are delivered to select constituencies and individuals. Thesharing of the spoils of office with constituents lowers the costs of stayingin office and the threat of competition, even if it cuts into the profits



incumbents could otherwise gain from office in the short run. Examples ofwidely known clientelist regimes include Mexico, Italy, and Japan, as wellas Austria and India. Their competitive configurations range from anauthoritarian one-party hegemony (Institutional Revolutionary Party [PRI]in Mexico until the late 1990s) to a democratic two-party duopoly (Austriauntil the 1990s) and a volatile democracy dominated by one winning party(Italy until 1994).2

Clientelism targets spending and regulatory provisions to supporters to gen-erate sufficient support to stay in power without providing public goods to all.Through stable and repeated interactions with supporters, rulers credibly com-mit to providing selective goods contingent on support (Stokes, 2005). It is afamiliar and widespread strategy: thus “virtually all electorally successful par-ties in Latin America, even the more ideological ones, have learned to cul-tivate clientelistic ties at the grassroots” (Coppedge, 2001, p. 176). And itprovides a self-enforcing solution to the twin problems of ensuring adminis-trative loyalty and popular support (Crenson & Ginsberg, 2004).

Distribution without contestation is exemplified by the fusion of partyand state. To do this, rulers replicate and politicize state structures, subor-dinating them to incumbent representatives at every level. The ruling cohortdistributes rents contingent on societal acquiescence and lowers its proba-bility of exit by resolutely eliminating the opposition. Fusion precludes

Table 2Competition and Rent Distribution

Freedom House Scores

Political Civil RentCountry Rights Liberties Distribution

Italy, 1946-1994 1 2 HighJapan, 1955-present 1 2 HighMexico, 1929-1999 4 4 HighRussia under Putin, 2000-present 5 5 HighSingapore, 1959-present 5 5 HighCommunist East-Central Europe, 1948-1989 6-7 6 HighNigeria under Abacha, 1993-1998 7 6 LowIndonesia under Suharto, 1967-1998 7 6 Medium, then lowPhilippines under Marcos, 1966-1986 5 5 LowPoland, 1989-present 1 2 LowCzech Republic, 1989-present 1 2 LowSlovakia, 1989-present 1 2 Low

Source: Freedom House, 1970-2006. Scale is 1-7, with 1 as high level of freedom/rights


competition through the repression of potential competitors, either de iure(the “leading role of the party”) or de facto (high entry thresholds, financ-ing and registration requirements).3 Examples of fusion include the com-munist states of the Soviet bloc and Singapore. As one analyst observed inSingapore, “PAP [People’s Action Party] has set up a . . . system of partycells at the grassroots level and combined it with a direct role in the admin-istration of the electoral wards and city districts. PAP and government, inthis sense, are more or less one and the same” (Sachsenröder, 1998, p. 19).Elections are held, but “the ruling party obviously uses all available legaland organizational means to make it less easy for the few opposition politi-cians” (Sachsenröder, 1998, p. 11). As a result, the ruling PAP holds all but4 to 6 seats out of 81 in the Parliament. Another example is post-2000Russia, where the cohort around Vladimir Putin has effectively taken overstate structures to produce “a merger of state budget and party organiza-tion” (Smyth, Wilkening, & Urasova, 2007, p. 9).

In the absence of contestation, organizational investments are made inboth the state and the party, but the goal is to eliminate the opposition asmuch as to ensure popular acquiescence. In both Singapore and Russia, forexample, the rule of law was used selectively to eliminate rivals. Communistparties developed dense organizational networks that reach down to thelevel of local governments, workplaces, and residential units. These partyorganizations not only delivered (or withheld) welfare state services such ashousing, education, vacations, and health care to individual workers (Fainsod,1958; Hirszowicz, 1980; Kaplan, 1987, 1993), but they also directly moni-tored political opinion, named officials, controlled economic production,and subordinated government agencies.

Institutional exploitation is one result of political competition withoutdistribution of selective goods. It consists of deliberately building formalstate institutions that allow direct extraction of benefits and perpetuateexisting informal practices of rent seeking. Examples of exploitationinclude Slovakia until 1999, and the Czech Republic and Poland after 2004(though even more severe cases are found in Latvia and Bulgaria). Theserulers were committed to elections and to democracy: Having just emergedfrom decades of authoritarian rule, which had eliminated potential com-petitors, new postcommunist parties had little interest in pursuing strategiesthat could easily turn against them and give rise to another one-party hege-mony. Such commitments were further reinforced by the firm stance of theEuropean Union (EU) that only democratic countries could enter the EU.

At the same time, these rulers did not enter into distributive contractswith their constituents. Voters were relatively expensive to buy off, given


the relatively high economic development and income equality. Furthermore,parties had no capacity to develop the channels of monitoring and delivery.Members4 and organizations5 were both sparse, and the dominance ofnational media campaigns rendered party organizations superfluous. Finally,party instability made it difficult for voters and parties to engage in particu-laristic contracts: High volatility and fragmentation made party disappear-ance all too likely. Offering selective goods to supporters was both inefficientand implausible. In the absence of distribution, however, exploitative partiescould not count on a loyal and dependent electorate, making exploitation verysensitive to changes in competition. As a result, the high levels of exploita-tion in Slovakia dropped significantly after 1998, when a reformist coalitionswept the dominant party from office. Conversely, states with relatively lowlevels of exploitation became far more open to it once competition becamemore disorganized and muted in its criticism, as in Poland after 2004.

With neither distribution nor contestation to constrain capture, extractiveelites have the discretion to pursue capture directly, without making orga-nizational investments in welfare state delivery and monitoring channels orprotecting contestation. Thus, in elite predation (kleptocracy or predatoryrule; see Hutchcroft, 1998, for important distinctions among predatoryregimes), rulers steal government funds and expropriate both state propertyand private assets (especially those of potential opponents). Distributivecontracts between rulers and supporters do not arise, because rulers havenot invested in requisite organizational linkages and voters are not as nec-essary to maintaining office as elite allies or armed forces. Classic exam-ples of countries that experienced predation include the Philippines,Nigeria, and Indonesia, where Ferdinand Marcos (1965-1986 in office),General Sani Abacha (1993-1998), and Mohamed Suharto (1967-1998)each stole billions USD while in office (Goldsmith, 2004; TransparencyInternational, 2006). Competition is severely constrained by repression,electoral fraud, and anticompetitive institutions, and institutional invest-ments reflect the dominance of repression over redistribution. Such regimes“tried to eliminate, weaken, or take over any nongovernmental institutionthat might contest their legitimacy and authority” (Bratton and van deWalle, p. 72). Parties and factions that do not gain control of central exec-utive office find themselves starved of resources necessary for survival.

As a result, rulers have greater opportunity to “ma[k]e little distinctionbetween the public and private coffers, routinely and extensively dippinginto the state treasury for their own political needs” (Bratton & van deWalle, 1997, p. 66). They have considerable discretion to shift strategiesand rates of capture: For example, initial years of Suharto’s rule in Indonesia

saw credible efforts to attract investment, as a way to thwart the communistthreat and shore up his own rule. To that end, Suharto informally ensured theproperty rights of the Chinese minority entrepreneurs and maintained capitalmobility throughout his early rule (see Lewis, 2007). Once the communistcollapse made the domestic communist threat far less viable and the regime’ssphere of control was firmly established, however, Suharto sought chiefly toprotect his financial interests. Special preferences, arbitrary decisions, andplaying (and paying) off the army against Golkar, a corporatist civilian orga-nization, by Suharto all combined to accelerate the depredation of theeconomy, setting the stage for the country’s financial collapse in 1998.

These examples serve as useful archetypes, but clear-cut examples of asingle strategy are relatively rare. Rulers diversify and “catch-as-catch-can,”and these strategies are compatible with each other to an extent. Clientelismis especially adaptable: Thus, predation or exploitation can be augmentedwith clientelist distribution, as rulers buy off the support of potentially trou-blesome factions or individuals without systematically relying on such pro-visions to stay in office. It is also possible to use one strategy on the nationallevel and another on the local, subnational authoritarian enclaves, or localexchanges that support national-level predation (Ichino, 2006). Third, thesestrategies can change over time, as the relative costs and benefits of distribu-tion and competition change. Finally, they can vary across state sectors: Forexample, the Singaporean PAP monopolizes the politics of redistribution butallows free markets to flourish. And lucrative state sectors (e.g., customs,infrastructure) are more tempting targets for capture.

The Origins of Rent Sharing and Contestation

How, then, do these configurations of rent sharing and contestationarise? What actor rationales and structural constraints underlie rent distrib-ution and competition? These choices are conditioned by existing organi-zational endowments, the costs of buying support, and the trade-offbetween costs and probability of exit from office.

Rent Sharing and Distribution

One fundamental question for rulers is whether to share the rentsobtained with supporters. The key distinction is whether to share with non-officeholders: The motivation to do so is to buy widespread popular support,whereas rent sharing with fellow officeholders buys the acquiescence of


direct and potentially powerful rivals. Rent sharing with constituents cutsinto the share of gains the incumbents can keep, but the dependency onselective good provisioning reduces demand elasticity for rulers.6 It makessense when (a) it is cost effective, (b) supporters are available and sensitiveto the provision of such goods, and (c) the contracts between supporters andrulers are credible. The less these conditions hold, the more it makes sensefor incumbents to extract for themselves, without sharing rents with non-officeholders.

Poverty and income inequality increase the pay-offs of redistributivestrategies (Stokes, 2005). Low levels of economic development and inequalitymean that potential supporters can be bought off relatively cheaply (com-pared to buying off wealthier sectors of society). Poor voters are cheap andeffective targets for clientelist rulers (Calvo & Murillo, 2004; Magaloni,2006; Stokes, 2005).7 Moreover, the poor are less likely to challenge incumbentcapture than the wealthy are. And under lower levels of economic develop-ment, the economy is not closely tied to the development of capitalism andless able to support public good provision or property right enforcement(Khan, 2005). Weak feedback from the capitalist sector gives considerableleeway to extract and redistribute, because there is less pressure for theprovision of public goods.

Potential supporters become more dependent on such rent distributionwhen they have few other options, thanks to low labor mobility, underpro-visioning of public goods such as education, and inability to enter into prof-itable economic activity. Moreover, “because of poor people’s limitedphysical mobility and clustered patterns of residence, politicians can alsomonitor the adherence of the poor to clientelist deals better than that ofaffluent individuals” (Kitschelt, 2000, p. 857). Where a sizable middle classexists, clientelist strategies are costlier, because middle-class voters areexpensive to buy off and less likely to agree to bear the costs of rent distri-bution if it does not provide public goods (Kitschelt & Wilkinson, 2006;Robinson & Verdier, 2002).

Rent distribution requires organizational investment. It relies on institu-tional channels of monitoring and benefit delivery (Grzymala-Busse, 2007).Potential supporters and rulers need to enter into credible exchange contracts,and these are monitored and delivered by state and party organizations. Theseorganizational investments take a variety of forms: members, local activistsand brokers, and affiliated organizations (see Levitsky 2003; Stokes, 2005).Members themselves are less important than the party’s ability to reachindividuals through the organizational networks they command.8 Thus, theJapanese Liberal Democratic Party (LDP) developed a very dense network


of affiliated local organizations (koenkai) in each electoral district thatdelivered services and mobilized LDP support (Richardson, 2001; Scheiner,2006). And the Peronist vote in Argentina is higher and more stable in areaswith dense party organizations and extensive public employment (Calvo &Gibson, 2001; Calvo & Murillo, 2004). Where rulers do not have such orga-nizational resources at their disposal, distribution of selective goods is notsustainable and rulers are more likely to turn to either predation or exploita-tion (Grzymala-Busse, 2007).

Distributive networks are both costly to establish and to maintain, sorulers will not build them if they anticipate an unstable political environ-ment. External guarantees and domestic relationships can both serve asinsurance: The Soviet support for the communist project in East-CentralEurope, or existing patron–client ties in Latin America, made the develop-ment of the organizational networks and state institutions tenable. Thus,parties require stability to distribute rents and, subsequently, distributionbreeds the dependence that may ensure stability. This cycle may be one rea-son why one-party authoritarian regimes are more durable than military orpersonalist ones (Geddes, 1999).

Even under fully free competition and universal suffrage, the distributionof rents to supporters makes little sense where few party–constituency link-ages exist: When voters face a different menu of political parties at each elec-tion, under conditions of high electoral volatility, or when political parties areunable to identify loyal voters, rent distribution helps to ensure such loyaltybut does little to identify its sources initially. High rates of party fragmenta-tion and voter volatility all make organizational investments needed for rentsharing costly and the pay-offs uncertain. Rulers then extract state assets andmaintain competition, without redistributing to constituents: They can faceelectoral punishment if their rates of capture are too high (and becomepublic), but they will not be punished by voters for not sharing rents, becausethere is no voter–ruler contract that exchanges support for selective goods.This scenario is most likely in new democracies, where parties arise in themodern era of mass media rather than mass mobilization and organizationalinvestments, and where voter loyalties and party identities are fluid.

At the same time, distribution acts as a buffer against competition: Thedependence generated by selective good provision lowers the probability ofexit. First, defection is costly for voters, placing would-be competitors at adisadvantage (unless they can either offer higher levels of goods or the elec-torate’s demand for such goods drops). As Medina and Stokes (2007) argue,clientelist incumbents can establish credible threats against clients who maydefect to a challenger, thus reducing the potential opposition. As a result, even


if voters discover corruption or elite rent-seeking, they may have little reasonto punish the incumbents if the latter distribute rents (see Adserá, Boix, &Payne, 2003). Second, even if there is attrition among supporters, the exten-sive organization of supporters and activists acts as a buffer, so that a partymay survive an electoral downturn more readily than a party with no infra-structure. Moreover, incumbents can pre-empt rivals by increasing their ratesof distribution. If there is no competition, distributing selective goods makesmonopoly rule less costly: Rulers can threaten to withdraw housing, educa-tion, and jobs from potential defectors and their families, a well-knownpenalty that dissuades potential opponents (see Smyth et al., 2007).

Competition

Competition or contestation consists of the capacity to contest the con-duct of government and to present distinct alternatives to the incumbent(Dahl, 1971). The more intense the competition, the more the oppositioncan be clearly distinguished from the incumbent, and its criticisms and pol-icy alternatives are credible. If voters object to rent seeking (e.g., theyreceive no benefits from it) and they are responsive (they are not fullydependent on the incumbent), then competition lowers incumbent rentseeking. It does so by increasing the threat of exit from office for the incum-bent (as a result of electoral backlash) and by increasing the rate of turnover(limiting any one incumbent’s opportunity to obtain rents).

For incumbents, competition increases the likelihood of exit from officeand lowers the portion of private gains rulers can keep. If institutionalized(mechanisms for succession are clear and losers are guaranteed safety andcontinued ability to compete), it also lowers the costs of exit, ensuring thatlosers survive and have the opportunity to re-enter office. Given the legit-imacy it can confer, it makes rule less expensive as well. However, wherethere are no clear mechanisms for succession nor guarantees (eitherdomestic or international) for the losers of their safety and continued abil-ity to compete, competition can increase the rate of capture as a result. Forexample, in Nigeria, “incumbency has become everything . . . to lose officeis to lose almost the only means of survival, as well as immunity fromprosecution” (“Big men,” 2007).

There is a vast literature on the factors and strategic interactions thatunderlie this trade-off between the probability and the cost of exit, whichprompt some rulers to accept competition and others to reject it (e.g.,Boix, 1999; North & Weingast, 1989; Przeworski, 1991). These includeinternational conditionality (e.g., the Soviet Union precluded competition



in its satellites, the EU insisted on it), the demands and mobilizational abil-ities of the potential electorate, the costs of repression, and whether all eliteactors can accept competitive selection and the institutional guarantees forthe losers. In postcommunist East-Central Europe, for example, the com-mitment to democratic competition was the result of shared fears of back-sliding into an authoritarian regime that would eliminate the inchoatedemocratic parties and elites (Grzymala-Busse, 2007). Fundamentally andsimplistically, we see commitments to competition when the costs ofrepressive or noncompetitive rule become unsustainable and both elites andvoters coalesce around the competitive equilibrium.

Impact on State Capture

Both rent sharing and competition result in distinct configurations of statecapture: clientelism, predation, fusion, and exploitation, and in the formationof specific state institutions and capacities. Incumbents seeking to obtainprivate benefits from the state have a variety of extractive mechanisms attheir disposal. Rewarding government contracts and tenders to allies (withthe expectation of kickbacks and campaign funding), expropriation, assetnationalization, patronage, extrabudgetary funds and agencies, opaqueaccounting procedures, skimming or outright theft of foreign aid moneysand mineral resource profits are all ways of diverting state resources into theprivate coffers of ruling elites. To develop maximum control over state agen-cies, rulers will purge the civil service, weaken regulatory agencies, politi-cize fiscal bodies (such as central banks and budget offices), and take overthe allocation of foreign aid, customs, and mineral wealth.

Rent distribution and political competition constitute and constrain thechoice of these strategies. Distribution of selective goods necessitates thebuilding up of both state capacity and political party organizations todeliver and monitor selective good provision. Furthermore, because rentsharing relies on teams within political parties and the state, the personal-ization of office is reduced. Distribution does not affect the levels of extrac-tion from the state—but contestation can. Contestation further reduces thelevel of elite discretion and increases some state capacities. Distributionand contestation themselves interact; for example, distribution provides abuffer against competition.

Rent distribution affects the mechanisms and agents of state capture. Themechanisms of rent distribution include (a) expanding partisan control overthe welfare state, (b) expanding those provisions that can be selectivelydelivered, (c) monitoring the recipients’ support through both formal (state)

and informal (party) means, and (d) withdrawing benefits if necessary.These are needed both to ensure that rents can be systematically shared andthat they buy supporter loyalty (and thus increase the expected utility ofoffice). We observe this pattern in both clientelistic and fusion regimes.

First, often under the guise of state reform, regulatory, budget manage-ment, and audit agencies are brought under partisan control, increasingaccess to state resources and their distribution. Incumbents pack the stateadministration with loyal supporters, who then further hire on the basis ofloyalty. Control over housing, education, and other welfare provisionsremains nominally at the ministry level, but local party representatives are putin charge of distributing these goods (see Chandra, 2004; Piattoni, 2001). InSingapore, the ruling PAP offers the electorate a set of constituency-specificprograms, including welfare provisions, infrastructure, facility upgrades, andhousing subsidies, “only offered if the PAP is voted in” (Seng, 1998, p. 389).These programs are under the jurisdiction of government ministries, butparliamentarians manage the housing estates in their constituency, and 86%of the population lives in public housing.

Second, welfare state expansion in the service of elite state capture con-sists of increasing relative spending on those benefits and services that canbe targeted and which are likely to have the greatest pay-off in terms of thenumber and loyalty of supporters (who are likely to be relatively poor, rural,and less educated). These include targeted economic development and ruralcredit programs (National Solidarity Program [PRONASOL] in Mexico;see Diaz-Cayeros, Estevez, & Magaloni, 2006), jobs within the public sec-tor (the Austrian proporz system), local infrastructure projects (the concreteclientelism of Japan; see Scheiner, 2006), and property rights (title and landregistrations awarded at the discretion of local land-settlement officials; seeChandra, 2004). These sectors promote capture by targeting delivery andallow the incumbent to keep as large a portion of the rents as possible whilemaximizing the electoral pay-off.

Finally, rent distribution further affects capture strategies through thedevelopment of (and payments to) an extensive organization within thestate and teams outside of it. Both state and party institutions are used tomonitor recipient support. Rural development officials, local registrars andelectoral commissions, utility managers, and school teachers all obtain theirjobs through the party. They are expected to be both loyal supporters andmonitors of how widespread that support is among the populace. Thenumber of state officials expands as the incumbents seek to develop theirmonitoring network, and the loyalty of these agents is ensured by theirdependence on the party for state employment (Chandra, 2004). As a result,


we would expect that the more extensive the rent distribution, the greaterthe state capacity to regulate and to monitor both citizens and their transac-tions. Incumbents also make their own extensive organizational investmentsin parties that act both as a mechanism for the delivery of goods from officeto party to constituency and for the enforcement of the voters’ support(Chandra, 2004; Magaloni, 2006; Piattoni, 2001).

Rent distribution perpetuates the rule of these party teams: Individualelites benefit, but the key aim is to ensure that the cohort can receive theresources and payments necessary to perpetuate its rule and the underlyingsystem of rent distribution. Systematic distribution thus restricts the per-sonalization of office, or the process of increasing the decision-makingweight of individuals relative to state institutions, legislatures, courts, orministerial cabinets. Where distribution is sporadic, targeted, and driven bylooming crises, few organizational investments are made: For example, themodal party organization in Nigeria under predatory rule was a one-personoperation, with few regional–national linkages other than ad hoc coalitionswith local leaders who deliver votes and intimidation in varying proportions(Ichino, 2006; Lindberg, 2004).

As a result, if either competition or distribution is systematic and institu-tionalized, we are more likely to see capture on behalf of ruling organiza-tions rather than on behalf of individuals. A portion of the gains will bereinvested into the gain-seeking organization. This is because parties resolvecollective action dilemmas inherent in policy making and elections—bothdistribution and electoral competition relies on organized parties (Aldrich,1995; Kitschelt, 2000). Where neither distribution nor competition takesplace, individual rulers gain private benefits without making organizationalinvestments, as in predation.

Contestation affects capture from the state in two main ways. First, itaffects the choice of extractive mechanisms: Given their commitment to therules of competition, incumbents are less likely to resort to tactics thatwould destabilize the competitive system: sudden nationalization of assets,outright expropriation of potential rivals, or the violent capture of assets.Without a commitment to competition and the relatively level playing fieldit requires, incumbents will discretionarily and arbitrarily use both repres-sive mechanisms and the rule of law to starve the opposition of resourcesand appropriating these for the incumbents. Second, intense competitionincreases the probability of exit from office. If rulers expect electoral pun-ishment when their rent seeking is revealed, they will directly curtail therates of their extraction from the state and insulate state institutions frompolitical influence, creating new, independent institutions of oversight and


regulation. Endangered incumbents fear that unless they do so, their rivalswill be able to use state institutions to enrich and entrench themselves oncein office. Thus, contestation can directly affect the rates of extraction inways that distribution does not.9

Where competition is institutionalized and programmatic (or at least notbased on delivering selective goods), and no rents are shared, incumbentsare especially vulnerable, because they have no supporters that they canblackmail into loyalty. The costs of exit are relatively low, because losersare guaranteed safety, but there is no buffer of dependent supporters.Without the distribution of selective goods, voters have few reasons to tolerateexploitation but have the franchise necessary to punish the ruling parties(Grzymala-Busse, 2007; O’Dwyer, 2004). Competitors highlight incumbentshortcomings and are as credible in their appeals as the incumbents. As aresult, rates of exploitation are highly vulnerable to changes in competition.And as Poland after 2004 shows, exploitation held in check by a robustopposition can quickly bloom once the opposition falters.

Although these causal arrows can be logically reversed, it is unlikely thatstate institutions produce rent distribution and political contestation patterns.First, we see the same extractive strategies being adopted on the basis ofvery different institutional legacies: For example, fusion arose on the basisof postcolonial, postdemocratic, and postautocratic states, relying on theweakness of competitive pressures (a decimated civil society and absentalternative political elites) and demand for rent distribution. Second, there isthe question of temporal precedence: As noted earlier, clientelism built onexisting patron–client ties, exploitation arose simultaneously with therebuilding of the postcommunist state, and so forth. State institutions subse-quently maintain elite state capture strategies: Decades of supporter depen-dence generated by clientelist practices reduces the plausibility of oppositioncompetitors, for example. But state institutions themselves do not producethese extractive regimes.

Consequences for the State

If state formation reflects state capture strategies, we should see the samepractices and mechanisms by which redistribution and contestation affectstate capture mirrored in the creation of state institutions and capacities. Thissection argues that, accordingly, rent distribution bolsters certain aspects ofthe state’s infrastructural capacity (its ability to suffuse and implement itsdecisions within civil society) through the development of rent delivery



channels and support monitoring. Contestation reduces the state’s despoticcapacity, or the ability to act discretionarily, without consultation withsociety (Mann, 1988).

Rent distribution has several effects on state capacities. First, partisancontrol weakens the institutions of audit or regulatory agencies, allowingincumbents to use them selectively. Second, the expansion of welfare stateprovisions, even if contingent and targeted, increases spending on healthcare, education, and other provisions. It further necessitates increasing statecapacity to deliver goods and monitor compliance. Public administrationexpands both as a result of this increased demand and because patronagejobs are one of the goods distributed. Third, distribution and monitoring ofconstituency support requires that the state develop legibility, or the capac-ity to identify supporters and defectors and to process this information(Scott, 1998; Slater, 2003). In contrast to claims that redistribution does notrequire formal institutions (Gandhi & Przeworski, 2007), then, this analy-sis argues that rent distribution necessitates state institutions, not only partyorganizations.10 Fourth, institutions create opportunities for individualpoliticians to take credit for delivering rents to supporters.

In turn, intense contestation builds up the quality of oversight and regu-latory institutions, where the electorate is not dependent on rent sharing andthus free to support the opposition. Incumbents lower their rate of rent-seeking and insulate state institutions from the political influence of theirsuccessors. Contestation without distribution also results in smaller stateadministrations relative to advanced democracies (given fewer incentivesfor patronage), with commensurately lower wage bills (given the lowerrent-seeking). Finally, competition places additional pressures on rulers toincrease legibility and infrastructural capacity, because elections requirevoter registration, ballot distribution, and the calculation of results. Theseconfigurations are summarized in Table 3.

The impact of distribution and competition, and the mechanisms thattranslate state capture into state formation, are visible in four institutionaldomains of the state: formal state institutions (including property rights,regulation and oversight, the rule of law, and tax collection), state adminis-tration, development programs, and electoral institutions. These institutionsfulfill fundamental state roles.11

State Institutions of Law and Oversight

Formal institutions that protect property rights, ensure transparency ingovernment spending, and regulate contracts between governments and


private actors can all constrain capture, and this is precisely why rulers areoften loath to implement or enforce them (Dixit, 1996). Yet contestation andrent distribution can constrain these impulses. As Table 4 shows, strategiescompatible with competition (clientelism and exploitation) go hand in handwith higher ratings for the rule of law and regulatory quality, whereas ratingsfor fusion and predation are both lower and display greater variance. Withoutrent distribution, contestation becomes the main impetus for building strongstate institutions: Audit institutions and ombudsmen are powerful only whereintense competition takes place (Poland, and also Hungary, Slovenia, andEstonia: see Grzymala-Busse, 2007). Without rent distribution or contesta-tion, predatory regimes have the weakest state institutions and greatest rulerdiscretion, as their poor rule of law and regulatory ratings suggest.

Rent distribution simultaneously weakens individual property rights andexpands the provision of contingent welfare to perpetuate supporter depen-dency on the ruler. The requirements of distribution necessitate the devel-opment of formal state institutions, but there are few incentives to makethese institutions autonomous. Both fusion and clientelist states have con-siderable opportunity to develop strong state institutions of monitoring, taxcollection, oversight, and so forth, but also have the discretion not to do so(given the popular dependence on state provisions). Thus, patronage is a

Table 3Consequences of Extractive Regimes for State Institutions

Extractive Formal Public Developmental ElectoralRegime Institutions Administration Projects Institutions

Clientelist Redistribution Large, Contingent, Credit taking:favored, weak commensurate targeted, personalizedproperty rights, wage bill and delivercredit taking goods

Fusion Relatively high Large, Contingent, Credit taking capacity, beholden commensurate more broadly but no to political party, wage bill targeted contestationcredit taking

Predatory Greatly Small, outsized Directly extractive, Noncredit taking weakened, wage bill or ruse for but also limited personalized embezzlement contestation

Exploitative Relatively Large, No special Noncredit takinghigh capacity, relatively small emphasisdiscretionary wage billwithoutcompetition


Table 4Indicators of State Governance and Capacities

World World Governance GovernanceIndicators Indicators

Rule of Regulatory TaxOversight and Regulation: Audit Law Rating Quality Revenues

Country Courts and Ombudsmen (OECD: 91%) (OECD: 90%) as % GDP

Italy Audit court has limited investigative, 73 79 41extensive punitive powers, no ombudsman

Japan Audit court has limited investigative, 89 68 27no punitive powers, no ombudsman

Mexico Audit court has limited investigative, no 43 66 20before 2000 punitive powers, no ombudsman

Russia Audit court has investigative and 21 36 36under Putin punitive powers, but can be immediately

recalled by Duma or Federation council; Ombudsman established in 1997,

no investigative powers, can only obtaininformation with consent

Singapore Audit court has investigative but not 92 99 31punitive powers, set up in 1970,no ombudsman.

Communist Late communism; few ombudsmen, n/a n/a n/aEast-Central parliamentary appointed, limited Europe powers information only 4 12 7

Nigeria under Audit court has no investigative orAbacha punitive powers; ombudsman established

in 1975, investigative powers,but can be removed at any time

Indonesia Audit court set up in 2001, limited 18 25 19under Suharto investigative and no punitive powers;

ombudsman established in 2000,but no investigative powers

Philippines Audit court set up in 1973, limited 34 51 12under Marcos investigative but punitive powers;

ombudsman a presidentialappointment since 1987, after Marcos;no direct enforcement

Poland after 1989 Audit court established in 1994, 66 70 37opposition-led, extensive investigativeand some punitive powers; ombudsmanestablished in 1987, increasingly extensive investigative powers

Czech Republic Audit court established in 1992 but 71 84 38after 1989 government controlled until 2000,

no in-depth investigative powers; ombudsman established in 2000(vs. limited investigative powers)

Slovakia Audit court established in 1993, but 63 77 29after 1989 controlled by government; no

independent investigative powers;ombudsman established in 2002,apolitical

Note: OECD = Organisation for Economic Cooperation and Development.Source: Asher, 1989; World Bank, 2002.

favored strategy of filling state positions, because it ensures loyal anddependent state officials. Similarly, rather than attempting to develop uni-versal welfare state systems, clientelist politicians will seek to keepservices, infrastructure, and development benefits at their discretion. Thereare two reasons to do so: First, particularized benefits ensure continued sup-port, because they can be withdrawn. Second, politicians receive directcredit for patronage, rather than the party taking diffuse credit for universalpolicies (Chandra, 2004).

Two results follow: (a) a set of state formal institutions that can collecttaxes, regulate the economy, and enforce the rule of law but will not do soconsistently or uniformly, and (b) a stronger state capacity to gather infor-mation and reach into remote areas. This legibility works both ways:patrons monitor support, and clients can assign credit. As a result, both ruleof law and effective tax collection are feasible, but rulers are less likely topursue these constraints on their extraction in less competitive and eco-nomically developed systems. As Table 4 shows, the result is that Japan andItaly have higher governance ratings than Mexico does. With fewer resourcesand a meager potential tax base, the PRI in Mexico concentrated on target-ing contingent goods rather than on developing these state capacities.

In fusion regimes, state agencies are responsible to the ruling party aloneand had few regulatory or oversight powers of their own.12 As a result, stateinstitutions mirror party preferences and capacities. One extreme is Singapore,with a highly visible and enforced rule of law and regulatory system,designed expressly in mind with attracting investment and promoting eco-nomic growth. Another is Putin’s Russia, which strengthened legal andoversight institutions selectively. As a result, despite low overall regulatoryratings, powerful state institutions of oversight and regulation exist, such asthe Tax Authority, which can conduct on-site audits of any company or indi-vidual, with no statute of limitations on the audits, duration limits, or rightto appeal. The legibility capacities of such states grow in the service of theparty’s control over state and society: registration requirements limit mobil-ity, job assignments are controlled by the party, and so on.

The development and control of formal state institutions without con-testation also allows incumbents to legally neutralize rivals and rule by law,rather than follow the rule of law. For example, Putin and his cohort havelimited competition through formal channels by raising the requirementsfor territorial presence, financial reserves, popular signatures, and partymembership. As a result, the 60+ parties of the Yeltsin era have beenreduced to fewer than 15. Putin has eliminated other potential competitorsby using the rule of law, strictly but selectively applied, to question the


property rights that were acquired in the mid-1990s in a much shakier legalframework (Allina-Pisano, 2005; Darden, 2001). This tactic eliminatedpotential challengers and helped to establish enormous new state-ownedholding companies in critical sectors such as gas and mineral resources,automobile and aircraft manufacturing, shipbuilding, nuclear power, dia-monds, and titanium. Similarly, PAP actively limited legislative oppositionand brought the legal system, state administration, and trade unions underits control, enabling it to use administrative law against its political oppo-nents (Seng, 1998).

Predatory regimes combine the control of the state, made possible by theelimination of competition, with low pressures to build up state institutionsof legibility or good provision delivery in the absence of rent distribution.Rulers are free to concentrate power in their own hands and rule by decree(Sidel, 1999). Such personalization still relies on building up specific stateinstitutions, especially those that increase access to state resources and theirdiversion (such as unregulated privatization, extrabudgetary funds, andexpropriation mechanisms). To maintain the incumbent in office, repressivemechanisms and state institutions are also strengthened (Slater, 2007). Forexample, in the Philippines, both the army and the Supreme Court weregiven additional power and resources under Marcos—but at the same time,they were made beholden to him.

Although formal state institutions selectively enforce property rights infusion and clientelist regimes, state institutions cannot do so in predatoryregimes. Fearing expropriation, property owners purchase protection fromrulers and ruling factions individually (Khan, 2005). Asset holders will seekto preserve asset mobility (through speculation and capital flight) and tocollude with bureaucrats. Because insecure property rights and uncertaintysurrounding contracting increase fears of expropriation and lower invest-ment rates, predatory rulers wishing to attract investment have to turn tomembership in international organizations, convertible currency, or openfinancial markets: external commitments that trigger sanctions againstexpropriation (Lewis, 2007). Their domestic institutions are unable to offersuch guarantees.

Predatory rulers have few incentives to build infrastructural capacity. Toensure discretion, formal institutions are largely weak, with little or no inde-pendent oversight and regulation. With few resources and little efficiency (theresult of administrative purges), state institutions have little capacity toenforce laws, regulate the economy, or collect taxes (Jackson & Rosberg,1982). Oversight and regulatory agencies, the civil service, and the judi-ciary are left “weak and politicized, thereby compounding the uncertainties



that flow from central policies” (Lewis, 2007, p. 20). Tax collection rates inpredatory regimes are the lowest among the cases considered, even accountingfor their lower income levels, as Table 4 summarizes.

In exploitative regimes, competition underlies the building of formalstate institutions. First, the same commitments to competition limit thestrategies of state capture: Few cases of outright expropriation take place.Postcommunist incumbents, for example, benefited extensively from priva-tization through favorable awarding of bids and tenders but did not abnegateproperty rights once established (Ganev, 2007). Property rights are pro-tected, all the more so because privatization is a lucrative contributor of stateassets. Second, because voters receive no selective goods and thus care moreabout programs and policy competence, competitors can profit electorallyfrom incumbents’ malfeasance. The more intense the competition—themore voters are given clear, credible alternatives to the incumbents by anopposition that is highly critical of the incumbents—the more likely therewill be a regulatory regime, with antinepotism and antipatronage laws,powerful regulatory agencies and courts, and oversight institutions such assecurities and exchange commissions, anticorruption offices, and centralaccounting offices. Their terms do not coincide with the Parliament’s, andthey are not controlled by the incumbents. Finally, competition places addi-tional demands on state legibility and other capacities, because representa-tion and contestation are ensured by formal state institutions. Incumbentscommitted to contestation need to ensure that state institutions can registervoters, run local polling places, or gather ballots.

Faced with a higher probability of exit, but knowing they were likely tocompete for power again, incumbents built institutions that would restraintheir successors. One result is higher rule of law ratings, as Table 4 shows.Another is that ruling parties rapidly established a slew of formal state insti-tutions, investing them with considerable powers and insulating them fromparty politics. Where a more robust competition existed in postcommunistdemocracies, 85% formal state institutions of oversight and regulation wereimplemented voluntarily, before the EU demanded adoption. Where com-petition was weaker, only 31% of such institutions were implemented vol-untarily. They were either weakened and politicized—or simply not built atall. Latvia, Slovakia, the Czech Republic, and Bulgaria all delayed impor-tant oversight institutions, such as audit courts, securities and exchangecommissions, and ombudsmen.

Unlike rent-distributing regimes that take credit for rent distribution,both predatory and exploitative regimes seek to remove swathes of publicaccounts out of public scrutiny to minimize the assignment of blame. To do

so, they rely on a variety of quasistate organizations and funds to preservediscretion. Such off-budget items include various quangos, foundations,private armies and security forces, economic authorities, tax farmingarrangements, and contracting firms. Predation is both aided by and resultsin budgetary opaqueness. Both because rulers preserve their discretion andbecause they do not take credit for rent distribution, the fiscal regimes areoften kept deliberately obscure. Thus, the amount and allocations ofPhilippine’s national budget after 1973 were hidden from all but the high-est bureaucrats. Fiscal transfers were concealed so that “officers in particu-lar agencies knew when budgeted funds had not been received, but eventhey had no clear indication as to where the funds had gone” (Wurfel, 1988,p. 139; also see Sidel, 1999). Similarly, extrabudgetary funds underpinnedpredatory rule in Indonesia (Robison & Hadiz, 2005). Nigerian peacekeep-ing activities in Africa were conducted off budget and cost far more thanUN estimates of these activities (Lewis, 2007).

Exploitative incumbents either continued or established numerous fundsand quasipublic agencies in the postcommunist democracies (Grzymala-Busse, 2007). Although some were inherited from the communist regime,exploitative incumbents expanded many of these to shift moneys out of thepublic budget, especially after the windfall associated with the privatizationof state enterprises. Yet competition limited this expansion: Where compe-tition was weaker, the number of opaque extrabudgetary institutions andquasistate agencies increased by 100%—where competition was morerobust, the increase was a relatively modest 28% (Grzymala-Busse, 2007).

State Employment

Employment in the state sector is both a source of rents and a mechanismof rent distribution. The steady employment and wages of state jobs can beattractive rewards to supporters and to the rulers at whose discretion theemployees serve, ensuring greater dependency on the ruler. As state agenciesand positions multiply, they also offer the opportunity for state agents to mon-itor support for rulers, as noted above. For regimes that distribute rents, there-fore, expanding public employment provides both rents and the channels ofstate legibility. For regimes that do not distribute rents, public administrationexpansion is a ruse for either outright appropriation of funding or the expan-sion of state agencies to increase discretionary access to state resources.Actual hiring is incidental to these goals. Furthermore, by inflating the wagebill (through creative accounting, no-show jobs, and channeling funds intocapacity development), rulers gain access to a major source of funds. Table 5



shows that the ratio of spending to the size of state employment varies alongwith these patterns of state capture.

Thus, clientelist and fusion regimes see a rise in overall public employ-ment, specifically in the welfare state sectors of health and education, whichare largely controlled by the government (Calvo & Murillo, 2004; Gimpelson& Treisman, 2002). Exploitative regimes have smaller states and relativelysmall wage bills, further constrained by robust competition. Predatoryregimes do not have large state administrations, because no rent distributiontakes place and constant purges ensure both loyalty and little accumulation.However, the wage bill is disproportionately large, given ruler discretion.

Both clientelist and fusion strategies seek to create dependence amongsupporters, and jobs in the state sector are contingent and targeted awards.It is not surprising that the percentage of the population employed by thegeneral government (health, education, welfare) is high, at the levels of theOrganisation for Economic Cooperation and Development average or higher(see Table 6). In Italy, for example, one study found that up to 500,000employees were hired through patronage from 1946 to 1958. (Lewanski,1997).13 Parties form and maintain loyal constituencies by handing out state jobsand then using these to create and monitor broader dependence on the ruler.

Similarly, in fusion regimes, employment in the general public sector,especially in health care, education, and affiliated sectors, is relatively high.The wage bill as a percentage of government expenditure is also very high.

Table 5State Administration and Wage Bills Across Extractive Regimes

Ratio of Spending% Population % Population in Wage to % Employed Employed by Employed in Bill as % of (Wage Bill/TotalCentral State General Government Government

Extractive Regime Administration Government Expenditure Employment)

Clientelist 1.9 5.8 11.4 2.1Fusion 1.1 9.9 19.4 2.9Predatory .6 1.5 9.5 8.4Exploitative 1.0 6.6 9.7 1.5Organisation for 1.8 7.7 4.4 1.7

EconomicCooperation andDevelopment average

Note: For the sake of comparability, these figures are reported in the percentage of the population;when computed as a percentage of the employed, these percentages are to be higher. For example,the average central state administration in exploitative regimes is over 5% of those employed (seeGrzymala-Busse, 2007).


However, as the party takes over the state and its regulatory roles, one ironicresult is that the actual state administration is tiny: well under the 4.5% ofthe developed world average. Because public administration employment isnot chiefly used to enrich elites, the wage bill is also below average.

In contrast, in exploitative and predatory regimes, in the absence of rentdistribution, there is no systematic growth in employment in health care,educational systems, and other state services that have been the traditionaltarget of patronage hiring. In postcommunist states, these actually shrank,thanks to employee departures and the increasing privatization of these sec-tors. The state in general lost its importance as a source of employmentafter 1989.14 And instead of mass patronage, both exploitative and preda-tory rulers engaged in prebendalism, rewarding elite allies with office (vande Walle, 2003).

Rather than pursuing patronage, postcommunist exploitative incumbentsestablished new state agencies and funds, increasing the staffing of centralstate agencies to expand their budgets and thus the funds under the controlof the incumbent governing parties. In some cases, state administration

Table 6State Administration and Wage Bills Across Cases

Ratio of Employment

% Population % Population in Wage to SpendingEmployed by Employed in Bill as % of (Wage Bill / TotalCentral State General Government Government

Country Administration Government Expenditure Employment)

Italy 3.4 9.1 11.2 1.2Japan 0.7 3.5 5.3 1.5Mexico 1.7 4.8 17.8 3.7Average 1.9 5.8 11.4 2.1Russia 0.4 8.4 13.7 1.6Singapore 0.8 6.1 25.0 4.1Communist 2.0 15.3 na na

East-Central EuropeAverage 1.1 9.9 19.4 2.9Nigeria 0.1 0.1 1.3 13.0Indonesia 0.7 2.3 13.3 5.8Philippines 1.1 2.2 ~14.0 6.4Average 0.6 1.5 9.5 8.4Poland 0.6 4.1 7.6 1.8Czech Republic 1.4 8.1 8.1 1.0Slovakia 1 7.7 13.3 1.7Average 1 6.6 9.7 1.5

Source: World Bank, 2000.


employment more than quadrupled in the 15 years after the collapse ofcommunism. Jobs, however, went to loyal elites, not supporters.

The predatory regimes examined here have the largest wage bill but thesmallest state employment. This paradox is the result of contradictorystrategies: Predatory rulers try to build up the bureaucratic apparatus as aninstrument of their will (Jackson & Rosberg, 1982) but at the same timedemand absolute loyalty. Predatory rulers act to eliminate potential oppo-nents or resistance to their extractive projects partly by purging state admin-istrations. Technocrats and skilled officials are among the first to be fired,and the positions are either left vacant or replaced with loyalists, especiallyin sensitive (and lucrative) state sectors such as trade, customs, naturalresource management, and so on.

With no widespread distribution of jobs as rewards, the wage bill isdiverted to pay for lucrative elite employment and discretionary accountspending. The salaries of purged civil servants are often appropriated by theruler and allied elites. For example, in the Philippines, state-owned enter-prises (“corporations”) were created by fiat and used as vehicles forsinecures. The biggest increases in bureaucratic hiring took place within thecorporations: Their staffing grew from 41,000 in 1975 to over 106,000 in1979, and “soaked up to 30% of public expenditures by the late Marcosyears” (Hutchcroft, 1991, p. 446). These appointments were made possibleby the appropriations policy: Bureau directors received appropriations fromlegislature in exchange for hiring. It is not surprising that the bureaucracywas described as subordinate to political interests (Hutchcroft, 1998; Kang,2003; Wurfel, 1988). And once state revenues go into the pockets (or rather,the offshore bank accounts) of the rulers, state institutions find themselveswith insufficient funding. Staff members go unpaid, weakening regulatoryoversight and enforcement and creating incentives for state officials to com-pensate their meager salaries through selling services for additional fees(bribery) or skimming from government accounts. The high wage bill inpredatory regimes is the result of resource diversion, and the small stateemployment is the result of low rent distribution and the maximization ofruler discretion through constant administrative purges.

Development Programs

Rulers have distinct incentives to establish development programs. Fornondistributing rulers, they offer enormous discretionary income. For rent-distributing rulers, they are a further means of targeting the most cost-effectiveconstituencies. Development programs are an effective and attractive

mechanism to deliver contingent and targeted goods, such as agriculturalsubsidies, loans, infrastructural spending and other policy benefits. AsChandra (2004) shows, development spending is used selectively to cement theloyalty of party supporters; development can become highly targeted.

Rent sharing goes hand in hand with building up specific developmentprograms. For example, agricultural spending typically targets the mostvulnerable and numerous citizens. It is therefore most likely to pay off inthe kind of loyalty and dependence that clientelist strategies seek, furtheraffording considerable discretionary use. It is not surprising that in Mexico,Japan, and Italy, agricultural spending and development programs becamea key delivery mechanism of selective goods (Magaloni, 2006; Scheiner,2006). In another example, the Integrated Rural Development Program inIndia was a subsidized credit program that allowed indigent rural familiesto take up self-employment. The program is income based, but becauseincome is difficult to verify, enormous discretion rests with the party-affiliatedstate agents who select the eligible (Chandra, 2004). We observe a similarpattern in fusion regimes (Allina-Pisano, 2007).

However they are contingent or inefficient, such programs nonethelessdeliver benefits to constituents. They help to perpetuate broad dependenceon the ruling party and further require that the state develop its institutionalreach down to the most rural or peripheral areas. In contrast, predatoryregimes with large agricultural sectors use development programs largely tochannel funding into the pockets and accounts of the rulers. There is littlepay-off to either targeting or delivering these programs to their intendedconstituencies, narrow or broad. The history of such programs in thePhilippines under Marcos, Nigeria under Abacha, or other cases such asZimbabwe after 2000 is that of outright expropriation—in some cases, aswith Marcos’s coconut and sugar levies, from the very agricultural produc-ers whom the development programs supposedly benefit.

Where agricultural and infrastructure programs in rent-sharing regimesdeliver benefits to local supporters, predatory versions of similar programsdivert funds into the pockets of ruling elites at the national level, before dis-tribution can take place. For example, in the Philippines, Marcos and hiscronies directly siphoned off resources, most notably foreign aid. TheUnited States continually gave aid to assist in reforms of the state, but thesewere simply channeled into the private bank accounts of Marcos (Kang,2003). The Marcos land reforms further expropriated opposition landown-ers in the name of development (Aquino family assets were the first to bedispossessed). Banks and other enterprises owned by regime opponentswere transferred into cronies’ hands (Hutchcroft, 1991).


Predatory rulers can even reverse the flow of funds, expropriating agri-cultural actors, potential opponents, or lucrative sectors of the economy tobenefit the incumbents. Thus, Marcos imposed a levy on coconut farmersin 1971. The initial levy levels quickly increased, and the purpose of over-seeing agency changed from price stabilization to “investment for coconutfarmers.” The levies garnered close to $2.5 billion in less than a decade. In1976, Marcos also established a similar Sugar Commission, which costsugar producers an estimated $3 to $4 billion between 1974 and 1983.Unrestrained by either distribution or contestation, the scale of the depre-dation was vast: In 1977-1997, 43% of potential tax revenues went into pri-vate hands (Bhargava & Bolongaita, 2004, p. 88). Similarly, in Nigeria,working with a handful of retainers and cronies, General Sani Abachaseized funding from industries, construction, and other capital developmentprojects (Lewis, 2007). Bankers were arrested, the assets of Yoruba regimeopponents confiscated, and billions in oil revenues embezzled. In finalyears of the regime, nearly a quarter of the budget went into the pockets ofAbacha and his cronies. Development programs became another tactic ofexpropriation that expanded the repressive capacity of the state withoutbuilding its infrastructure.

Formal Electoral Rules

Rent distribution creates incentives for credit claiming on behalf of theincumbents. It is clear to all actors that jobs, housing, higher education, and wel-fare state benefits are contingent on compliance with the regime. Institutionsreflect this contract: the basic unit of communist parties, for example, was ineach workplace, and food ration allotments, vacations, and other benefits weredistributed through these party organizations. Similarly, the party units of theSingaporean PAP are organized in housing estates, making it clear that infra-structure improvements or housing transfers are contingent on party support.

In competitive regimes, electoral institutions allow rulers to take credit orevade blame for their capture of state assets, as part of the institutionalframework that buttresses extractive strategies. Electoral rules can explicitlyaid state capture only where competition exists. At the same time, there isno simple relationship between institutions and clientelism (much as nation-alism, clientelism is a wanton mobilizational strategy that comfortablycohabits with diverse institutional and political bedfellows). Nonetheless,for rent-sharing strategies to establish constituent loyalty, politiciansmust be able to claim credit for the provision of goods in the eyes of theconstituents—and everyone must be aware of the redistributive outcomes.


Credit taking is so critical that transparency measures introduced to monitorearmarked pork allotments in the U.S. Congress actually increased theamount of earmarking, as congressmen competed not to fall behind in pro-viding for their districts and face electoral censure (see Andrews & Pear,2007). Electoral institutions imposed on clientelist relationships by self-serving rulers thus tend to allow voters to identify patrons and patrons tomonitor supporters.

Many clientelist exchanges rely on a personal vote or the degree to whichvoters can reward or punish individual politicians (as opposed to entireparties). Moreover, clientelism favors small coalitions necessary to winoffice: The broader the swathe of voters whose support is necessary to winoffice, the lower the incentives (and the ability) to provide expensive clubgoods. In short, voters and politicians establish clear channels of responsi-bility, and narrow coalitions bring politicians into office. Therefore, we seesome combination of personalized vote institutions (such as single non-transferable vote or open-list proportional representation; see Carey &Shugart, 1995). We observe these institutions in Japan (single nontransfer-able vote prior to 1994, a combination of single-member district [SMD]and open-list proportional representation [PR] after 1993), Italy (open-listPR until 1993, then a mixed SMD-PR system) and Mexico (60% of seatselected with SMD, but the rest in closed-list PR with large districts, alongwith a presidential system that enhanced the personal vote). The overrepre-sentation of areas dependent on clientelistic benefits can further benefit theruling party (as it did the LDP in Japan; see Scheiner, 2006).

Note that in all these cases, the electoral institutions were imposed onexisting clientelist relationships: Patron–client relations dominated the pol-itics of Italy, Japan, and Mexico long before these countries adopted mod-ern electoral institutions. Clientelism appears to influence electoral systemchoice but not vice versa. And it is not the case that personalistic electoralinstitutions necessarily result in clientelism; open-list PR was also adoptedin several countries with little clientelism: Chile, Denmark, Finland,Luxembourg Switzerland, and Uruguay, and in several postcommuniststates, such as Slovakia, Estonia, Latvia, and Poland (until 1997). Electoralinstitutions do, however, foster the monitoring and credit assigning that iscritical to clientelist relations.

In contrast, in exploitative regimes, rulers have no incentive to form eitherclose ties to the constituents or to engage in mutual monitoring of theexchange contract in the absence of rent sharing. Instead, their preferred insti-tutional solutions focus on programmatic competition, assignment of creditto parties rather than individual competitors, and avoidance of individual



credit taking. Accordingly, in the new democratic states where exploitation istaking place, a variety of parliamentary electoral institutions were adopted:from closed list PR (adopted in Poland in 1997) to semiopen lists in Slovakiaand to a mixed SMD-list PR system (Hungary). In all cases, parties have notdeveloped strong ties to society, and the focus is on national campaigns andissues rather than on local mobilization and concerns. In contrast to clien-telism, electoral institutions were adopted before exploitation began inearnest, as part of a transitional package of economic and political reform.

Mechanisms and Dynamics of Change

Rulers have the greatest leeway to adopt particular capture strategiesafter crises of the state; democratization, regime collapse, or externalshocks can alter the costs and benefits of distribution, competitive configu-rations, and institutional and organizational investments. For example,exploitative rulers had such leeway to form porous state institutions,because parliamentary parties initially assumed much of the legislative andadministrative decision making after the collapse of communism in 1989(Ágh, 1994; Nunberg, 1999). The sheer volume of laws to be drafted andthe unresolved debates about powers and functions meant that political par-ties in Parliament had a unique opportunity to create state institutions andbuild in subsequent access to state resources. Similarly, Indonesia after theeconomic collapse and Suharto’s departure from power in 1998 can bedescribed as having moved from a predatory to an exploitative regime, itspolitics centered on a fractious, rent-seeking democratic Parliament thattolerates competition but provides little distribution (Sherlock, 2002).Finally, Marcos’s targeting of oligarchic clientelist families that ruled thePhilippines can be seen as an explicit attempt to shift to predation after aneffective coup: The Philippines were traditionally a clientelist regime withenormously wealthy oligarchic families as the patrons. When Marcosassumed power in 1972, predation began in earnest, in favor of technocratswith no mass constituencies.

Once the institutional upheaval subsides, initial experiments give way todecreasing oscillations between strategies. They generate their own con-stituencies and institutional support. Incumbents can incrementally changetheir strategies but face considerably more difficulties in changing the expec-tations of supporters and the institutional framework. Nonetheless, someequilibria may be undermined over the long run (e.g., economically compet-itive sectors may rebel against clientelism; Kitschelt, 2000). Predatory rulerscan have long time horizons, but once they begin to fear the catastrophic cost


of leaving office (itself the result of predatory rule), they will acceleratetheir rate of capture (Goldsmith, 2004). Other rulers may become the vic-tims of their own (relative) success: “growing equality and economicdevelopment encourage democratization because they reduce the value ofthe strategy of vote buying” (Magaloni, 2006, p. 30).15 In fusion regimes,once rulers establish the expectation of broad good delivery as the basis ofcompliance, an inability to fulfill this expectation endangers regime stability.Demographic change may also undercut capture strategies. Thus, Japan’sshrinking and aging rural population is lowering the electoral pay-offs ofclientelist provision.

Each of the strategies discussed above is sensitive to distinct incentivesand constraints. Rent-sharing strategies respond to changes in the supplyand demand of selective goods: If supporters gain alternative sources ofthese goods, if their economic standing improves, or if rulers becomeunable to supply the goods, support for incumbents can quickly wane. As aresult, rent-sharing strategies are limited by the rulers’ ability to extractenough to distribute—but not so much that economic growth stalls. Ascommunist rulers found, this can be a tall order.

Changes in competitive configurations can alter both the type and levelof capture. Thus, exploitation rates vary relatively directly with shifts inpolitical competition, but predation rates vary inversely with the appearanceof political challengers, as rulers attempt to extract all they can while theycan. Competition can also ratchet up the rates of clientelist capture, as par-ties compete by bidding to provide more selective goods (Kitschelt &Wilkinson, 2006). However, this outbidding is limited by the credibility ofthe challengers, who do not have access to office and its benefits.

Strategies that combine rent distribution with contestation are moreresilient to changes in competition. Rent distribution provides a buffer ofinelastic support and organizational resources, as noted above. As a result,democratization or changes in electoral competition tends to change ratherthan end clientelist relations (Khan, 2005). For example, in Japan, postwarland reforms meant that landlords could no longer control and deliver the vote,but politicians still pursued clientelist linkages. Politicians turned to koenkaiand local politicians to deliver the vote and continued to deliver clientelist ben-efits even after subsequent electoral reforms in the 1990s (Scheiner, 2006).

Conclusion

This analysis advances three related claims. First, distribution and compe-tition, themselves rooted in earlier organizational investments and electoral


expectations, have a fundamental impact on extractive strategies. Rent distrib-ution promotes nonpersonalized elite extraction and the explicit building ofstate institutions of monitoring and delivery. Political Competition curbsthe discretionary use of these infrastructural state capacities and can lowerrent seeking when voters are both responsive and available. This analysiscomplements existing studies of the interaction between electoral institu-tions and clientelism, which argue, for example, that personalistic electoralinstitutions and intraparty competition favor clientelism. An open questionis the subsequent impact of such institutions on other capture strategies,such as fusion, predation, or exploitation.

Second, state capture and state formation go hand in hand. This is mostexplicit in exploitation but is a fundamental characteristic of other extractivestrategies. Two mechanisms translate capture into state building: The expan-sion of welfare state institutions is used for targeting contingent benefits tosupporters, and the weakening of oversight and regulatory agencies allowsgreater discretion. Where institutionalized competition for office is intense, itcreates incentives for lowering the rates of capture (for fear of electoral pun-ishment) and for building stronger regulatory agencies (to prevent the next setof incumbents from entrenching themselves through extraction). What is lessclear is the impact of state capture on economic development.

Third, moving beyond clientelism and predation allows us to account forthe diversity in extractive strategies and for the distinct configurations ofstate capacities that follow. The regimes that result from distribution andcontestation can be further disaggregated: Vote buying, for example, com-bines rent distribution with far lower organizational investments than inclientelism (Hicken, 2006). Finally, the propositions developed here need tobe tested on other cases of state capture (and lack thereof). In so doing, afundamental point remains: Fitting a variety of strategies of state captureinto the procrustean beds of clientelism or predation leads us to overlookboth the variation in their redistributive and competitive aspects and theirimpact on state formation.

Notes

1. Clientelism has coexisted with various forms of political competition, from one-partyhegemony (Mexico, see Magaloni, 2006), to one-party dominant systems (Japan) and tofractious multiparty democracies (Italy, dominated by the Christian Democrats until 1994).

2. Clientelism is not only compatible with contestation but can also buttress popular sup-port for democracy and its daily functioning. For example, the postwar Austrian system of pro-porz, which divided patronage into two main ruling parties, was part of new, postwar electoralcommitments to avoid the antidemocratic fractioning and polarization of the Weimar era


(Luther & Müller, 1992). Similarly, in Italy, patronage cemented the new democratic system:Popular support for democracy immediately after World War II was based on the “concretebenefits the [ruling Christian Democrats] provided to its social bases” (Tarrow, 1990, p. 312).

3. Some rulers using fusion strategies further bolster their power by nationalizing the econ-omy. The result is then both monopoly access to state resources and another lever of control oversociety, because most workers are now state employees. This was a central element of commu-nist state–party fusion, but is not a necessary component, as the case of Singapore illustrates.

4. Postcommunist party membership rates were below 3.0% of the population, less thanhalf of the West European average of 8.2%, and only a tenth of the membership rates of coun-tries such as Austria or Sweden.

5. The Argentine Partido Justicialista’s dense clientelist organizational networks coveredeach square kilometer with an average of 1.8 base units, and its membership alone comprised18% of the electorate (Levitsky, 2003). The most densely organized postcommunist party, theCzech Communist Party of Bohemia and Moravia (KSCM), averaged only .09 base units, andits membership never topped 3% of the electorate.

6. Elasticity is determined by the income available to spend, the available substitutes, and time.7. Considerable debate exists on whether clientelist parties target swing voters (Dahlberg

& Johanson, 2002; Dixit & Londregan, 1996; Schady, 2000; Stokes, 2005) or core supporters(Calvo & Murillo, 2004; Cox & McCubbins, 1986; Diaz-Cayeros, Estevez, & Magaloni, 2006;Magaloni, 2006).

8. Dense organization, however, does not necessarily indicate clientelism, as in Sweden,Finland, or Denmark, where they are the result of earlier labor or union mobilization and partyideology.

9. High rates of rent extraction can coexist with rent distribution, as in Chung-Hee Park’sSouth Korea from 1963 to 1979 (see Kang, 2003).

10. Gandhi and Przeworski (2007) argue that in contrast to distributive concerns, theresolution of internal regime conflict necessitates legislatures and other formal state institutions.Left unexplained are the differences in the institutional demands made by conflict resolutionand distribution, or why only the former requires formal institutions.

11. I do not examine the maintenance of internal order and border security.12. For example, the communist state had no civil service: Bureaucrats were subject to the

general Labor Code rather than to a Civil Service code that could both ensure their politicalneutrality and offer state employees protection against political reprisal. Ministries hired theirown employees, who were beholden to the party, not the state.

13. Carolyn Warner (2001) argues that 100,000 jobs were created.14. This is not to say that parties did not attempt to target provision: Populist parties such as

the Slovak Hnutie za demokratické Slovensko, the Polish Polskie Stronnictow Ludowe PSL, andthe Hungarian Fidesz tried to reward loyal local governments with spending. But these effortswere too short lived and localized to account for the growth of national state administrations.

15. This argument further runs counter to the Acemoglu and Robinson (2006), who claimthat equality breeds contentment with the regime and lowers pressures for democratization, asin Singapore.

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Anna Grzymala-Busse is an associate professor of political science at the University ofMichigan. Her second book, Rebuilding Leviathan: Party Competition and State Politicizationin Post-Communist Democracies, was published by Cambridge University Press in 2007.

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