Corruption depends on relationships between politicians and businesspeople.
These relationships are drastically under-theorized in the existing literature,
which assumes a unified political elite. We argue that different relationships
will be chosen by business depending on the nature of party competition,
which varies substantially. We also stress the importance of the parties’
ability to punish firms relative to their ability to reward firms. In the vast
majority of political systems, parties can provide rewards of a much greater
magnitude than the punishments they can inflict. We show that, in the context
of regular alternation, the most rational choice for business is to “marry” a
particular party. This prediction is tested against qualitative evidence from
Poland, Bulgaria and Romania and survey data from Poland.
1. Theories of corruption
The closeness of economic elites to political elites has been a critical variable in
arguments about corruption. The standard argument is a very simple one: businesses
need to develop relationships with politicians so that they can win profitable policies,
and politicians need to develop relationships with firms in order to raise cash. We
argue that depending on the nature of political competition, different types of
relationships with parties will be optimal for firms. Political competition interacts
with a number of other variables, most notably the extent to which parties can punish
firms as compared to the extent to which parties can reward firms. Surprisingly, in a
situation of regular alternation in power, the most rational choice for firms is to
“marry” a particular firm.
There is a fundamental problem with existing theoretical and general accounts of
corruption in post-socialism: they assume a unified elite. We argue that this is an
empirically dubious and theoretically consequential assumption. There are two
dimensions to possible elite unity or disunity. Firstly, there is the relationship between
the political and economic elite. Hellman’s seminal article tends to assume a unified
politico-economic elite (Hellman 1998). He argues that the first wave of “winners” of
the post-communist transformation have stalled reform to lock in their gains. The
game seems to be over and the winners are a cohesive group controlling politics and
the economy.
Secondly, there is the question of unity within the economic and political elites.
Shleifer and Vishny assume that there is no competition within the political elite.
Their model portrays a cohesive politico-bureaucratic elite extracting rents from
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Convention