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Economic Corruption in Central and Eastern European (CEE) Countries

Info: 9395 words (38 pages) Dissertation
Published: 9th Dec 2019

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Tagged: EconomicsLawInternational Law

While corruption is a phenomenon that transcends borders, political systems, and time, its manifestation differs from one country to another, and one regime to another. Western consolidated democracies are less impacted by crude corruption practices, both at low-level petty corruption, and at higher level political and economic corruption than Central and Eastern European (CEE) countries. According to Transparency International’s Corruption Perception Index (CPI), in 2016 most West European countries, Australia, New Zealand, and Japan occupied the top places of least corrupt countries in the world, while the CEE fall significantly behind (Transparency International, 2016). Latest research in corruption practices in Europe estimates that about  €990 million, or about $1.2 trillion in GDP terms is lost annually to corruption in Europe (Hafner, Marco; Jirka Taylor; Emma Disley; Sonja Thebes; Matteo Barberi; Martin Stepanek; Mike Levi 2016). Most of the lost revenue is in CEE countries.

The current study focuses on the reasons for the apparent differences between Western and CEE countries, and argues that the persisting legacies of the past, and more precisely the inherent general distrust in the efficiency and impartiality of the state institutions for redistributing and regulating are largely responsible for this discrepancy. The omnipresent political and economic patronage of the state-party monolith that existed before 1989 is largely responsible for the framing and formalizing of a special kind of relationships between the individuals, between the individuals and state institutions, as well as between different state entities, based on nepotism, tutelage, and ‘small favors’ subculture. These special relationships, existing as a necessary counterweight to the failures of the centralized economic system, perpetuated the use of barter of reciprocal ‘services’ and pushed through what Gramsci (1971) calls the ‘hegemonic threshold’ of the general acceptance of social norms based on patron-client and reciprocal small favors culture.

A growing body of research points that the corruption practices in the post-communist societies, including the former Soviet Union, can be attributed to particularities of the transition from communism (Shleifer 1997, EBRD 1999), in addition to the specific cultural norms and factors that predated the transition from communism, and favored the ‘survival’ over the principles of the rule of law and institutional stability (Sandholdz et al. 2005). The particularities of the communist political system of party domination over the state, the infusion of the party and state structures and roles, and the centralized economic system all created structural incentives for engaging in corruption practices. The transition from communism intensified instead of to eliminate these cultural practices. The liberalization of the economic sector, the transition to market economy, and the necessity for large-scale privatization of state-owned factories and means of production provided a historical opening for well-connected elites, placed at key political and economic locations, to conspire and take advantage of the opportunities for corruption.

The study continues in the following manner. In the next section, it offers a working definition of corruption, followed by a short discussion of corruption in post-communist societies, and a conditional classification of the types of corrupt practices observed in the region, where political and economic aspects intertwine with preexisting social and informal relations between individuals and groups of the society. A short case study of Bulgaria is then used to exemplify the evolution of corruption practices, and how large-scale political corruption impacts proliferation of small-scale corruption practices at state agencies level. The study concludes with some policy recommendations and more general conclusions regarding the links between the legacies of the past and the proliferation of corrupt practices in the post-communist societies, as well as for those emerging from authoritarian rule.

Definitions and Dichotomy of Corruption

The wide range of meanings that are usually put in the term ‘corruption’ precludes a meaningful discussion of the phenomenon. Providing an operational definition is not always easy. Definitions in social science are haunted by the impossibility to achieve inclusion and precision at the same time. It is essentially a trade-off with no clear equilibrium. Thus a definition is either exhaustive, but in turn also includes so many variables that become all-encompassing and vague, which often renders it non-operational. Or, it is too narrow and exclusive, therefore unsuitable to apply outside a very limited set of observed phenomena. This paradox has been observed by Sartori (1970: 1040) who keenly remarked that definition is like “climbing and descending along a ladder of abstraction” – the higher we climb, the more we lessen the abstract concept’s properties and attributes. The existing wide range of definitions of corruption is a case in focus.

Oxford English Dictionary (OED) organizes nine broad meanings of corruption in three general groups: physical, moral, and the perversion of something from its original state of purity. From these nine meanings, OED outlines that only one has application to political contexts: “Perversion or destruction of integrity in the discharge of public duties by bribery or favor; the use or existence of corrupt practices, especially in a state, public corporation, etc.” Despite the theoretical hurdles of deriving an operational definition of corruption, the majority of scientists have settled around the notion that corruption is the “misuse of public power for private gain,” or a variation on that theme, where the verb ‘misuse’ may be substituted with ‘abuse’ for example (c.f. Huberts 2010). More notably, this definition separates corruption from crime or other treacherous behavior in the private dealings between individuals and clearly places the emphasis on the holding of public office as a precondition. In other words, corruption is linked to regulation and redistribution—the two main tasks of any state—and involves the dealings with ‘pubic goods’ (c.f. Johnson 2009; Kaufmann and Vicente 2011). Other authors have concluded that when it comes to development, ‘personal gains’ do not necessarily need to be monetary in nature (Keohane & Nye 1999). In support of that thesis Lowensten (1990) has found that in litigations of cases of corruption in the American legal context, the least ambiguous element is that they all involve a public official, which is almost always the case, therefore confirming the political nature of corruption, and the political-economic context, in which it exists.

From an economic perspective, corruption is linked to the principle-agent theory: principals become engaged in designing a system of incentives that would induce agents to behave in a manner coherent with the principal’s objectives in situations where the agent’s actions cannot be directly observed. If the public servants are considered the ‘agents’ and the general public, along with its pertaining interests, are the ‘principals,’ it is then claimed that corruption occurs “when an agent betrays the principal’s interests in pursuit of her own” (Klitgaard 1988:24). The clear weakness of this definition is in the use of the term ‘betrayal,’ which precise meaning for the purposes of empirical data measurement remains largely unidentified, and thus lies in the eye of the beholder.

From a political perspective, corruption bears not only a procedural connotation but also a normative one, too. In the Western tradition, corruption is considered to be directly linked to social decay and long-term damaging consequences for the political system and the society as a whole. If an individual, who is holding a public office, uses his power for attaining his own ends, or his actions are governed by non-transparent considerations and behind the scene reeling-and-dealings, it is believed that the sanctity of the dominant political system is in danger.

In the juxtaposition of political and economic kinds of corruption becomes clear the tension between what seem to be more ‘popular’ definitions on the one hand, and more ‘technical’ ones on the other (c.f. Philp & David-Barrett 2015; Rothstein & Teorell 2015). Thus, while the ‘popular’ definitions seem vague and encompassing of a large number of practices that at times may seem culturally acceptable, excusable and justifiable, the technical ones seek to be precise and particularistic. Moreover, in the ‘popular’ definitions of corruption, we may detect the sense of indignation, where people exhibit the propensity to explain their own frustration at the political system with almost conspiratorial events linked to covert sectional forces. It is precisely the presence of emotive and normative connotations in the definition of corruption that cast the greatest shadow on the feasibility to empirical positive approach to the systematic study of corruption. In a sense, the tension between ‘popular’ and ‘technical’ definitions, in conjunction with the emotive normative approaches to the phenomenon, reflect the theoretical conundrum of definitions of social sciences as a whole, as coined earlier by Sartori.

Even more paradoxical is the observation that this definitional conundrum is also indicative of the general approach to corruption as either ‘grease’ or ‘sand’ for development.

Conceptualizing Corruption in Post-Communist Societies: A Grease or a Sand

Of all types of corruptions studied in the past decades, the bulk deal with the general concept of political corruption. In the years of transition from communism, corruption became linked to the general perception of patronage—in all of its forms—to the building of networks of interconnected interests that quietly took over the state machinery, and were subsequently used for the provision of guarantees for political survival of the old elites in the years of transition to liberal democracy and capitalist economic system. In the first decade of transition from communism, we observed the coming into prominence of a kind of political strategy of a centralized offering of ‘political power for rent’ to those who could pay the asked price. Usually, this involved rent-seeking business groups, which economic rise and success depended exclusively on the unrestricted access to vital state resources.

For decades now corruption has been seen by many theorists of development as the ‘grease’ that oils the points of attrition between private entities and the state, facilitating trade and furthering development that otherwise might not have happened at all (c.f. Leff 1964; Leys 1965; Huntington 1968; Meon & Weill 2010). These studies claim, often providing selected empirical evidence, that corruption is the mechanism through which private sector agents circumvent cumbersome and destructive regulations put there by clueless administrators or unscrupulous lawmakers.

The opponents of this approach often come from the policy perspective and counter the claims of beneficial ‘greasing the wheels effect’ of corruption on development, claiming that this is, in fact, a ‘sand effect’ that comes at a price of furthering bad and ineffective institutional settings, thus creating layers upon layers of vicious corrupt circles (c.f. Mauro 1995; Reinikka & Svensson 2004, 2005; Aidt 2009). Studies about the impact of corruption on development in Africa, Middle East, and Asia have found not only that corrupt practices impede development, but also that is directly linked to crime and other social ills (Gire 1999; Ionescu 2014), but even to terrorism (Shelley 2014).

Despite the large and growing empirical evidence compiled on both sides of this scholarly debate, to date, the findings remain largely inconclusive. Some recent studies have even split hair and attempted to reconcile the two opposite views, demonstrating that the interaction between corruption, aggregate efficiency, and institutional quality, may indeed result in “greasing the wheels” in countries marked by deficient institutional frameworks, but also “sanding the wheels” in countries with higher institutional quality (Méon, P-G.; Weill, L. 2010). The sporadic appearance of such studies, and the controversies they protrude only shows that contemporary scholarship continues to suffer from a lack of sufficient cross-regional empirical research that would bring a more definitive and measurable assessment of corruption’s effects, and their transmission on different economic and social aspects of the functioning of the state’s agencies.

With the empirical assessment of corruption role on development aside, recent trends in the scholarship have identified also a number of desirable effects from building institutional trust on countering corrupt practices. A higher level of institutional trust has been found to correlate positively with economic growth, especially in developing societies (Easterly et al. 2006). To understand better the effects of corruption on the process of building such institutional trust in the post-communist societies, it seems unavoidable to examine the role of the legacies of the communist past in those countries. Even at first glance, institutional trust seems to stand at odds with these legacies. A number of studies that have focused recently on examining the impact of the legacies of the communist past on the transition from communism have pointed at ‘survival’ as the factor that is more ostensibly impacting the quality of these transitions (Obydenkova & Libman, 2013; Libman & Obydenkova, 2015). They have concluded that corruption undermines institutional trust, which then leads to suboptimal outcomes with regard sustainable economic development. Similarly, others have found compelling evidence that increases in corruption erode trust at all levels of the societal institutions, including political parties, government and financial institutions, and how this leads to lower institutional trust (Habibov et al. 2017).

The overwhelming majority of the studies of corruption in post-communist societies focus on the concept, and on the consequences. But they rarely, if ever, look into the perpetrators of corrupt practices: who are the corrupting agents. Thus, not only from theoretical and empirical points of view but also with regard to a greater historical accuracy, it is even more pressing to examine the agents of corruption. The current study uses previous research to discriminate between elites endowed with different capital, rather than control over resources, and then uses this knowledge to trace the evolution of these ‘endowed’ elites and their ability to exert control over the resources they have managed to inherit, or appropriate otherwise, during the transition from communism. Clearly, there is an overlap between the elites endowed with a specific type of capital and those who exercise control over available resources. In some way, one can argue that the former, as a wider category, envelops the latter. As it will be illustrated with the case study of Bulgaria, however,  the two not necessarily overlap, at least not in a straightforward way.

In more precise terms, the possession of a specific type of capital, or the lack of it thereof, had determined the prospects for adaptation under the new social and political constructs. A seminal transitology study from the first decade after the fall of communism has offered one of the best theories on the role of different elites during the transition in CEE. In Making Capitalism Without Capitalists, the authors outline three types of capital that the power elites can possess at any point of historical development, pre-, during, and post-communism: social (i.e., political), economic, and cultural capital (Eyal, Szelenyi, & Townsley 1998).

According to their argument, elites that had economic capital were powerful in the pre-communism times because back then wealth and economic power were valued more over the other types of capital. During communism, since wealth was ideologically associated with the capitalist society, those who possessed economic capital were at best ignored, and at worst—were prosecuted and often killed. In the meantime, the social capital—that is the political power and location in the hierarchy in the structures of the communist party—were valued most. Membership in the most powerful organization, the communist party, was the most important necessary condition for a career advancement. Only by joining it and pledging loyalty to the communist ideals and to its leaders, one had a chance to move up the social hierarchy. It most mattered whom you know and how loyal you have shown yourself to be to those on the top, who naturally possessed the most of this political capital. It was, indeed, a pyramidal top-down hierarchical structure.

In the aftermath of the fall of communism, in the post-communist societies, the economic capital was yet missing, while the social capital was no longer acceptable. In fact, it was also stigmatized and subject to lustration policies. The only type of capital that had value, and as such could further collective interests of an elite, was the cultural capital, i.e. connections and networks. They predated the transition period, and during communism were seen as one of the strategies for survival: small scale favors, tit-for-tat exchanges, and access to state resources, some of which were hidden from the ordinary citizens.

It is this type of capital, and not the hierarchical structure of power distribution that existed during communism, that explains why in all post-communist countries certain segments of the old elite, including members of the secret security services, party functionaries, and bureaucrats, have found themselves on the ‘winning’ side of the emerging capitalist economies. They all have profited from their former positions and contacts, building new networks of informal connections that remarkably resembled the structure of the ones that existed during communism: barter of reciprocal ‘small favors’ and ‘services’ system (c.f. Levin and Satarov 2000). As a result, today in most countries in Eastern and Southern Europe, including Bulgaria, Croatia, Greece, Macedonia, Romania, and Serbia exists a clear system of political patronage and economic corruption, often times well protected by a deeply corrupted judicial system.

Another element that plays an important role in enabling corruption practices in the post-communist societies is the prevalence of a general culture of tolerance and acceptance of corruption, as inevitable and as a part of the political and economic landscapes. The general attitude of large segments of the post-communist societies towards corruption rests on the perception of it as omnipresent and ubiquitous, a characteristic of the political structure, and not something that can be either changed, or battled against. So, it is better to make the best of it, by accepting it and working within its framework, in order to guarantee one’s survival. This approach is very much consistent with the way much of the society functioned during communism, where the ubiquitousness of the communist state and all of its agencies made it impossible to fight it, and the best individual approach lied with accepting it and working within its structures for getting the best outcome from it. Regrettably, not only that this attitude was carried over in the post-communist social systems, but  also fewer ever made any link between corruption of any sort and the persistent violation of human and social rights in those post-communist societies. Often times, small-scale corruption is considered as either an instrument for survival in conditions of massive violations and state plunder by the strong of the day, or even as a way to ‘get back’ to an unjust political, economic and social system that ‘leaves no other option’ to the ‘little man’. Both of these manifestations of corruption have their roots in the deep mistrust citizens of these countries hold of the state institutions. This, indeed, is a clear legacy of the communist past.

Patronage Democracy and the Media: the Case of Bulgaria

In a way, the transition process itself necessitated the corruption of the system. After the fall of communism in 1989, the states in Eastern Europe found themselves in the need of political and business elites. To this end, there were none—at least formally—since communism as a political system did not allow the existence of alternative formations and political discourse of any sort outside of the auspices of the communist party, while the economic system of centralized planning a priori excluded the possibility for formation and existence of private initiatives, entrepreneurship, and capitalist-like business elites. The inception of the new elites, therefore, happened in a ‘primordial sin’ figuratively speaking, forged by the reformist old elites, who sought to build a political system from scratch, while protecting their political and economic interests. This led to the establishment of a strong patron-client relationship between the political parties and the businesses, and to a complex intertwining of economic and political interests that transcended the established norms of democratic consolidation. As a result, it was possible to observe in these countries the birth of a patronage democracy, a form of illiberal or ‘hollow democracy’ (c.f. Zakaria 1997, 2003) that is characterized by quasi-transparent relationships between political and business elites.

In the case of Bulgaria, but also very indicative of the rest of the ex-communist bloc, the creation of a ‘new’ business elite had to go through the abolishment of the pre-transition state agencies that possessed any information about the economic wheelings and dealings of the old elite. Thus for example, the Committee of Party and State Control—the communist party watchdog for embezzlement, corruption and other similar crimes—that was in function in the last decade of the communist rule in Bulgaria, was disbanded in 1990, immediately after the fall of the regime, under the instructions of the communist reformer and then prime minister, Andrei Lukanov. Lukanov himself a highly controversial figure from the top brass of the old regime with close ties to Moscow and KGB was the transformative figure charged with the transition from communism. He was subsequently assassinated in 1996, allegedly for shady financial dealings. More importantly, during his tenure as a prime minister, and then as a leader of the Bulgarians Socialist Party, the hair to the former communist party, he served as a bridge between the old and the new system, and is largely seen as the architect of the transitional system, and the formation of the new elites needed for that system: opposition parties and western-style business elites. In 1990 he pushed through the all-communist parliament without much resistance the controversial decree to abolish the committee on embezzlement and store its archive for future examination. Soon after that, all amassed documents and files containing information on individuals alleged in corrupt practices and embezzlement in the past decade of communism promptly disappeared (Bikov et al. 1992; Ganev 2007; Ganev et al. 2013). In addition, most of the dossiers and files of the old security apparatus, containing not just the names of the former officers and operatives of the secret repressive apparatus of the communist state, but also of the hundreds of thousands of collaborators and informers, mysteriously disappeared, too, with some of them being burned in an incendiary accident in the old communist party building in 1990, while others were simply hauled away to an undisclosed location for safekeeping and future use for blackmailing and control. Similar faith befell other state archives in the internal ministry, as well as other archives of the security services and various former state agencies responsible for overseeing, monitoring and collecting data on alleged misconduct of state-owned enterprises that had occurred during the last decade of communist rule.

Thus, strategically located state elites were quick to build a new infrastructure of networks anew, using their old connections that now went clandestine and largely untraceable, and began to construct a new power-system, based only partially on the political system of the day—that is the fledgling democracy—but largely subordinated on their own political and economic logic. These new power networks made use of the information that was accessible only to them, in order to tie up rings of influence, and began mass privatization that would result in the making up of the new economic elite system in the country overnight.

In a seminal empirical study of transition from communism to liberal democracy, Joel Hellman (1998) brings abundant evidence that sheds light on the dynamics of the processes that allowed the ‘winners’—the transitional old elites endowed with large social capital, but not necessarily political one—to amass their new wealth, and to manage to turn it into an agenda-setting veto power tool, so that they can control and guide the transition process in ways that were beneficial to them. He focuses on the key players during the transition and singles them out as “the earliest and biggest winners” from the transition (Ibid. 221-22). As he correctly observes, this group of actors initiated the reforms, got in a position to guide the reform processes, but only so that they can stall them hanging in midair in what he calls a “partial reform equilibrium” (Ibid. 203). As a result, these half-hearted reforms served as generators of concentrated rents themselves. The status quo was well guarded by the new powerful elites that benefited from it and managed by the exercise of their veto power acquired earlier in the process. As Hellman concludes, the actions of the winners constituted a causal factor that had an independent impact on two societal groups, the elected politicians, and the disgruntled constituents.

Hence, on a more theoretical level, the patronage democracies can be conceptualized as a system, in which certain elites behave in congruence with rational voluntarism, enabled and energized by specific characteristics of the post-communism transition process. Pretending to act simply as ‘regular social elements,’ the members of these elites were actually endowed with the extraordinary capacity to move large social and political capital around, in order to carve out space for themselves and perpetuate a particular status quo that favored their political and economic power and control.

The basic attributes of the patronage democracies become apparent mostly through the political technology of parliamentary systems. However, their power structures, as noted already earlier, operate via their own, unofficial if not outright clandestine networks. As such, they could act as independent civil society actors, and even encourage and facilitate the creation of other civic organizations that ultimately could further their narrowly defined economic rent-seeking interests. Because they resorted to the use of indirect and nontransparent methods of operation, the conventional mechanisms of the representative democracy for detection and identification of such relationships and networks remained in the past, as well as in the present quite limited, if not severely impaired.

One way for these elites to maintain their rain over the system and keep the reforms suspended midair was to establish a firm control over the social discourse on the topic of corruption, transition, democracy, and the legacies of the past, by influencing and manipulating the public conversation through the use of medias. Immediately after the fall of communism, these elites either created or acquired previously existing print and electronic media, monopolized the distribution channels and thus established control of the way information is disseminated. With the former state electronic medias, TVs and radio stations, in their hands, and in control of the largest and most popular news papers and magazines, they were able to control the public discourse on the subjects of transition, to diverge attention, to guide public conversations, as well as to smear opponents and independent journalists. The new business elites were, of course, also those who had exclusive access to capital to publish newspapers or to acquire and run TV and radio stations. By controlling the printing houses and the distribution channels, they could deny the publishing and distribution of alternative sources of information. By using this power of information, these elites slowly began establishing a culture that turned a blind eye to high-level corruption and accepted small-scale corruption as a part of the political and economic landscape of the country.

In a relatively small country, such as Bulgaria, with a total population of fewer than 7 million people, the size of the media market should correspond to the real consumption of news and entertainment. Yet, a cursory review of the current state of affairs would reveal that in fact the media market is unnaturally engulfed. At the beginning of 1990, right after the fall of communism, 301 newspapers were registered for print, with only 17 of them being daily newspapers. As a comparison, according to the Bulgarian National Statistical Institute, in 2015, there were already 436 registered newspapers, of which no less than 70 were published on a daily basis. The total count of published newspapers in 1990 was 371 million, but 20 years later they are up to 896 million. This makes about 128 newspapers per capita, from 53 two decades earlier. Even by the standards of 1990, a count of 53 newspapers per capita per year, including babies and elderly people, was quite high. This means that the actual concentration of newspapers was between four and five times higher, considering that many households shared newspapers and magazines, as did many co-workers. Thus, the estimated real count of newspapers per household was probably around 150-200 per year.

In the years after the fall of communism, such high consumption of newspapers would not have been all that unusual. Both, the desire for alternative news, and the process of political socialization required a greater consumption of news. Thus a newspaper per household per day, distributed across all households across the country—which is not entirely realistic, but provides a more manageable measuring approach—seems closer to the real demand for newspapers that existed then. However, a three times higher demand, or some 400 newspapers per household after a quarter century later, in conditions of a growing number of young people who have no interest in politics and economic, with a dying generation of newspaper readers, and a vast proliferation of electronic media, internet, and the smartphones, seems utterly unrealistic. The only conclusion that is consistent with the logic of the events then is that the demand has been artificially heightened in order to inundate the market with publications, in which a quarter century democratic consolidation and institution building prompted and guided by the European Union membership of the country. The underlying strategic logic of such explanation lies in the attempt by the post-communist elites, who despite being in control of large swats of the economy, are unable to maintain a complete monopoly and must deal with inklings of independent journalism and the emergency of independent media that may challenge the status quo of the post-communist elites. Enjoying their much enhanced economic domination than twenty-five years before that, and thanks to much more consolidated monopoly over the producing, printing, or otherwise generating and disseminating of news, these elites feed on one other’s capital through advertisements, mergers and acquisitions, other subsidiary business dealings, or outright private financing the media system that cannot survive by the principles of a normal market economy. It is frequent to bring foreign capitals from just registered financial trusts and companies in tax heavens in the Cayman Islands, Luxembourg, Switzerland, or Cyprus, and present them as foreign direct investment in the media market, while in reality recycling ownership between themselves.

Even with this diversification of the types of media, and when the total count is taken under consideration, it has been estimated that the owners of the newspapers in the country alone have come down in 20 years to a single digit number. In interviews, interlocutors from the State Agency for National Security (SANS) claimed that their investigations have determined that despite a large number of formal ownership of newspapers in Bulgaria, only five or six are the actual owners. They control the media market and are actively using the power of the media as a source of influencing the public, hammering their opponents, and blackmailing.

In the interim, a number of shady political deals were conducted, including the finalization of the privatization in 2014 of the largest tobacco producing company on the Balkans, Bulgartabak, whose owner’s identity despite being obscured by a large number of shell companies registered at tax heaven islands in the Caribbean and Cayman Islands, was gradually revealed as Delyan Peevsky (Krastev 2016). These deals would have been impossible without the role of the state, and the personal blessing of the prime minister himself. In 2016 Peevsky also bought Printing House “Sofia” and thus now he and his mother control the two largest printing houses in the country. Peevsky’s and Krusteva’s media empire was built with over $80 millions of unsecured loans from the failed CCBank, prior to the unraveling of the partnership between Peevsky and Tsvetanov (Antonova et al. 2016), and thus thanks to the schemes in which state officials and institutions, shady businessmen, and kingpin politicians linked to the old communist regime all connived to drain public funds for funding private enterprises that would then allow them to hijack the state. Over all this sits the protective umbrella of the Chief Prosecutor and the heads of the independent judicial system.

Link Between Top-Level Corruption and Small-Scale Corruption

The complex and intertwined political and economic corruption at the higher levels of the state arguably enables also the proliferation of small-scale corruption, especially in the context of a prevailing culture, where ordinary administrators and state officials may believe that such course of actions is not only justified in light of the  proliferation of large-scale corruption practices at the top political and economic  state levels, but it is also their only course of action given the limited ability to resist, and also a way to ‘stick it’ to a profoundly unjust social and economic system, and the people who perpetuate it.

Recent research on the subject of a proliferation of small-scale corruption practices on a daily rate has demonstrated that corruption practices in Bulgaria for 2014 is an average of about 158,000 incidents per month (CSD 2014). Furthermore, The SELDI/CSD Corruption Monitoring System in South and Eastern Europe for 2016 indicates that corruption pressure for the region is at the average of 25.9%, hardly a change from 2014 when it was estimated at 27.1% (SELDI/CSD 2016). From the nine countries monitored by SELDI/CSD, Bulgaria ranks at the bottom forth, preceded as more corrupt only by Albania, Macedonia, and Bosnia and Herzegovina. Although there is a small difference between ‘pressure’, i.e. “being asked for a bribe” (24.4%) and ‘involvement’, i.e. “have offered a bribe”, the numbers for Bulgaria are among the highest in the region, and certainly the highest among the EU member-states (Ibid.). Yet, they are not an exception, when compared with other EEC, such as Romania, Serbia, Montenegro, Slovakia, or the former Soviet Union republics, all of which are impacted by the same legacies of the communist past. It is even more damning the attitude of the majority of citizens, however, who overwhelmingly believe that the anti-corruption policies are unlikely to substantially reduce levels of corruption ( an average of 67%).

Indicative of the corrupt practices in the post-communist countries is that most occurrences happen at the initiation of members of the state administration, and the majority of the victims of these practices are citizens, who depend on the use administrative services: registrations, issuing of certificates, etc. Corruption occurrences in the business sector are also high, where certain practices are usually seen as effective methods for solving various day-to-day procedural predicaments, such as speeding up of issuing certificates, obtaining permits, and processing paperwork. In that aspect, the majority of the surveyed businesses have clearly indicated the lack of trust in the public agencies and institutions and their absence of confidence in the judicial system to offer them rightful and just treatment (CSD 2014).

Measuring of the proliferation of corrupt practices (both, reported and non-reported) is an extremely difficult task. Apart from the obvious reason that many practices are sometimes considered culturally acceptable, or at least habitual as ‘the usual way of doing business’, as well as the actual lack of tools to measure the so-called ‘gray area’ issues, such as the exercise of interpersonal influence, the largest problem for measuring corruption pertains to the frequency of underreporting such events. Thus, it is estimated that only a very small number of the corrupt practices that occur on a daily basis are really reported, mainly due to the high latency of the corruption victimization, i.e. the victims have no real interest in reporting corruption practices, in which they have partaken, especially for purposes of expedience and procedural efficiency of ‘jumping the line’. Another, related issue is the latency of reporting crime in general, where the victims do not report crimes, because they simply do not believe that anything can or will be done to protect them and to bring justice, or due to the inability or incompetency of the investigating agencies to actually do anything about such crime incidents.

According to the National Statistical Institute of Bulgaria (NSI), the only official data that exists on corruption comes from the Attorney General’s Office and pertains to the persons effectively sentenced for corruption. The review of the data is telling. While in 1989, the year of the fall of communism, there were 355 people found guilty of embezzlement and abuse of public office for personal enrichment, their number sharply slides down in the next five years: to 234 in 1990, 125 in 1991, 79 in 1992, 50 in 1993, 33 in 1994, hitting 17 in 1995 (NSI 2015). In 2013, the latest date for those prosecuted and found guilty of graft and corruption, the number is 5, the lowest for the entire period. In the meantime, there is no real indication that the cases of corruption have effectively decreased. The numbers for people sentenced for accepting small bribes, considered by the Attorney General’s office as a separate crime, is slightly higher at 11 but follows a similar path (Ibid.).

According to the Center for the Study of Democracy, a think tank that specializes in research on corruption and organized crime, the percentage of people, age 18 and above, who report to have been demanded to pay a bribe, to do unregulated service, or to offer a present, has gone to a record high in 2014 to 39.4% of the total population (CSD 2014). According to CSD’s own System for Monitoring of Corruption, a tool that was put in place by the think tank back in 1999, the year 2014 was indeed the highest for observed and reported corruption practices in the country. Since then, small-scale corruption practices have decreased to 25%, a remarkable success by all means, but only slightly below the average for the region, which is 27.1% (SELDI/CSD 2016). The data suggests that at least one out of every four adult persons in the country has engaged at least once over the period of one year in some form of corrupt practice (CSD 2014).

Agents in the Fight Against Corruption

For 2014, 94% of the Bulgarian citizens have declared that corruption practices coming from various administrative state institutions are ubiquitous (CSD 2014). Yet, according to existing statistics, there is some variance among the branches of the administration and public services. For example, among the most corrupt in the country are considered the judges and court clerks (87%), police (84%), prosecutors (81%), journalists (71%), political leaders (52%), MPs (48%), state and city councilors (39%), and various mid-level administrators (37%) (NSI 2015). What emerges from the analysis of these numbers is the paradoxical conclusion that the general public tends to perceive the institutions and agencies that should be most actively engaged with the fight against corruption as the most corrupt.

The lack of trust then is a clear impediment to effective implementation of the anti-corruption measures. Currently, in Bulgaria exist a number of specialized agencies, charged with the task of monitoring and fighting practices of corruption. Among them, the leading role plays the Parliamentary Commission for Fight Against Corruption and Conflict of Interests (PCFACCI). Its main task is to collect and register declarations for conflict of interest by the lawmakers and the state administration apparatus. Yet, the Commission has been hardly working. For the period May 2013 December 2014, the Commission has met just ten times, due to internal political bickering between the participating members, and it has offered only two reports of administrative violations. Even thought PCFACCI became more active during 2015 and 2016, its preoccupation was the confiscation of wealth by criminals linked to smuggling and selling of drugs, than dealing with forms of political and economic corruption (24 Hours Daily 2017).

The other major anti-corruption agency in the country is the Permanent Commission for Prevention of the Corruption at the High Judicial Council (HJC), the supreme judicial administrative management body. Its main responsibilities include investigation of specific claims, and to inform the members of the HJC of the results. It is also charged with the task to analyze submitted information for corruption practices in the judicial system, and to develop policies and measures for countering and prevention of corruption in the judicial system. Its most important duty, however, is in the application and observance of the Codex for Ethical Conduct and Behavior of the Bulgarian magistrates, a document adopted in 2009 with the main goal of lowering the proliferation of corrupt practices in the judicial system.

Two more commissions exist in the fight against corruption. The first one is the Permanent Commission for Disciplinary Violations at the HJC. Albeit a separate commission, it is still linked to the judicial system. Its main task, as its name suggests, is to monitor for the disciplinary violations and punishments sequestered on judges and other high magistrates. The other is the Commission for Prevention of Corruption, a state-operated body created in 2006. The Commission is under the direct control of the Council of Ministers and serves as a watchdog against corruption practices in the government and its affiliated state agencies. By design, this Commission was supposed to become with the time the main anti-corruption agency in the country. In practice, however, it lacks resources and vision. Over the past years, some 28 regional sub-committees were created under the auspices of this Commission and its prerogatives. They, however, often overlap with regional anti-corruption agencies. This created agency turf battles and resulted in less, not more, shared information and cooperation.

Finally, in 2010 a special Center for Prevention and Counteraction to Corruption and Organized Crime (CPCOC) was created, with the goal to assess, plan and develop preventive anti-corruption measures. At the time of its inception, CPCOC aimed to acquire cyber system for analysis and monitoring of corruption practices, of the type V-Modell XT, which is claimed to be unique high-tech tool used in monitoring of corruption practices at administrative level, and development of effective counter measures, in a large number of countries around the world. For the period 2011-2013, however, CPCOC was heavily criticized for its poorly justified large budget and lack of tangible results. Despite the mounting public pressure, the agency is yet to produce any meaningful results.

Apart from these main anti-corruption centers, a large number of state agencies have included over the past decade in their bylaws and regulations different texts that aim at demonstrating their determination to fight corruption inside their own domains. There is a strong correlation between the rise of small-scale corruption and the top-level corruption. The 2013-16 is the period when top-level political corruption became so ubiquitous and unmasked in the country, that became the focal point of unprecedented scrutiny by the European Commission. Declarations of top state officials, such as the Chief Prosecutor, the head of Central Prokuratura, that he will not respond to demands by the Parliament to report on the levels of corruption in the judicial and political systems  (OffNews 2017), resonated within the society as a state sanctioning of corruption as a part of the daily life in the country. Recent studies had found that the magnitude of small-scale corruption is correlated to the structure of the government and the quality of the state institution, including the judicial system (c.f. Enste&Heldman 2017; SELDI/CSD 2016). If the state institutions are captured by high-level political corruption, it is highly unlikely that the state and its pertaining agencies, designated to fight corruption, will be able to stem out the practices at a lower level, too. As the governments possess control over key sectors of the economy, when the political and judicial systems are captured by interested groups and pressured to bid their interests, this breeds corruption practices at the mid and low-level administration, as well as in the relationship between the state agencies and the citizens. As a result, a culture of corruption proliferates and reproduces itself. Corrupt transactions cannot be enforced through legal means, and this necessitates reciprocation of the ‘favors’ which results in further multiplication of the corruption practices at the mid and low level, all coming in a closed vicious circle.


In more general terms, the current study has established the connection between relationships that predated the transition from communism, which not only were preserved, but also succeeded in hijacking key elements of the state economy and state institutions, and hold the state hostage. The study also found and confirmed an existing correlation between the public perception of large-scale corruption practices, i.e. the Kostinbrod-gate and the CCBank affair, and the practice of small-scale corruption at local, regional and state administrative levels. The proliferation of practices of political patronage and influence trading is hard to prove and prosecute. However, such practices frequently come to the fore of public knowledge and have spoiling effect on the willingness of ordinary citizens to engage in small-scale corruption practices.

The apparent contradiction between practically ubiquitous condemnation of corruption practices (94%) by the adult population, and reported engagements (39.4%)—i.e. one out of four adults over age of 18 reporting to have paid a bribe for public service—is a clear indication for the existing of what psychologists call ‘irrelevant relationship’ between cognition and actions among a large number of the citizens. In other words, people have a highly negative attitude towards corruption practices and almost universally condemn them, but on the other hand, willingly engage in such practices at a very high level (one out of four). Possible explanations for this observed discrepancy is the rationalization of small-scale corruption practices as acceptable in the context of the proliferation of large-scale ones that not only remain unpunished but in fact strengthen further the positions of the ‘winners.’ Political patronage and large-scale corruption in that sense have adulterating effects on the behavior of public servants of all levels.

Outside the big cities, for example, the political patronage is directly experienced by the ordinary citizens in rather peculiar ways. In smaller towns and rural areas with a lower economic level of development, negative demographic indexes, and opportunities for employment, usually, the municipality and the connected to it municipal companies are de facto the largest employers in the region. The regional administration is also the one to conduct the biddings for public procurements for regional development. They are also the ones to manage the funds for regional development coming from the EU. Thus, in these areas, the political patronage acquires direct and personalized manifestation, where the loss of elections may lead to serious damage to the welfare of the connected businesses and individuals to the current administration. This, in turn, leads political patronage, trading of influence, and nepotism. In practice, such practices also perpetuate a type of feudal system of dependency, which has a spoiling effect on the overall propensity to legitimize corrupt practices at small-scale, which may be seen by the public servants not just as acceptable, but also as necessary means for their own survival.

In more general terms, the link between large- and small-scale corruption practices in Eastern Europe, as clearly shown in the case study of Bulgaria, are interconnected, but with different causal effect. The large-scale corruption is linked to a dominant culture of political patronage and politico-economic plundering of the state by the ‘winners’ of the transition from communism to democracy. These are the ‘new’ elites linked to the communist political and economic system, who succeeded in capitalizing on their social capital, i.e. interpersonal connections, shared information, and access to state property during the process transition of the economy from state-owning centralized one, to a private-owning capitalist market economy. These elites managed to capture control over the vital industrial and economic resources of the former communist state, to privatize them, and to position themselves as veto players at key positions in the political and economic life of the country. From there they kept exercising control over the elected politicians, and to influence the constituents by having a direct impact on the wellbeing of millions of ordinary citizens.

Small-scale corruption, on the other hand, is caused by the mixture of disgruntled public servants, who see nothing wrong in getting ‘little something’ for themselves in what appears to be a very corrupt political system, and general dependency on political patronage for survival and wellbeing, especially in the rural regions. As a result, the proliferation of small-scale practices has an adulterating effect on the society as a whole, where two contradicting cognitions exist: negative attitude towards corruption and frequent participation in corrupt practices.

The cultural dimension of the link between high-level and small-scale corruption has also shown that society accepts the fact that in a system in which inequality of power, in which some individuals have lots of power and enjoy immunity from prosecution of large-scale corrupt practices, small-scale corruption becomes not only acceptable as a ‘fair’ response, or even as a way to ‘stick it’ to the ‘big man’ but gradually also becomes part of the political and social culture of every day doing business.

Finally, the study contributed additional empirical evidence to the perennial theoretical question about the ‘grease’ effect of corruption, by demonstrating the negative impact on political culture and the making of public policy the corrupt practices may have. The findings, however, are still inconclusive as to the overall negative impact of the ‘gray area’ corruption, i.e. the trading of political influence. Neither political influence is in any meaningful way measurable, nor at the moment we have the tools to compare the economic outcomes from both, political patronage and bureaucratically stringent application of policies. Clearly, the rule of law – a guiding principle in consolidated democracies – is suffering a blow from the high levels of corrupt practices that destroy trust in the ability of the political system to deliver social justice. The emergence of patronage democracies in Eastern Europe, however, is not in contradiction with the historical record of democratic consolidation. Early 19th century democratic systems in the United States and Britain both suffered from pronounced clientelism and political patronage. The culture of ‘zero tolerance’ of corruption is an ideal linked to the best traditions of Western European theories of late 20th century theories of democracy and development. Even if these theories are proven empirically correct at some point, the Eastern European societies will still need time to absorb and internalize the necessary values and practices that would bring them in congruence with such professed norms. The crisis of trust in the state institutions, a clear legacy of the communist past, is an issue that cannot be addressed and overcome in a couple years or even in a couple of decades. It is a generational problem that needs systematic and dynamic approach.

In the interim, the two most pressing challenges in front of the Eastern European states that emerged from communism a quarter century ago, are as follows: a) to affirm political will, and b) to build administrative capacity to fight the proliferation of corrupt practices at all levels. Political declarations that frequently come from the pronouncements of political and community leaders alike are not indicative of the genuine existence of such political will. They are at best demonstration of intention, and at worst – demagogy and striking a pose to partners at EU and US levels. Real political will finds its manifestation in the decisive actions at administrative levels, strengthening and building capacity. To avoid the vicious circle of feeding political (lack of) will and administrative (in)capacity, or for that matter either the frustration from lack of genuine will, or the resistance at lower administrative levels to any attempt for reforms, it is recommended to seek innovative ways of cooperation. The use of the so-called ‘triangulation mechanism’ in which new stakeholders, such as diverse groups of civil society, are brought in the process, seems as a necessary first step. It is also the right policy approach at a moment when the negative attitude of the adult population of the country towards corruption is at a record 94% high. This is an opportunity that must be captured before it is lost to political apathy and cynicism that often comes at the heels of frustration and perception of the political system as socially unjust.

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