State Capture and Political Corruption in Serbia and Albania (draft only) more

EUROPEAN REGIONAL MASTER'S DEGREE IN DEMOCRACY AND HUMAN RIGHTS IN SOUTH EAST EUROPE STATE CAPTURE AND POLITICAL CORRUPTION IN SERBIA AND ALBANIA Cluster: DEMOCRACY Cluster Leader: Prof. Francesco Privitera BY HEATHER MCROBIE SARAJEVO, BOSNIA AND HERZEGOVINA DATE 15.02.2010 1 NUMBER OF PAGES: 32 Table of Contents Table of Contents................................................................................................... 2 Chapter 1. Key concepts: political corruption and state capture............................7 1.1 Political corruption........................................................................................7 1.2 'State capture'...............................................................................................9 1.3 New institutionalism....................................................................................10 Chapter 2. Serbia: Kleptocracy and Recovery.....................................................12 2.1 From administrative corruption to kleptocracy...........................................12 2.2 The political economy of war.......................................................................14 2.3 Back to administrative corruption?..............................................................16 Chapter 3. Albania: Organised Crime as Political Corruption................................18 3.1 Causes and Consequences of the 1997 Crisis.............................................19 3.2 Organised Crime and Corruption.................................................................20 3.3 'State capture' in 2000s Albania .................................................................21 Chapter 4. Serbia and Albania: Hybrid Regimes...................................................23 4.1 War and Recent Independence...................................................................23 4.2 Recovery from Isolation...............................................................................25 4.3 Arenas of Democracy in Transition..............................................................25 Conclusion............................................................................................................ 28 Bibliography......................................................................................................... 31 2 Introduction Corruption in post-Communist South East Europe presents a paradox to political analysts: transparency and the absence of political corruption are widely seen as a cornerstone of democracies, crucial to upholding the rule of law and the legitimate balance of power, and yet the 'third wave of democratisation' in South East Europe saw an overall unprecedented increase in both institutional or political corruption and petty bribery. Alekander Fatic notes that, since the fall of Communism, "corruption is a part of the daily life in South-Eastern European societies, and it is an important phenomenon of their institutional transitions."1 Understanding the post-1989 rise of political corruption is therefore a central part of an analysis of whether democracy has been consolidated in the region in the twenty years since the fall of Communism. This paper is comparative in its methodological approach, and will analyse and compare political corruption in Serbia and Albania. Comparing two countries in this way points to broader issues facing post-Communist Eastern European countries as a whole. At the same time, however, it is worth acknowledging the limits of comparative methodology, particularly in the terms of the overarching narrative of the 'wave of democratisation' across Eastern Europe. Both Serbia and Albania are in some ways atypical of the usual generalisations of Eastern European transitions to democracy: unlike much of Eastern Europe from 1990, postHoxha Albania's trajectory was recovery from almost total isolationism, rather than recovery from Soviet imperialism; similarly the breakdown of Yugoslavia and the experience of Serbia under Milosevic means that the country is starting down the path of consolidating democracy and the EU accession process "after a delay of ten years of devastating war that has made the 1 Fatic, Aleksander. 'State Capture in the Balkans: Corruption and the International Organisations'. South-East Europe Review. 2003. 3 starting point of transition much less favourable in many respects"2 This paper therefore also raises the question of what extent we can conceive of the post-1989 democratisation process in South East Europe in terms of overaching themes and generalisable experiences. As a result of this approach, this paper draws upon work from a number of disciplines, namely studies of modern history, academic political analysis and reports and policy papers from anti-corruption NGOs and think tanks. In particular, reports from Transparency International provide both data and key concepts relating to corruption. It could be argued that Transparency International's role in the understanding of and attempts to combat corruption is broadly analogous with Amnesty International or Human Rights Watch in the 'human rights movement' inasmuch as it acts as both a source of information about abuses of corruption/ human rights, and simultaneously shapes the landscape of the debate in both academic and policy analysis through its evolving definition of what constitutes 'corruption'. Unlike the 'human rights movement', where the key concepts and central debates over, for instance, the relationship between first and second 'generations' of rights have developed over the course of the sixty years since the UDHR, the corresponding 'transparency movement' is only around fifteen years old 3 and corruption as a unit of analysis is relatively underdeveloped in academic studies compared to the literature on human rights. While it is important to acknowledge recent criticisms of Transparency International for its top-down, Western-oriented origins and the limitations of its research methodology, 4 its 2 Batt, Judy. 'The Western Balkans'. in Developments in Central and East European Politics 4. Batt, Judy, Paul G. Lewsi and Stephen White (eds). Palgrave Macmillan. New York, USA. 2007. p89. 3 Eigen, Peter. ’Combatting Corruption at Every Level’. Talk at Transparency International, 2007. Berlin, Germany. Available online via iTunes podcasts. (Last accessed, 10th February 2010). 4 Endre Sik has provided a convincing critique of the three quantitative measurements Transparency International use to measure corruption -- the Corruption Perception Index, the Global Corruption Barometer and the Bribe-Payers' Index -- particularly Endre's observation that these quantative measurements produce contradictory results when used together. Taking this on board, this paper will not use measurements such as the Corruption Perception Index, but instead the qualitative analysis from Transparency International reports. See: Sik, Endre. 'The Bad, the Worse and the Worst: Guesstimating the Level of Corruption' in Political Corruption in Transition: A Skeptic's Handbook. Stephen Kotkin and Andras Sajo, Eds. Central European University Press. Budapest, Hungary. 2002. 4 reports remain the most influential resources on the issue of corruption in South East Europe, and so a degree of reliance upon them is unavoidable for the time being. Chapter one of this paper will introduce the key concepts of political corruption and the definition of 'state capture', and outline how the political-science approach of 'new institutionalism' provides a framework for analysing the impact of corruption. Chapter two will show how these concepts can be applied to the case of Serbia, and present an analysis of Serbia's road from administrative corruption to endemic institutional corruption under Milosevic, and its partial but incomplete transition out of 'state capture' in the late 2000s. Chapter three will show that 'state capture' works in a different way in Albania, but is nonetheless an appropriate framework to describe the extent to which organised crime has compromised democracy in the country. Methodologically, the case of Albania also raises the ongoing -- and in some ways underdeveloped -- debate within corruption analysis, of the extent to which organised crime can be distinguished from corruption. Chapter four will compare Albania and Serbia as two examples of 'hybrid regimes', and point to the issue of reforming party financing laws as central to tackling political corruption in both countries. This paper intends to show that widespread political corruption and state capture in Albania and Serbia is a product of the mishandled path of transition from Communism to democratisation. It is therefore worth bearing in mind the larger Eastern European context of corruption in transition. As has frequently been noted, corruption in most Eastern European countries during the Communist era was widespread but predominantly administrative and 'petty', taking the form of bribery as a way to circumvent large and inefficient government bureaucracies, and patronage-politics among the nomenklatura. Transition to free-market economies -- particularly taking the shape of neoliberal 'shock therapy' -- ignited a privatisation process that Misha Glenny has characterised as an 'auctioning off the state.'5 This 5 Glenny, Misha. ’The Good Gangster'. Talk at the Royal Society of the Arts. London, UK. 2008. Audio version available online at http://www.thersa.org/events/audio-and-past-events (Last accessed, 11th February 2010). 5 combined with the new 'costs of democracy' such as election campaigns (and at a time when party-membership was declining throughout all former Communist countries)6 to provide both the incentive and opportunity for unprecedented political corruption and embezzlement. In conclusion, the cases of Serbia and Albania show that the transition from Communism did not necessarily mean a straightforward transition towards consolidated democracy in the 1990s and 2000s. Moreover, corruption is an issue of central importance to the future stability of the two countries: combatting corruption is essential to any hope of EU accession, and yet frustration at the slow pace of EU accession processes has been seen as a factor compounding political corruption.7 Understanding and combatting 'state capture' is fundamentally linked to broader regional issues: the hard-won democratic transition that followed the collapse of Communism in South East European countries is a meaningless victory if political corruption continues to hold the democratic process hostage and reinforce the balance of power in favour of the unelected and undemocratic few. 6 Lewis, Paul G. 'Political Parties'. Developments in Central and East European Politics 4. Batt, Judy, Paul G. Lewis and Stephen White (eds). Palgrave Macmillan. New York, USA. 2007. p183-184. 7 Miller, Robert F. ’The Difficult Fight Against Corruption in Transitional Systems: The Case of Serbia’. Transcultural Studies, Vol 2-3. 2007. p252. 6 Chapter 1. Key concepts: political corruption and state capture While the World Bank has influentially defined corruption as "the abuse of public power for private benefit", Transparency International's definition, "the abuse of entrusted power for private gain", is a more helpful working definition for several reasons, most notably because the concept of "entrusted power" includes the private sector. As Chapter 2 of this paper will show, political corruption cannot be treated as categorically discrete from private sector corruption, and an interplay of corruption in these two sectors has often been central to endemic political corruption, such as in Milosevic-era Serbia. Building upon Tranparency International's definition, this Chapter will define the concepts of political corruption and state capture, in order to secure a level of 'conceptual validity' in the comparison of state capture in Albania and Serbia in Chapters 2 and 3, and avoiding what Sartori has called 'conceptstretching'8, wherein abstract political concepts are rendered meaningless through their application in incomparably different contexts. Whilst it must be acknowledged that some trade-off between cross-national comparability and contextual validity is inevitable, this Chapter aims to define political corruption in such a way that allows a meaningful comparison between Serbia and Albania. 1.1 Political corruption Political corruption has historically been considered a disease of the executive branch of government, particularly one that plagues executive-legislative relations: in eighteenthcentury England, for instance, 'corruption' meant the encroachment of the government on parliamentary sovereignty and an abuse of norms of government-parliament procedures intended to uphold the rule of law.9 In contemporary analysis, political corruption is 8 Sartori, Giovanni. 'Concept Misformation in Comparative Politics.' American Political Science Review. Los Angeles, CA. 1970 9 Eigen, Peter. ’Combatting Corruption at Every Level’. Talk at Transparency International, 2007. Berlin, Germany. Available online via iTunes podcasts. (Last accessed, 10th February 2010). 7 considered to occur when leading individuals or groups in the executive, legislature or governing political parties misuse the power and resources at their disposal in a manner that depletes the state's resources and overrides democratic principles and the rule of law, leading to institutional decay. The act of political corruption can be defined in contrast to the ideal behaviour of political actors, in which politicians use the resources at their disposal for the good of the citizens of the state. 10 Most analysts divide political corruption into two types: accumulation (also called 'extraction') and power-preservation. Accumulation is the process whereby governmental/ political actors abuse their position of power to extract resources from government revenues and/ or the private sector11. Power-preservation describes the process whereby the resources political actors have at their disposal are used to maintain and extend their power. This manifests as 'favouritism' and patronage-politics, and encompasses the process of 'paying off' rivals and oppositional figures in order to preserve power, such as maintaining a parliamentary majority. In Transparency International's definition, it also includes favouritism in the form of giving preferences to private companies in order to gain campaign funds, and "paying off government institutions of checks and control [to] stop investigations and audits and gain judicial impunity."12 Most large-scale political corruption entails a combination of accumulation and power-preservation: for instance, when illegally 'extracted' money is used by government officials to buy political support. The concept of political corruption can also be further elucidated by contrasting it with administrative corruption. Schleifer and Vishney13 have outlined the difference between a 10 U4 Expert Answer. What Is Political Corruption? Transparency International. Available online at: http://www.u4.no/themes/political-corruption/introduction.cfm. (Last accessed, 13th February 2010). 11 12 U4 Expert Answer. Ibid. Ibid. 13 Schleifer, Andrei and Robert W. Vishney. 'Corruption'. Quarterly Journal of Economics. No 108, Vol 3. MIT Press. Massachussets, USA. 1993 8 decentralised pattern of corruption on the one hand and 'monopolised' corruption on the other. Whilst political corruption occurs in the highest echelons of state power, administrative (or 'bureaucratic' corruption) takes place at the service-provision end of politics, in public services such as the state education and health systems. The predominant form of corruption in most Communist countries, there is some debate amongst political scientists over the extent to which administrative and political corruption can be distinguished, as political systems differ in the extent to which the administration can be treated as separate from the political centre14. For the purposes of this paper, however, political corruption can be seen as corruption at the 'policy' (or power) stage of politics, whereas administrative corruption is a problem affecting the implementation of policies that come from the centre. 1.2 'State capture' The concept of 'state capture' was developed by the World Bank, primarily as a framework in which to describe and measure political stability in transitional economies.15 Although as a conceptual framework it suffers somewhat for its overdependence on the model of post-1991 Russia (an argument some scholars use to argue for its limited value or applicability) 'state capture' remains a helpful way of understanding the link between endemic political corruption and the failure of democratic consolidation in many post-Communist countries, including Serbia and Albania. State capture occurs when endemic political corruption allows corrupt political actors to change the regulations and institutions of the state in a way that favours the interests of their corrupt activities16. State capture can also be seen in legal terms -- when the state is 'captured' the state's legal institutions are operationalised to work counter to their intended function of 14 Sik, Endre. 'The Bad, the Worse and the Worst: Guesstimating the Level of Corruption' Begovic, Boris. 'Corruption in Serbia: Causes and Remedies.' Policy brief No. 27. The William Davidson Institute at the University of Michigan Business School. Detroit, Michigan. 2005. p5. 16 Begovic, Boris. Ibid. 15 9 upholding rule of law, and instead become the tool for preserving corrupt interests.17 Lack of political will cements endemic corruption into a position of 'state capture' when the key political actors are involved in corruption and therefore unwilling to address the issue. Moreover, one of the consequences of state capture is a culture of impunity towards corruption, and a sense of helplessness on the part of citizens, which leads to -- or reinforces, if already existing -- significant administrative-level corruption and petty bribery, which Peter Eigen has described as 'metastases' of high-level political corruption. Taken together with its consequences, it is reasonable to say that when a country is in a position of 'state capture' it is no longer possible to describe it as a real or consolidated democracy. 1.3 New institutionalism One of the problems with anti-corruption efforts -- perhaps even more so than comparable progressive efforts for the 'human rights movement' -- is the widespread impression, which analysis of corruption often reinforces, that when political corruption is endemic, it has reached a terminal stage from which it is impossible to recover. Concepts and definitions of political corruption which cannot account for change are not only empirically flawed but also feed into a vicious circle in which citizens feel that political corruption is inevitable and something they are powerless to act against. An account of political corruption is not complete without highlighting possible solutions, and as political corruption is by nature a problem that corrodes democratic institutions, solutions must similarly be presented through an institutional lens. The definitions of corruption outlined above can therefore be linked to 'new institutionalism'. New institutionalism builds upon the more traditional institutionalism of political theorists such as Weber whilst incorporating insights from the behaviouralist 17 Pesic, Vesna. 'State Capture and Widespread Corruption in Serbia', CEPS Working Document No. 262. Centre for European Policy Studies. March 2007. 10 approach of social sciences, particularly rational choice theory18. In recognising that institutions operate in a broader environment comprised of other institutions, this approach helps us de-tangle the way in which corruption in one arena (such as the executive) impacts upon other institutions such as the judiciary and the sphere of civil society, which is at the root of state capture. Similarly, new institutionalism helps operationalise the abstract concepts of political corruption and state capture by recognising the role that institutions play in shaping norms and individual preferences. As the following chapters show, state capture in Serbia and Albania can only be fully understood in the context of the institutions -- and capacities of institutions -- in these countries. 18 Powell, Walter W. 'The New Institutionalism'. International Encylopedia of Organization Studies. Sage Publishers. New York, USA. 2007. p2. 11 Chapter 2. Serbia: Kleptocracy and Recovery Transparency International estimates that Slobodan Milosevic syphoned in excess of US $1 billion of public funds between 1989 and 200019, making him one of the ten most corrupt politicians worldwide since 1945, in terms of the scale and extent of his embezzlement. Even without the devastation of war in the Balkans in the 1990s -- although this Chapter will show that the two factors are inextricably linked -- such egregious abuse of public power for private gain would still have played a decisive role in the corrosion of democracy and stability in Serbia and throughout South East Europe. This Chapter will analyse the trajectory of political corruption in Serbia from the administrative corruption of the Yugoslavia era, to the 'kleptocracy' of 1990s Serbia, and then analyse whether post-2001 reforms have meant the end of state capture in present-day Serbia, which is a subject of debate amongst political analysts. 2.1 From administrative corruption to kleptocracy Levels of corruption in Yugoslavia are sometimes underplayed -- some academics even deny that what we now consider 'corruption' was present at all during the Communist era -- as if to provide a black-and-white contrast with the rampant embezzlement and state capture present in 1990s Serbia. This nostalgia for Yugoslavia replays the official narrative of Titoist economic theory: that Karadlj's system of workers' self-management provided autonomy for workers and local communities that allowed them to avoid both the petty bribery of Stalinistbureaucratic Communist systems and the private-sector abuse of power in unforgiving freemarket economies. This presentation of Yugoslavia as devoid of corruption ignores the nuances of Communist social structure. Michael Voslenksy's famous analysis of the Soviet 'nomenklatura' was built upon Milovan Djilas's 1957 analysis of the 'new class' in Communist Yugoslavia, in which it was precisely the absence of regulation of property ownership under 19 U4 Expert Answer. What Is Political Corruption? Transparency International. Available online at: http://www.u4.no/themes/political-corruption/introduction.cfm. (Last accessed, 13th February 2010). 12 Communism that allowed members of the political elite to acquire material wealth without scrutiny. Coupled with the stifling bureaucratic inefficiency of a diverse federal state, the growth of the 'new class' meant administrative corruption in the provision of public services was present throughout the Communist era in Yugoslavia.20 But though corruption was present in Yugoslavia, the 1990s still present a sharp contrast in terms of the levels and modes of corruption. In 1989-1990, the USA began to push Yugoslavia to open, using the IMF and World Bank as vehicles for its neoliberal goals. It could be argued that the reason why corruption took a different -- but similarly endemic -form to Russia's experience in the 1990s was because the wars resulting from the breakup of Yugoslavia hindered IMF attempts to co-opt the process of economic transition in Serbia. Instead, Milosevic's regime can best be described as a 'kleptocracy', given the scale of his accumulation/ extraction, yet it is also clear that the two types of political corruption -accumulation and power-preservation -- were mutually-reinforcing under his rule. Begovic identifies 1990s Serbia as a classic political economy of dictatorship21, in which corruption was "endogenous to the political process." Extraction of state finances for Milosevic and his family was reinforced by Milosevic's patronage of corrupt, 'loyal' civil servants, who were promoted to ensure both loyalty to the regime and increased revenues from the bribe-taking of officials. Simultaneously strengthening state power in the hands of the few, loyal civil servants were permitted to extract from the state through "the sales of a limited number of permits and licences for all economic activities"22, which enabled 'licensing proceeds' to be diverted from their intended/'proper' use in the state budget (i.e. to finance public services) and toward private gain. Whilst Milosevic's family received most of the proceeds of this activity, loyal civil servants were also incentivised to participate by being 20 Miller, Robert F. ’The Difficult Fight Against Corruption in Transitional Systems: The Case of Serbia’. Transcultural Studies, Vol 2-3. 2007. p245. 21 Begovic, Boris. 'Corruption in Serbia: Causes and Remedies.' p2. 22 Ibid. p3. 13 granted a small share of the funds. In addition to nepotistic appointments in the judiciary and bureaucracy, Milosevic and his party allies also gave preferences to private companies in contracting processes in exchange for funds donated directly to the party (which in turn went directly to Milosevic). As the twin processes of accumulation and patronage interlocked, the purpose of power became wealth as much as the purpose of wealth became the preservation of power. 2.2 The political economy of war Serbia was at war throughout much of the 1990s. Although detailed analysis of the causes of the breakdown of Yugoslavia is beyond the scope of this paper, it is impossible to account for Milosevic's kleptocracy without considering the 'external' factor of regional conflict. It could even be argued that this factor was so central to Milosevic's rule that it is meaningless to contrast the 'internal' issue of corruption and the 'external' issue of war. The logic of a 'war state' system provided a rationale for Milosevic's embezzlement, whilst the wars themselves provided political and criminal elites with vast opportunities for plundering state resources, further strengthening their power. Privatisation was never completed, and public companies were instead 'seized' by the ruling parties, meaning public property was effectively converted into 'party property' and managed for their interests.23 War-profiteering and the opportunity -- or, some argue, necessity -- for smuggling due to the war fed into the process of extraction/ accumulation as well as strengthening the regional capacity of its network. Misha Glenny has spoken of how during the war Bosniak, Croat and Serb criminals and politicians were "publicly denouncing their national enemies as demons bent on genocide and extermination, but in private those same [individuals] bought, sold and exchanged all manner of commodities, knowing that the high levels of personal trust between 23 Pesic, Vesna. 'State Capture and Widespread Corruption in Serbia', CEPS Working Document No. 262. Centre for European Policy Studies. March 2007. p14. 14 them were much stronger than the transitory bonds of hysterical nationalism."24 In fact, he argues, stoking this 'hysterical nationalism' became one of the tools used by organised criminals and their allies in the political elite to foster the instability and opportunities that supported their illegal activities. Glenny's presentation of the exact cause-and-effect of organised crime and ethnic conflict in the 1990s may be an extreme and counterintuitive one that does not cohere with other respected accounts of the causes of the 1992-1995 Balkan conflict (and even contradicts the analysis presented in Glenny's earlier work The Fall of Yugoslavia). However, hyperbole aside, Glenny's account provides insight into the intimate connection between large-scale political corruption and the 'war state'. A report by the Center for the Study of Democracy has shown that "the elites of the Yugoslav republics [during the war] were actively involved in the development and organisation of smuggling channels and they protected and assisted those who were directly involved in their exploitation."25 The profits from these activities went to key political actors. International sanctions and embargoes further compounded the monopoly of organised crime networks,26 whilst the nationalist rhetoric of 'any means necessary' for self-preservation against neighbouring enemies provided a convenient political logic for the increasing concentration of power and assets in the hands of the political leader. The principles of rule of law and democracy stood little chance against the political economy of Milosevic's construction of a war-state, and left little public space for dissent, let alone institutional checks and balances. 24 Glenny, Misha. ’The Good Gangster'. Talk at the Royal Society of the Arts. London, UK. 2008. Audio version available online at http://www.thersa.org/events/audio-and-past-events (Last accessed, 11th February 2010). 25 Center for the Study of Democracy. 'Corruption, Contraband and Organised Crime in the Balkans'. Center for the Study of Democracy Research Paper. Sofia, Bulgaria. 2003. p9. 26 Ibid. p12. 15 2.3 Back to administrative corruption? Analysts are divided on the question of whether post-Milosevic Serbia has managed to fully transition out of the 1990s kleptocracy that the political institutions in the 2000s "inherited" from the former regime. Post-Djindjic, the discourse of 'combatting corruption' has become part of the prevailing rhetoric of the key political actors, yet attempts at reform have generally been "half-hearted" or "clumsy."27 Glenny has argued that Djindjic's role as both reformer and participant in corruption signified that in the late 1990s and early 2000s having the benefits of links to organised crime was a prerequisite for a political career in Serbia. 28 By the late 2000s, however, academics and analysts raised the question of whether Serbia was out of a state of 'state capture'. Vesna Pesic has argued that, although the severity of 'state capture' is less endemic than under the Milosevic era, the 2000s cannot be seen as a straightforward trajectory of 'progress' on anti-corruption. There is evidence of 'moments' of state capture in amidst reforms such as those of the Kostunica government and the law on financing political parties in 2003. Pesic highlights both the approval-process and content of the 2006 constitution as evidence of state capture, particularly in the fact that the constitution broadened the immunity rights of MPs29 and the fact that judicial independence is not constitutionally guaranteed through protection against party/ political influence over the courts. Similarly, public assets continue to be 'captured', as in 2006 the "17 biggest companies founded by the government of Serbia are managed by the parties that comprise the ruling coalition at the national level -- the managing boards, presidents and directors -- are compiled by a quota-system and divided up among each of the parties of the ruling coalition, which appoints the management positions as if the 27 Begovic, Boris. Ibid. p5. Glenny, Misha. ’The Good Gangster’ audio. See also: Glenny, Misha. 'The Death of Djindjic'. New York Review of Books. Vol 50, No 12. July 2003. Available online at http://www.nybooks.com/articles/articlepreview?article_id=16495 (Last accessed, 12th February 2010). 29 Pesic, Vesna. p5. 28 16 companies were their own property."30 Lastly, both Begovic and Pesic note that no substantial reform of the judiciary took place as part of the anti-corruption efforts of the 2000s. Nonetheless, anti-corruption efforts in the 2000s meant that corruption was, at least, transformed. Transparency International Serbia has noted that administrative corruption is now one of the largest facets of corruption in the country, which can be seen as positive in the sense that the corruption is no longer occurring primarily at the 'top' of the political system, whilst Begovic has argued that, from 2005, administrative corruption concerning the biased enforcement of legal rules has taken the place of high-level political corruption.31 If this is the case, 'state capture' may have passed its peak in Serbia, but it continues to limit the country's consolidation of democracy and 'normalisation' after the Milosevic era. For example, one of the major concerns of the European Union is the issue of transnational justice and the continuing issue of war criminals who remain at large, and as long as corruption in judicial and administrative sectors is still present, the capacity to ensure transnational justice is severely compromised in Serbia even if the political will is there. In conclusion, while Serbia's shift from administrative-level, nomenklatura-style corruption as part of Yugoslavia to the unprecedented kleptocracy of Milosevic's rule was a stark transformation fostered by the creation of the 'war state' economy, the transition out of this position in the post-Milosevic era has been more ambiguous and qualified, in large part because of the institutional legacy of the 1990s on modern-day Serbia. 30 31 Pesic, Vesna. p14. Begovic, Boris. p6. 17 Chapter 3. Albania: Organised Crime as Political Corruption This Chapter will outline how recovery from isolationism, and the dire economic legacy of the Hoxha administration, meant transition to democracy and the free-market economy was particularly fraught in Albania. This in turn meant the state lacked the capacity to uphold the rule of law in the face of the proliferation of organised crime, and this organised criminal activity came to bear directly upon the highest levels of political life. This Chapter will also raise the question of the link between organised crime and political corruption, as there is a lack of reliable literature on this subject, and yet Albania's case points to a close relationship between these two factors, which are usually treated as categorically discrete. The analysis on Albania presented here is based on the assumption that organised crime and political corruption are modern phenomena which can be explained with reference to political, social and historical forces and which can be feasibly combatted in various ways. This needs stating as several academics writing on Albania resort to a somewhat reductionist explanation of the high levels of corruption and endemic organised crime solely in terms of Ottoman-era traditions of smuggling and "features of Albanian society…such as mistrust of others, the clan mentality, absence of mutual respect.“32 Whilst sociological factors are undoubtedly relevant in analysing behaviour in post-Communist transitions, the implication that corruption is somehow 'inevitable' in Albania is as essentialist as the view that ethnic conflict is 'inevitable' elsewhere in the region, and denies the specific forces that enabled endemic corruption to develop, which this Chapter will broadly outline. 32 Bogdani, Mirela and John Loughlin. Albania and the European Union: The Tumultuous Journey Towards Integration. I.B. Tauris & Co. London, UK. 2007. p152. 18 3.1 Causes and Consequences of the 1997 Crisis Enver Hoxha's megalomaniacal rule over Albania was defined not only by arbitrary decrees of authoritarianism and the stark concentration of power in the hands of the political leader and his family, but also by increasing isolationism, as the country first allied with Maoist China in an attempt to protect itself against the perceived threat of Titoist Yugoslavia and the Soviet Union, until, in June 1978, China-Albania ties were also severed. Throughout the 1980s, Hoxha's successor Alia made no significant attempts at 'de-Enverisation’33 and when the wave of democratisation throughout Eastern Europe in 1989-1990 finally forced Alia to undertake considerable reforms such as visa liberalisation, this led to an unexpectedly significant level of mass emigration which contributed to economic instability in the early 1990s.34 With the introduction of multi-party elections and economic liberalisation in the early 1990s, the inadequate capacity of the state combined with the recession induced by economic liberalisation, while lack of governmental expertise in handling the economy further compounded the crisis. Throughout the early 1990s, up to two thirds of Albanians invested in what turned out to be Ponzi schemes, in large part due to sharp rise in poverty and unemployment caused by the mis-handled economic transition. These pyramid schemes were a front for money-laundering and weapon-smuggling activities, and their collapse meant that a majority of Albanians lost their personal savings, having unwittingly financed illicit activity by organised criminal networks. As money from the Ponzi schemes had been used to develop smuggling and weaponstrading activities,35 the 1997 crisis both highlights the way in which the Albanian state was 33 Brown, J.F. ’Albania’. In Legters, Lyman H. Eastern Europe: Transformation and Revolution: 1945-1991. D.C Heath and Co. Lexington, MA. 1992. p533. 34 Brown, J. F. Ibid. 35 Michaletos, Ioannis. 'The Shape of Albanian Organised Crime.' Research Institute for American and European Studies. 2007. Available online at: http://www.rieas.gr/index.php? option=com_content&view=article&id=332&catid=22&Itemid=69n (Last accessed, 10th February 2010). 19 beholden to organised crime to such an extent that its effects could lead to national crises and changes in political leadership, and the role the war in the former Yugoslav republics had on strengthening organised crime networks within Albania. Moreover, the fact that the fatal clashes in February 1997 began because citizens were demanding to be reimbursed by the government because they suspected government involvement in the Ponzi schemes highlights the lack of credibility the post-isolation government had in the eyes of Albanian citizens, an indication in itself that democracy could not be considered 'consolidated' at this time. While the rise and prevalence of these pyramid schemes were a result of the economic crisis of mid1990s economic problems in Albania, their collapse compounded economic difficulties and the lack of capacity of state institutions. 3.2 Organised Crime and Corruption The United Nations Convention against Transnational Organised Crime defines organised crime as "structured groups committing serious crime for profit."36 As some models of political corruption -- particularly the World Bank's definition -- leave little room for the role of organised crime in political corruption, it is necessary to raise the question in conceptual terms of the relationship between the two. Recently, Transparency International has begun to highlight what it calls the "organised crime-corruption nexus" in which corruption is seen as a "catalyst" or "facilitating factor" for organised crime, particularly in transitional or developing countries which have recently been integrated into the global economy, wherein widespread corruption -- along with weak governments and state institutions -- enables organisedcriminal activities.37 Although Transparency International's recent analysis has helped develop the correlation between organised crime and corruption, the causality it highlights (political corruption as an 36 U4 Expert Answer. Organised Crime and Corruption. Transparency International. Available online at http://www.u4.no/themes/organised-crime-corruption.cfm. (Last accessed, 12th February 2010). p1. 37 Ibid. p6. 20 'enabler' of organised crime) does not fully convey the vicious cycle of 'state capture' in 1990s Albania. Although further research is needed, it could be tentatively argued that the case of Albania shows that we should conceive of endemic organised crime as a form of political corruption. In 1990s Albania, impunity towards organised criminal activity did not merely come from the fact that political actors either had close ties with, or lacked the political capacity to stop, organised criminal networks, but because the direct "involvement of the highest representatives of the governing Democratic Party in smuggling and other criminal activities prevented any serious action against the illicit trade before the 1997 collapse."38 Using the definition of 'state capture' outlined in Chapter 1, it seems reasonable to argue that, based on this analysis, Albania in the 1990s reached a point of 'state capture' just as Serbia, Russia and other former Communist countries did, but that the state was 'captured' specifically by organised criminal networks linked to trafficking in the global economy. In other words, it is no longer meaningful to treat organised criminal activity and political corruption as discrete categories when the main political actors are themselves the key figures in organised criminal networks. 3.3 'State capture' in 2000s Albania Although data on organised criminal activity is often hard to verify, estimates in the mid2000s by Transparency International suggested that up to 80% of the Albanian economy is a 'parallel' one, and thus for every 100 Euros of documented capital, another 80 Euros are never accounted for, and much of this is assumed to come from organised criminal activities.39 Although this figure is so high that it requires further research and verification, it is worth contrasting it with the often-cited worldwide estimate of 18-25% of global capital which is considered to come from illicit revenues.40 The relevant point here is that all of this money is 38 Center for the Study of Democracy. 'Corruption, Contraband and Organised Crime in the Balkans'. Center for the Study of Democracy Research Paper. Sofia, Bulgaria. 2003. p13. 39 Michaletos, Ioannis. 'The Shape of Albanian Organised Crime.' (No page numbers). 40 Glenny, Misha. ’The Good Gangster’ audio. 21 untaxed and therefore cannot be used for the provision of state services and economic development, even if there is political will to do so. Moreover, analysts have noted that collusion between organised criminal networks and political parties in Albania has risen due to the increased need for party funding, as "state funds for political parties are very limited, while the electoral campaigns have become more and more expensive."41 Additionally, a telling sign of 'state capture' until at least the mid-2000s is the fact that under the 1997-2005 Socialist government, journalists and anti-corruption campaigners were frequently prosecuted for accusing politicians and public figures of involvement in organised crime and corruption.42 This is not only an indication of corruption in the judiciary, but a classic sign of the infrastructure of the state being used to preserve the interests of those who benefit from corruption. Overall, it could be argued that while organised crime is now the most pressing crisis for the Albanian economy, the underlying factor which allowed organised crime to flourish was the lack of capacity of the Albanian state institutions, while the proliferation of organised crime has now come full circle to entrench corruption at the highest levels, further weakening the state infrastructure and democracy. Moreover, the involvement of high-level political figures in organised crime means that there is not merely a causal relationship between the two, but in some respects they have fused to create prevalent 'state capture'. 41 Bogdani, Mirela and John Loughlin. Albania and the European Union: The Tumultuous Journey Towards Integration. p154. 42 Ibid. p153. 22 Chapter 4. Serbia and Albania: Hybrid Regimes Both Serbia and Albania could be broadly categorised as "hybrid regimes" which combine democratic and non-democratic characteristics.43 This Chapter will first outline the two independent variables highlighted by the case studies of Chapters 2 and 3 -- the impact of the war on corruption in Serbia, and the legacy of isolationism in Albania -- and then analyse how state capture in both countries can be seen as a corrosive influence on all arenas of democracy, as well as noting how the more 'general' process of post-Communist transition combined with these country-specific problems. 4.1 War and Recent Independence Whilst Albania remained a unified country throughout transition, the defining feature of Serbia in the 1990s was its emergence as an independent state through the process of devastating conflict. The Balkan wars of the 1990s allowed Milosevic to rule the country as a 'war state', centralising power in his hands whilst plundering the state resources. Meanwhile, sanctions resulting from the conflict cemented the organised structure of smuggling and the black market, which was closely controlled by key political actors. Aside from the toll of the war itself, the emergence of Serbia (beginning, in the early 1990s, as a kind of 'rump Yugoslavia') as a new independent state created problems for institutional capacity as "the collapse of an established state…accelerates the disintegration of government bureaucracies that must function smoothly to ensure the administrative effectiveness of democratic institutions."44 Taken together, these factors were decisive in the creation of 'state capture' in Serbia, whilst the same can obviously not be said of Albania. 43 Ekman, Joakim. 'Political Participation and Regime Stability: A Framework for Analysing Hybrid Regimes'. International Political Science Review. Vol 30, No 1. 2009. p8-9. 44 Parrott, Bruce. ’Perspectives on Post-Communist Democratization’. Politics, Power and the Struggle for Democracy in South-East Europe. Dawisha, Karen and Bruce Parrott (eds). Cambridge University Press. Cambridge, UK. 1997. p9. 23 However, it is important that we do not create a false dichotomy between Serbia's experience of war and Albania's experience as a continued unified and 'peaceful' state. Endemic smuggling and corruption as a result of the conflict in the former Yugoslav republics had a decisive impact upon -- and could not have been possible without -- Balkan countries that did not directly experience the war. Glenny and Miller both note the pivotal role that organised crime in Albania played in the smuggling of weapons and laundered money, which in turn strengthened the influence of organised-crime groups over national-level politics in Albania. That organised criminal activity became increasingly transnational and regional can be seen in the emergence of a new "division of labour" in organised crime after the fall of Communism.45 By the late 1990s, analysts began to talk in terms of 'specialisms' of national organised criminal networks, which supplied their specialist services to other organised criminal groups in exchange for their commodities -- notably, Turkish and Albanian specialism in heroin trafficking, Albanian, Macedonian and Bulgarian groups in peopletrafficking, and Serbian and Russian criminal groups in hired killings.46 Whilst, as noted in Chapter 3, it is necessary to dismiss essentialist claims that corruption in the Balkans is somehow an inevitable part of a legacy of 'clan culture', the rapid rise of durable networks of criminal activity must be seen in the light of regional geography, and the historical role the Balkans played as the most important European point-of-entry for Asian heroin.47 While this in no way makes organised crime in the Balkans 'inevitable', the specific forces of the 1990s conflicts and the problems of post-Communist transition in the region combined with this geographical factor to lay the ground for the proliferation of organised criminal activity. 45 46 Center for the Study of Democracy. 'Corruption, Contraband and Organised Crime in the Balkans'. p13. Glenny, Misha. ’The Good Gangster’ audio. 47 Center for the Study of Democracy. p16. 24 4.2 Recovery from Isolation As outlined in Chapter 3, the legacy of Hoxha's isolationism and backwards economic policies meant that Albania faced far greater difficulties integrating into the global economy than post-Communist countries such as, for example, Poland and then-Czechoslovakia. Alia's reluctant and partial attempts at reform meant the country stalled at the crucial moment when wholesale reform would have kept Albania closer to the path of Central Eastern European countries' transition processes. Moreover, integration into the global economy itself provides greater opportunities to corrupt regimes, and these opportunities were quickly seized by the political elite in Albania: the international financial system allows corrupt governments to "both divert national wealth for their own benefit and to conceal the proceeds of corrupt and illicit gains"48 far more easily, and on a far greater scale, than in the pre-globalisation era. However, as with the issue of the impact of the war in the case of Serbia, we should be weary of creating too sharp a distinction between Albania's isolation and Serbia's experience, as sanctions against Serbia in the 1990s -- which constituted a kind of enforced economic isolationism -- undoubtedly played a large part in the increasing reliance on the black-market economy, funds from which 'fed up' from organised crime networks into the political elites. The key difference is that the capacity of the Albanian state, and the Albanian economy, were uniquely ill-equipped to cope with economic transition primarily as a result of the legacy of isolationism, which was not the case in Serbia. 4.3 Arenas of Democracy in Transition Having outlined the two key differences between Albania and Serbia, it remains to note the similarities not only in their present condition of 'state capture', but also in the conditions that led to this state. To more fully explore this idea, it is helpful to draw upon Stepan and 48 U4 Expert Answer. Corruption and the International Financial System. Transparency International. Available online at http://www.u4.no/themes/corruption-international-system.cfm. (Last accessed, 12th February 2010). 25 Linz's concept of the five arenas of democracy, as their analytical model provides a way of highlighting the interrelated failures which led to state capture in the 1990s and 2000s in both Serbia and Albania. In Albania, political corruption arose primarily a result of economic collapse (which in turn emanated from the difficulty in transitioning from Hoxha-era isolationism), whereas in Serbia 'state capture' was a product of the political economy of Milosevic's construction of an economic war-state. However, all arenas of democracy in the two countries could be said to be affected by the state capture that resulted from these experiences. In both countries, 'state capture' compromised judicial independence, particularly after legislation in both countries aimed at providing immunity for politicians, and after a culture of nepotistic appointments became entrenched. Moreover, serviceprovision in areas such as health and education suffered both from the vast scale of public funds that had been syphoned off (particularly in 1990s Serbia) and by the 'metastases' of administrative corruption. Similarly, although a detailed analysis of the problems faced by civil society in postCommunist countries is beyond the scope of this paper, Transparency International have highlighted the impact of 'state capture' on civil society, in terms of both the diversion of funds away from civil society organisations and the consequences of 'state capture' in which legal institutions are hijacked to perpetuate the corrupt status quo, and thus work 'against' actors who are outside of the political elite, such as civil society. In Serbia and Albania, this negative impact of state capture on civil society intersected with the general problems caused by over-reliance on donors and resultant 'projectitis' to weaken the capacity of NGOs and civil society as a whole. Following Stepan and Linz's model, in which democracy can only be considered "consolidated" when all the major components of the state function in accordance with 'democratic rules', we can see that political corruption has not only hindered democratic 26 practices in the executive sphere, but corroded the 'democratic' elements in the other arenas of the state. Moreover, in addition to the specific problems facing Albania and Serbia since the fall of Communism, we should not ignore the fact that both also faced 'general' difficulties of transition, which presented problems for democratic consolidation. The first issue is that of taxation, the introduction of which strained the capacities of most former Communist countries. Perhaps more significant is the issue of the expense of elections, which coincided with an overall decline in party-membership (thus reducing a potential source of financing for electoral campaigns). Although full multi-party systems did not exist in either Serbia or Albania in the 1990s, the era still differed from the Communist regimes in terms of the costs involved in presenting the window-dressing of democracy.49 In conclusion, political corruption in Serbia and Albania grew out of differing experiences -- the war/ recent independence, and recovery from isolation -- but both had the result of 'state capture', which in turn led to similar problems for the consolidation of democracy. On top of the specific problems of the two countries, the 'general' issues of statecapacity and the difficulties of democratisation faced by former Communist countries entrenched the proliferation of political corruption. While anti-corruption organisations in Serbia and Albania have both highlighted the centrality of party-financing reforms and clearer constitutional/ legislative definitions of what constitutes a political party as the key to combatting political corruption, this paper has attempted to demonstrate that corruption affects all arenas of political and civic life, and thus it is necessary to reform all arenas simultaneously. 49 Lewis, Paul G. 'Political Parties'. Developments in Central and East European Politics 4. Batt, Judy, Paul G. Lewis and Stephen White (eds). Palgrave Macmillan. New York, USA. 2007. p174-176. 27 Conclusion This paper has attempted to show that Serbia and Albania cannot be considered consolidated democracies in which democracy is "the only game in town", and this lack of consolidation is in large part due to the fact that political corruption has stymied the arenas of democracy in both countries, from civil society to the rule of law. Whilst the trajectories of Serbia and Albania in the 1990s and 2000s differ considerably, the mishandling of transition from Communism and lack of political will to address corruption underlies the continuing problem of 'democratic deficit' in both countries. The preliminary analysis of state capture in Serbia and Albania presented in this paper obviously has a number of limitations. The first relates to the gaps in the conceptual frameworks on the link between organised crime and corruption, as stated in Chapter 3, which is in turn linked to the predominance of Transparency International's influence on definitions of 'corruption' in both academic studies and the publications/ advocacy work of anticorruption organisations. Secondly, this paper has been focused on the impact of political corruption on the democratisation process, but there is an equally valid and crucial lens through which the impact of political corruption can be viewed and its negative effect proved to be tangible -- namely, the lens of human rights. Political corruption, particularly when affecting the judicial system and the rule of law, enables political actors to violate human rights with impunity. Not only has the relationship between human rights and democratisation itself been shown to be decisive50 but harnessing the the influence of the 'human rights movement' and the predominance of human rights discourse in both political science and civil society by demonstrating the links between political corruption and human 50 International Council on Human Rights Policy and Transparency International. Human Rights and Corruption: Making the Connection. International Council on Human Rights Policy Publications. London, UK. 2009. Available at http://www.ichrp.org/files/reports/40/131_web.pdf . (Last accessed 12th February 2010). 28 rights abuses is an important part of the ongoing project to redefine both the concept and impact of political corruption. As the above indicates, this paper leaves many opportunities for further research. One issue which has been pointed to but not fully explored here is the issue of 'new' postCommunist countries, such as Serbia's emergence from Yugoslavia. In this paper, two separate but interrelated variables have been treated as synonymous -- Serbia's status as a 'new' country, and the fact that the emergence of countries from the former Yugoslavia was singularly fraught with war, conflict, and tension on a scale unparalleled in other European countries in the 1990s. For a deeper understanding of the ways in which 'new' postCommunist states are particularly vulnerable to political corruption, and to fully isolate the variable of the impact of war on levels of political corruption, it would be helpful to compare the levels (as well as causes and consequences) of political corruption in Serbia and a country such as Slovakia or the Czech Republic, products of the post-Communist 'Velvet Divorce', in which the emergence of new states was peaceful and yet political corruption remains a concern. Despite these limitations, a study of state capture in post-Communist Serbia and Albania highlights the extent to which political corruption impedes democratic consolidation. As of February 2010, Serbia has formally begun the process of EU accession talks, and hopes of joining the European Union is a major impetus for tackling political corruption in both Serbia and Albania, the prospect of eventual accession to the EU appearing to at last stimulate political will amongst the governing elites to tackle corruption. 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