No Rule of Law, No Democracy

Conflicts of Interest, Corruption, and Elections as Democratic Deficits

Cristina Nicolescu-Waggonner

• Publisher: SUNY Press
• Year: 2016
• Print ISBN: 9781438462646, 9781438462639
• eBook ISBN: 9781438462653
• Topic: Politics & International Relations
• Subtopic: Comparative Politics
• Index: Politics & International Relations

Mainstream theories assert that democracy cures corruption. In market economies, however, elections are expensive and parties, with ever-thinning memberships, cannot legally acquire the necessary campaign funds. In order to secure electoral funds, a large number of politicians misappropriate public funds. Due to the illicit character of these transactions, high officials with conflicts of interest prefer to leave anticorruption enforcement mechanisms unreformed and reserve the right to intervene in the judicial process, with dire consequences for the rule of law. In No Rule of Law, No Democracy, Cristina Nicolescu-Waggonner demonstrates that when corrupt politicians are in power—true of nearly all new democracies—they will protect their office and fail to implement rule of law reforms. Consequently, these polities never reach a point where democracy could and would cure corruption. This dysfunction is tested in one hundred cases over sixteen years with significant results. In the case of the Czech Republic, for example, which is regarded as a consolidated democracy, there is systematic corruption, misappropriation of state funds, an unreformed judiciary, and arbitrary application of law. The only solution is a powerful, independent, well-funded anticorruption agency. Romania, one of the most corrupt countries in Europe, established, at the European Union's request, powerful anticorruption bodies and punished corrupt leaders, which created the predictability of enforcement. It is the certainty of punishment that curtails corruption and establishes true rule of law.

PART I

Democracy, Rule of Law, and Corruption

1

Introduction

Fighting corruption with legislative measures is like fighting the narcotics mafia with legislation.

—Tomáš Kafka

Start with what is right, rather than what is acceptable.

—Franz Kafka

One of the most decayed practices in a corrupt democratizing polity is the interference with law enforcement. High officials with conflicts of interest, who predict lax application of legislation, reserve the right to intervene in the judiciary and influence its decisions. We hear about this obstruction, we see the biased results of so-called impartial judgment, and we know this lies at the core of a vicious cycle in new democracies. However, we are rarely able to observe the dynamics of this mechanism. This book uncovers the causal paths through which corrupt politicians with conflicts of interest prevent the establishment of rule of law.1 Though in charge of carrying out reforms, they fail to create and strengthen enforcement institutions that might punish them. If the guardian of justice is arbitrary, then the entire society reflects its practices. This behavior dismantles not only the observance of rule of law, but also the core values of the democratic political culture.

Cătălin Voicu, a member of the Romanian parliament, teaches us how to perform judiciary influence peddling.2 He was indicted for receiving hundreds of thousands of dollars to put pressure on police officers and judges to “positively” solve the corruption files of certain “friends.” In one case, while a member of the Romanian parliament, he received over 300 thousand dollars from a businessman “to fix” a corruption file with the Supreme Court of Romania (High Court of Cassation and Justice—ICCJ) involving a freeway construction acquisition contract.3 Voicu asked a judge to influence the high court’s decision in return for substantial benefits. He let the judges know that “it is the preference of someone with political ties for a positive resolution,” and that the company involved “is entitled to this beneficial outcome” (Gherguț 2013b).4

The exchange of favors is something very familiar to Voicu.5 Investigations brought to light that he has controlled and influenced the Secret Service, the police, the prosecution, and judges, including the High Court of Cassation and Justice, for several years. Right after the Romanian revolution (1989), the interim president Iliescu appointed Voicu, only 21, as the new Chief Prosecutor’s bodyguard and in charge of coordinating the activity of the General Prosecutor’s Office. He learned from the “communist-transformed-democrat” prosecutors the art of hiding and manipulating personal files and of obtaining incriminatory information. Several former and current members of the Secret Service and new prosecutors delivered covert knowledge to Voicu. He found, in the secret archive, compromising notes about magistrates, policemen, and politicians, which he used for his personal database. Later he worked for the Romanian Special Forces, and in 1997 he opened a security company. According to his declarations, he “had the civilian phone lines,” implying that he was able to listen to private phone conversations and gather compromising intelligence. From 2001 to 2004, as Ion Iliescu’s presidential advisor, he reviewed all the secret documents from the Ministry of Interior (Defense). He concluded his concealed database after 2009 when he again came to enjoy access to the Administration Secret Service Department, DGIPI (Gherguț 2013b). He perfected blackmailing to an art and illegally influenced the judiciary decision-making in countless files and investigations. In his words, this is how he did it.

I kept a piece a paper about everyone’s past, I stopped them, I made them loyal, including the Secret Service. A person is faithful to you if they have a motive. It’s good if you helped them with something. But it’s even better to have a piece of paper about them. Two motives are better than one. I go to an authorized person, I tell all of them to come to an office, and I say, “Gentlemen, if you appreciate what I did for you when I was at the Cotroceni Palace [the Presidency—a.n.], if you are alive today (…) how many times did I treat you with due respect, friendship, and I didn’t let go [information] about you, I am kindly asking you to treat this as a personal favor, because if my request is refused, I will take it as a personal offense. So please check ten times, and if you assess that this is criminal, then we will talk, I will talk to a friend, the General. And I am telling you that by elections nothing will happen. Because if I tell them about this, we will create extreme difficulty.” Cătălin Voicu, Romanian Senator (Gherguț 2013b)

Senator Voicu is just one example among countless instances of corruption. Why does this happen in new democracies and how can it be stopped? While we are starting to adjust our expectations and to reconceptualize democracy, we come to grips with the fact that advanced democratic regimes may have been the unique product of historical circumstances. Outside of a handful of mature democracies from Western Europe, North America, Australia, and New Zealand, we encounter a range of flawed democratic, democratizing and nondemocratic regimes. From the procedural6 democracies with a rather positive record of human rights and civil liberties, such as Poland and Chile, to procedural democracies with oppressive elements and centers of power outside of the state, such as Mexico, to terribly corrupt democracies characterized by a host of human rights violations, such as India, and a variety of competitive authoritarian regimes of the Russian sort, the world has not reached democratic rule of law and constitutional liberalism.

The politicians in new democracies, along with their families and friends, thrive on state money illegally acquired from public acquisition contracts, misappropriation of financial aid, and kickbacks from preferential deals with international corporations. Their illicitly obtained wealth is immense. It consists of large estates, big bank accounts, and lavish lifestyles, while millions of people try to survive below the poverty line and pay exceedingly high taxes. In many cases the electoral votes are bought, judges are corrupt, legislation is poor and serves the rich, the laws to protect the citizens do not apply, all institutions are overly politicized, and the bureaucracy is inefficient and corrupt.

For example, the Czech Republic was regarded as the ultimate success of a consolidated democracy among the former communist countries of soviet influence. Leading international indexes, such as Freedom House and Worldwide Governance Indicators, placed it at the top of the democratic and rule-of-law scale, sometimes very close to the United States. However, at the same time, over two decades after the fall of Communism, state-plunder, unaccountable politicians, a disaffected electorate, and lack of rule of law prevailed. A snapshot of the political life in 2011 Czech Republic painted a perplexing picture. For instance, Vít Bárta, the owner of the biggest Czech-owned security agency (ABL), revamped the Public Affairs Party (VV), based on a business model. Bárta, along with a popular former media figure, Radek John, a few attractive 20- and 30-year-old women with great ambitions, and other members of the party, set the goal to win enough votes to be part of the governing coalition. Bárta’s personal aim was to receive several government seats from which to illicitly manipulate the distribution of public contracts with the purpose of obtaining party finance. Electoral campaigns are very expensive, and this is the reality all parties in democracies have to face.

Despite Bárta’s intentions, the party ran a virulent “anti-corruption” electoral campaign, promising serious reforms. It won approximately 10.9 percent of the votes. Radek John occupied the much-targeted Ministry of Interior portfolio, while Bárta received the Ministry of Transportation (he transferred his security company to his brother before taking office). One party member recorded Bárta giving details about granting preferential public procurement contracts from his ministry. Following a bribery scandal, Vít Bárta was eventually prosecuted, a rare event at that time in the Czech Republic. However, his sentence was suspended, which means that he did not go to jail and his record was unaffected. This renders the retribution system meaningless and it incentivizes bad behavior.

Thus, because party finance is expensive, corrupt networks of politicians and judges work in tandem to extract public funds. Business beneficiaries and their politician friends profit financially, while the judiciary remains unreformed. These politicians have huge conflicts of interest, and no reasonable incentive to establish the rule of law. This book uncovers their story and a story of unconsolidated democracies at the beginning of the twenty-first century. It comes at a propitious time, when prominent representatives of the social science community are trying to solve the puzzle of why new democracies are stuck in a stage of formal democracy without its application.

Great scholars of democracy have written about the failure and success of its formation (Almond and Verba 1963; Dahl 1971; Huntington 1984, 1991; Linz 1990; Lipset 1959; Moore 1966; O’Donnell 1979; O’Donnell, Schmitter, and Whitehead 1986; Przeworski 1991; Schmitter and Karl 1991). They linked success with a set of preconditions, i.e., a strong civil society, international timing, the type of previous authoritarian regime, the type of transition, the economic indicators, and/or the snowball effect. However, despite successful transitions, we still observe that the new democracies of the third and fourth wave, after they establish procedural democratic elements in form (e.g., free and fair elections, separation of powers, independent judiciaries), get stuck in a stage of perpetual incomplete transformation in practice.

First, in these polities, people are regarded as citizens with respect to their political rights, but not as citizens with protected civil liberties (Zakaria 1997). They lack enforcement and application of the democratic procedures; that is, they do not have the rule of law, which is the legally based rule of a democratic state (O’Donnell 1998a, 1998b, 2004). It is now understood that while constitutional liberalism leads to democracy, democracy does not automatically lead to constitutional liberalism (Zakaria 1997). Second, during the consolidation stage of democratization, all actors alike (elites and masses) should learn to respect democracy as the “only game in town” (Dahl 1971; Diamond 1997; Lipset 1981; O’Donnell 1992, 1994; Przeworski 1991; Putnam 1993; Stepan and Linz 1996). This means they should voluntarily act within its legal bounds. But in new democracies they do not. Scholars have been disappointed with these outcomes and they argue for the establishment of “good institutions,” which the most recent literature argues would lead to “good governance” (Acemoglu, Johnson and Robinson 2002, 2005; Acemoglu et al. 2008; Diamond 2008; Fukuyama 2011; Hellman, Jones, and Kaufmann 2000; Johnston 2000; North 1981, 1991; O’Donnell 1998a, 1998b, 2001, 2004; Olson 1996; Putnam 1993; Wallis 1989; Weingast 1997). The contribution of this book is to show that new democracies may not be able to create these “good institutions” due to corrupt leaders with conflicts of interest. Staying in power has high stakes in these polities.

Coming either from a neoinstitutionalist or economist perspective, the solution of “good institutions” assumes a rational actor that responds to incentives created by the institutions in place. Hence, an army of policymakers and practitioners go from country to country and advise on the creation of these desirable institutional and legal transformations. International donors—among them the World Bank, IMF, European Union, and the United States—condition giving aid on the application of a blueprint to cure corruption, and consequently, to establish rule of law. In the meantime, critics charge them with following a self-interested neoliberal agenda detrimental to the developing and underdeveloped world. They assume that the Western democracies are mostly interested in facilitating the goals of the free market to benefit the already rich countries. But even apart from these controversies, the donors’ attempts lead to little success. For good institutions to function, they need to be governed by the rule of law. While scholarly work focuses on how formal institutions incentivize behavior, we are still short of understanding why rule of law has not yet been established.

Research shows that even though rule of law was expected to spring from the business community’s demands for property rights, this route failed. Uncertainty about the legal system leads to asset stripping (Hellman 1998; Hellman and Kaufmann 2001; Hoff and Stiglitz 2002; Shleifer and Vishny 2002), even though business associations may challenge a corrupt bureaucracy and contribute to a more effective and predictable regulatory system (Duvanova 2013). Foreign pressure, aid, and influence showed severe weaknesses and though they led to some advancement, they stopped short of establishing the rule of law (Carothers 2006; Emmert 2008; Golub 2003; Johnston 2013; Kleinfeld 2012; Nicolaides 2003; Stromseth, Wippman, and Brooks 2006). This happened mostly because scholars did not account for realities on the ground and the local culture. In the case of non-Western societies, the study of how formal institutions affect behavior (Elster 1993; Elster, Offe, and Preuss 1998; Weaver and Rockman 1993) may fail to notice the effects of networks of relationships. These patterns of interactions (informal institutions) (Mungiu-Pippidi 2003a, 2003b, 2005, 2006) create a different set of behavior incentives. Since practitioners focus on establishing high-quality institutions, they may miss the incompatibility between the informal political cultures based on networks of relationships and the Western type of institutionalism (Golub 2003; Kleinfeld 2012; Stromseth, Wippman, Brooks 2006). Consequently, a new set of recommendations advises for changing cultures, mobilizing civil society, building social coalitions, creating grassroots movements and establishing rule of law with bottom-up strategies, respectively (Golub 2003; Kleinfeld 2012; Johnston 2005; 2013; Mungiu-Pippidi 2013; Stromseth, Wippman, and Brooks 2006). Research shows, though, that civil society pressures fail due to collective action problems (i.e., the inability to collectively mobilize) (Weingast 1997).

So why is it so difficult to establish good institutions? Because, in essence, while the democratic sets of rules (the institutions) are not difficult to introduce, their practice and enforcement are a completely different story. It took centuries for the exercise of rule of law to evolve in the advanced democracies. However, this task, to create enforcement mechanisms, is now left to politicians, the agents of change. Some scholars—who favor agency explanations—conclude that “lack of political will” or “lack of interest” prevents them from doing so (Brinkerhoff 2000; Daniels and Trebilcock 2004; Kaufmann 1998; Przeworski and Maravall 2003; Riley 1998; Tisne and Smilov 2004), but this response has a general character. This book complements this conversation by adding a refined conceptualization of “political will” linking it to conflicts of interest.

Thus, this book discusses what could perhaps be one of the fundamental problems of the beginning of this century: that of human agency. I specifically focus on corrupt politicians who misappropriate public funds for private gain and who are the same politicians (agents) supposed to establish the rule of law. I first narrow the scope of a general “political interest” explanation by identifying the explicit activity that leads to the observed lack of rule of law. Second, I hone in on one type of corruption, rather than deal with the universe of practices that make up this complex concept. The core of a democracy—free and fair elections—creates its main dysfunction.

This book also signals a potential classification problem in the governance literature, which may lead to confusion for policymakers. This school of thought places “corruption” and “lack of rule of law” under the same subcategory of governance, “respect for citizens and the state institutions,” while the distinction between their respective measurements “is not clear cut” (Kaufmann, Kraay, and Mastruzzi 2006, 2007, 2008, 2009, 2010, 2011). Works on governance tend to treat these concepts interchangeably, defining corruption as mere absence of rule of law, and vice versa. This is not correct conceptually. While political corruption refers to a breach of trust by an official, rule of law represents the capacity of the political and legal system to prevent this behavior through predictable enforcement of rules and normative principles. However, absent this predictability, officials will not necessa...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Illustrations
• Preface
• Acknowledgments
• Abbreviations
• Part I Democracy, Rule of Law, and Corruption
• Part II Democratic Rule of Law and Corruption in Practice
• Part III Democratic Rule of Law and Corruption: Cross-National Time-Series Analyses
• Appendices Definitions, Interviews, Lists, Legislation, Results
• Notes
• References
• Index
• Back Cover