Political Parties in Business
AbstractWhy have some mono-parties in emerging market economies (such as Taiwan’s KMT and Ethiopia’s EPRDF) established formidable business empires while powerful ruling parties in socialist economies invariably decried them? The phenomenon of party-owned business (Parbus), much like military-controlled businesses, is an integral part of the drive for a total "capture," by an insurgent vanguard party, of key state and societal institutions in weak market economies. A Parbus-based fusion of political power and economic power is a conundrum for traditional conceptions of corruption, public enterprises, bona fide private enterprises, or oligarchy. Party-state capitalism is a novel phenomenon that is quite germane to the debate on developmental states and neo-patrimonialism especially in Asia and Africa. At the extreme ends of economic and political governance, the Parbus can be viewed as a market-defying institutionalization of grand corruption or as a market-facilitating strategy of shared growth. The parasitic rent-seeking interpretation is that the Parbus is an ingeniously disguised mechanism for tunneling public assets and for creating and redistributing economic rent in resource-poor, post-conflict societies where the state is the biggest economic prize. The alternative, developmental-vanguard, interpretation is that party-owned business empires constitute an innovative third way for responding effectively to paralyzing mix of market failure and government failure. The Parbus stem coordination failures and informational failures (such as investment pooling and allocation, and discovery of new products and markets) where the private sector itself engages in rent seeking as much as in profit seeking. The Parbus thus provide the ruling party investable funds to underwrite shared prosperity and, hence, legitimacy. The war chest of patronage finance can also be tapped to ward off political contenders. This paper makes a modest contribution to the scanty literature on a touchy subject by offering a theoretical framework buttressed by analytical studies of two canonical cases. It identifies key explanatory variables and outlines the conditions under which developmentalism or parasitism is likely to dominate. We argue that the overall impact of Parbus on long-term wealth creation and distribution revolves around four empirically measurable regime characteristics: insecurity, organizational capacity, ideology, and degree of centralization of inherited state. Self-confidence and organizational capacity are most decisive in determining the magnitude of socialization of economic losses and privatization of economic benefits. Three possible paths of evolution emerge: a paragonist path favoring transition to an open system, a parasitic path toward a poverty-tyranny trap, and a mutualist path of unstable equilibrium among state, party, and private competitors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, College of William and Mary in its series Working Papers with number 113.
Length: 69 pages
Date of creation: 20 Apr 2011
Date of revision:
Party-state capitalism; party-owned companies; developmentalist state; Ethiopia; Taiwan.;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- F35 - International Economics - - International Finance - - - Foreign Aid
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002.
"Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development,"
CEPR Discussion Papers
3643, C.E.P.R. Discussion Papers.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
- Mkandawire, Thandika, 2001. "Thinking about Developmental States in Africa," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 289-313, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daifeng He) or (Alfredo Pereira).
If references are entirely missing, you can add them using this form.