State Capture Revisited: Security Risks of Grand Corruption in the Czech Republic

This paper presents the main results of a three-year research project that empirically examines the key problems of organized crime and corruption in the Czech Republic, arguing that the Czech Republic has undergone a dangerous, new phase of state capture. While media reports have often pointed out the indirect relationships between Czech political parties, local mafia, and influential business people, there has been little scholarly research explaining the nature of these ties. This paper will present the results of three analyses: 1) an updated analysis of Czech state capture using the old methodology of Joel Hellman but with updated data, as well as how the theory of state capture applies to the Czech context; 2) an analysis of the problems in political party financing regulations, which have enabled foreign companies and private individuals to bankroll political parties without detection, and contrary to the law; and 3) an analysis of the problem of public procurement, which enable individuals to receive public tenders without disclosing their identities, thereby creating illicit kick-backs to politically-connected business people. The lack of transparency in political party financing and public procurement creates a feedback loop that over time has enabled a small set of business people, often associated with criminal networks, to reap huge monetary benefits from the Czech state. The analysis of political party financing and public procurement is based on public, quantitative data as well as specific examples. The paper concludes with an overview of the policy recommendations that are needed to reduce these security risks, though it is argued that legislative reform is unlikely due to the inherent interests the main left- and right-wing political parties have in maintaining the status quo.