Elite capture

Elite capture is a form of corruption whereby public resources are biased for the benefit of a few individuals of superior social status in detriment to the welfare of the larger population. Elites are groups of individuals who because of self-ratifying factors like social class, asset-ownership, religious affiliations, political power, historically discriminated social groups, political party affiliation, economic position, etc have decision-making power in processes of public concern. This specific form of corruption means that elites deviate public funds, originally aimed to be invested in the larger population, to fund projects that would only benefit them, differentiating elite capture from embezzlement, misappropriation or other diversion of funds by a public official. Elite capture is related to information asymmetry, inefficient regulation or inefficient allocation of resources because it causes a biased distribution of a public good or a service, resulting in the case where certain segments of the population experience reduced access to them than others. In this context, as long as there is evidence of elite capture taking place the welfare impact will not be Pareto Optimal nor equitable.

Elite Capture in Decentralization

For long it was thought that creating decentralized governments would avoid the limitations of a single planner in society. A centralized government often lacks knowledge and might be subject of intense lobbying, leaving certain territories unattended. On the other hand, theory predicts that when people are involved in governing and have representation in decision making, public spending are supposed to be more efficient, more equitable and more sustainable. However, despite the theoretical predictions, the outcomes of many development projects in decentralized governments have not met with expectations. By yielding power to smaller units the money should be more efficiently distributed but local governments are more vulnerable to pressure groups. Failure can occur when particular subgroups of the community, are able to mobilize resources to further their own self-interest. The same way central governments are prone to corruption, local governments can be captured by local elites or interest group politics to a higher degree. Attempts to reduce elite capture in decentralized governments range from going back to a heavily centralized planner to providing citizens with funds to initiate projects. This last option has been criticized because the citizens’ ability and skills to actually implement programs may be weaker than the local leaders. According to the World Bank, development assistance independently of the form that it may take: funding, supplied, policy decisions, foreign fund transfers are vulnerable to manipulation or hijack by elites because it requires governmental or private agency to ensure the transfer to households. It is in this intermediary stage where instances of elite capture are most manifested. Be it centralized or decentralized government, there is a risk element of ineffective public resource delivery involved, where part of the local population will receive more than the rest of the local population. This situation has welfare consequences.

Alternatives of solution

First, elite capture of public resources by local elites can be relatively lessened by the presence of media to balance the asymmetry of information. Empirical studies have shown that government responsiveness and accountability to ensure equal distribution of public goods and avoid elite capture is hedged on the availability of information and general levels of awareness among the local population. Second, the ‘counter-elite’ approach to deal with elite capture advocates challenging elites by completely excluding them in the implementation of projects. It assumes that all elites are bad in nature. By raising public awareness of power inequalities and building local capacity, this approach suggests that community empowerment and political citizenship would be effective in resisting elite domination .This approach is not necessarily effective in challenging elite domination, because of the structural dependence of poor people on the elites and the breaking of established institutions. Third, the ‘co-opt-elite’ approach suggests that cooperation with elites, rather than confrontation, is the solution to alleviating poverty. It asserts that not all elites are bad, and some of them can play a constructive role in community development. It also assumes a pragmatic use of elites’ networks and resources can benefit poor communities. The ‘counter-elite’ approach is not necessarily effective in eroding the elites’ power whereas risks legitimizing the authority of the elites and worsening inequality.

Similar Concepts Elite capture and discrimination are very similar concepts because both imply unequal power status and denial of public resources. Though, closely related, social discrimination can promote elite capture, they are clearly not interchangeable. Elite capture exists based on a state of an unequal power relations whereas discrimination may or may not be the cause of an unequal distribution of power. Elite capture is a changing dynamic process; power structures change with it a new elite raises. Discrimination is rather static in this sense. Elite capture is a manifested form of corruption, and social discrimination is a manifestation of a set of beliefs in a society. Elite capture and State capture are also similar because they are both related to deviation of public resources for private benefits, but differ in how power is exercised. Elite capture is carried out but an elite that is legitimately entitled some level de jure power. State capture is carried out by elites that exercise de facto power (e.g. powerful unions or big multinational companies) that aim to have influence on the decision making process of the institutions. However, both phenomena are both symptom and a main reason for bad governance because it allows a vicious cycle pattern to be followed, with long-term effects on institutional and bureaucratic performance.

Examples

Examples can be found in a variety of situations. In the United States it is said that the phenomenon happens when high representatives of private sector are appointed public offices in the process of revolving doors. Also, examples are found in most developing countries, where an increasing proportion of government and foreign aid is distributed through community driven development but fail to properly reach the target population. Additional examples are male-dominated cultures where women may be disproportionately influenced by elite capture, since they tend to be excluded from the social elect and public services. It is a phenomenon that may even take place even where there is no clear indicators of ‘capture’ of power or corruption like access to education in rural areas of developing countries. While there are primary schools in the villages, they are somewhat dysfunctional due to lack of maintenance. As a result, children have to go to neighboring villages to study. Usually girls are not sent far away from their villages, limiting their study years. Therefore, girls are systematically denied access to a public resource (education) as opposed to boys in the same village. The absence of an enabling social, political and economic environment can also encourage unintended elite capture. But at the same time, corruption and inefficiency appear to be a concomitant part of the elite capture problem. Academic Approaches As many other activities related to corruption, there has been very few systematic attempts to measure and identify causes and consequences of this phenomenon in economy. The concept itself is still in constant evolution because majority of evidence comes from non-experimental case studies or empirical data sets and there is very little consensus on the outcomes. A formal representation of the level of elite capture can be done by considering a single public service and how much does the elite capture changes the per-capita enjoyment of if it was equitably distributed. The idea is to consider how different the average consumption level of a certain public program would be if the average formal elites were eliminated. Empirical studies often analyze total welfare and utility function of a society. The idea is to identifying utility function of all households in three scenarios: current unequal distribution situation, with probability of equitable distributions and unavailability the public service or good to finally compare the data.

See also

• State capture
• Discrimination
• Regulatory capture

References

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