This book avoids relying on surveys of the perceptions of corruption as indices of state exploitation. Existing surveys have focused on business elites and owners rather than citizens per se (for example, both BEEPS and Transparency International [TI] surveyed only businesspeople, and TI polls only the representatives of international firms, which may face additional barriers in countries where the ways of doing business may not be familiar). Others have asked the question only sporadically (for example, the New Democracies Barometer asked questions regarding bribery, but only in the Czech Republic in 1998). Even where public opinion regarding state efficacy and corruption has been canvassed, the indices are problematic. The respondents rely on previous survey results in formulating their opinion. Comparability across countries is severely limited. “Effectiveness,” “corruption,” and “legitimacy” are concepts that are difficult to measure, and the reference baselines vary enormously from country to country.

Minor corruption can be publicized to the point of creating perceptions of massive catastrophe. It is thus not surprising that as more and more international agencies began to pay attention to corruption, all the countries in the region received worse rankings after 1997. Such changes in perceptions of corruption and politicization may have more to do with their changed form than with any increase in actual levels. Some analysts have defended such polls by arguing that since they are expensive and yet are in high demand, the data must be valuable.

Why can some political parties freely reap private gains from the state while others constrain such extraction? The proliferation of sovereign states after the communist collapse in Eastern Europe and the Soviet Union in 1989–91 provides surprising answers that recast the relationship among political parties, party competition, and the state. It demonstrates that the degree to which governing parties can obtain private benefits from public state assets is constrained by robust competition: opposition parties that offer a clear, plausible, and critical governing alternative that threatens the governing coalition with replacement. This prospect induces anxious governments to moderate their behavior, create formal state institutions, and share power – in short, to construct safeguards against the extraction of state resources. Opposition can thus limit discretion – and inadvertently build the state.

Such competition is critical in new democracies, as the development of post-communist states shows. As democratic governing parties established the institutions of market and democracy after the communist collapse, they also opportunistically reconstructed the state: the set of formal institutions that implement policy and enforce legal sanctions. Democratic parties that earlier sought to eliminate authoritarian abuses of the state were all too happy to benefit themselves subsequently while rebuilding state institutions, and to build in continued access to state resources.

Thanks to the collapse of communist rule, post-communist democratic parties had the opportunity to gain enormous private benefits with few constraints. Why would they fail to take full advantage of such privileged access to state resources? This is a fundamental question of post-communist state development, since building the formal institutional framework of the state was both a key challenge of state reconstruction and an enormous opportunity for governing parties to build in benefits for themselves.

This chapter argues that faced with a high probability of having to leave office, incumbents would rather constrain themselves, and all subsequent governments, than allow their successors to have access to state resources. Where a robust competition produced a credible threat of replacement to governing parties, post-communist governments deliberately chose to tie their own hands and to limit their leeway in disposing of and redistributing state resources. They built formal state institutions of monitoring and oversight, such as national accounting offices, civil service laws, auditing chambers, or ombudsmen that subjected their actions to legal review and limited their freedom to extract resources needed for their survival. They even turned over the leadership of these agencies to their political competitors: the opposition.

As a result, all the states under consideration privatized state enterprises – but only some developed independent regulation of the auctions and sales.

State administration consists of central and territorial offices of the national state: the employees of the ministries, regulatory and fiscal agencies, social security and labor office administration, and their territorial branches. This category excludes employees in state health care, education, and the armed forces. The data used in Chapter 4 and throughout the book were gathered from the national statistical offices in the countries under consideration.

This book relies on government statistical offices reporting of the Statistical Classification of Economic Activities in the European Community (NACE) state administration category. The NACE is used in all of the countries under consideration, and has been used consistently since 1990. The main category used and reported here is L: state administration and defense; compulsory social security. This category includes the following: administration of the state and economic and social policy of the community, general public service activities, regulation activities of state agencies, regulation and contribution to more efficient operation of business, supporting service activities for government as a whole, provision of services to the community as a whole, foreign affairs, defense activities, justice and judicial activities, public security, law and order activities, fire service activities, and compulsory social service activities. The L category excludes the soldiers and officers of the armed forces. It also explicitly excludes education and health care (reported in the M and N categories, respectively), as well as other community, social, and personal service activities (sanitation, membership organizations, media, artistic and literary activities, libraries and archives, sports arenas and recreational activities, or museums and national parks), which are reported in the O category.