ISMAIL LAGARDIEN: Rolling back organised crime requires scrutiny of private-public sector relationships

The Financial Mail’s report on the possible “end of SA’s construction industry” is the latest in a long running story of organised crime in the country (“Abandoned: Is it the end of SA’s construction industry?”, November 3). The reports should deepen our understanding of the way organised crime, “the construction mafia” and “mafia-type crimes” affect societies in transition, and the challenges they pose for policymaking. Allow me some reflection.

I have had an active interest in organised crime, mainly in southern Italy, for about three decades, to the extent that in 2007 and 2008 I prescribed Roberto Saviano’s book, Gomorrah: A Personal Journey into the Violent International Empire of Naples’ Organised Crime System, for my political economy students in the US.

The first three or four chapters were compulsory reading, recording how organised crime in effect seized control of the political economy around Naples and southward towards Calabria and Sicily, where three main groups dominate almost all business, enterprise and state institutions. The chapters also showed how organised crime spreads through manufacturing and private enterprises in general, across national boundaries.

So when I made a contribution to SA’s National Development Plan, which was published in 2012, I made specific reference to organised crime “transnational crime” and “cross-border crime” in chapter seven, which essentially dealt with SA’s foreign policy. After leaving the secretariat of the National Planning Commission I took time off in Europe, where I refreshed my knowledge of organised crime and its transnational effects.

I had tied myself to an ethical code and would not write about specific insights I had into state capture. The best I chose to do at the time was to write allegorically about organised crime in Italy, and hope that readers would draw their own conclusions. In particular, I wrote about southern Italy: “The only way that a bridge or a building could be built was to give politicians and organised crime groups a share of the funding. The role of agents in the criminocracy did not end there. In some cases infrastructure was built at substandard quality, and was expected to last for, say, five to 10 years (criminal groups sometimes have great entrepreneurial vision) so that the contract for maintenance or reconstruction could be reissued — invariably to the original syndicate.

“This low-intensity but high-impact corruption … often occurs stealthily, behind a veneer of legitimacy. It is typically achieved through the cultural assimilation of criminal activities, and the blurring of lines between public service and criminal activity. This reference to ‘culture’ has nothing to do with notions of race, admixture, genetics, nor with perceptions of ethnicity or geographic specificity … It has to do, simply, with what is considered to be acceptable conduct, customs and practices.”

As much as we have to continue exposing corruption, maladministration and rent-seeking in the prebendal state, we might want to consider the general way in which firms, too, may be involved in a type of “capture economy”. The World Bank produced a paper more than 20 years ago that drew attention to the way companies, especially in “transition economies”, have been able to shape the rules of the game to their own advantage “at considerable social cost”, which results in a “capture economy” in many countries.

The phrase “shape the rules of the game” conceals what we refer to as “cognitive capture” — the outcome of the revolving door between finance corporations, management consultants and the public service. In the capture economy, the World Bank explained, “public officials and politicians privately sell underprovided public goods and a range of rent-generating advantages ‘à la carte’ to individual firms”.

SA is a long way down the road of economic, cognitive and state capture. While a lot of scrutiny has gone into corruption and maladministration in the public sector, as well there should be, it is necessary to expand the scope of inquiry to the private sector. In the simplest of terms, in almost all cases of corruption there is a giver and a taker of bribes or questionable tenders.

A good starting point would be to investigate, empirically, the similarities and differences in the relationships between (private) firms and the (public) state. Of particular concern is the way cognitive or economic capture by private actors influences public policies. Such an inquiry would benefit from definitional clarity around relationships between firms and the state, the influence of private actors and agents in public administration, and the way these shape the “rules of the game” — regulations, laws and so on. To be sure, private actors have an interest in the rules of the game.

However, once administrative injustice enters the equation — when public servants benefit from private largesse in the policy-making process — the rules of the game are rigged in favour of firms. One of the conclusions Saviano reaches in Gomorrah is that in the Campania region of southern Italy the criminals, as a system of corruption, no longer need the state, it is the state that needs the system to perpetuate its existence.

The best we can hope for in SA is that efforts to bring to justice the people implicated by the Zondo state capture commission are sustained, to break unethical, mutually beneficial links between the private and public sectors.

• Lagardien, an external examiner at the Nelson Mandela School of Public Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.