Political parties, political corruption, and the economic theory of democracy

Crime, Law & Social Change 27: 255–274, 1997. 255c 1997 Kluwer Academic Publishers. Printed in the Netherlands.

Political parties, political corruption, and the economic theory ofdemocracy

JONATHAN HOPKINDepartment of Political Science and International Studies, University of Birmingam,Edgbaston, Birmingham B15 2TT, U.K.

Abstract. Many prominent cases of political corruption in Western European democracieshave involved political parties, yet the link between theories of political parties and theoriesof political corruption has not been explored. This article seeks to examine this link from theperspective of economic theories of democracy. It is argued that the economic model of partyorganisation is liable to encourage corrupt behaviour on the part of politicians, and that modernparty organisations are coming to resemble this model, making political corruption more likelyto emerge. It is suggested that this hypothesis finds some empirical support in the evidence ofsystematic corruption amongst Southern European socialist parties.

Introduction

In recent years, political corruption has become a key issue in a number ofWestern European democracies. In Italy, the formidable power structure builtaround the Christian Democrats and their allies has collapsed under the weightof evidence of massive corruption, and in Spain, a previously unassailablegovernment has suffered electoral defeat partly as a result of corruptionscandals. In Britain, “sleaze” has contributed to the dramatic electoral collapseof the Conservative Party, while serious cases of political corruption have alsobeen detected in Belgium, France, Germany and Greece. Many of these caseshave directly affected political parties, with abuse of political office in order toobtain finance for parties becoming systematic in some countries. Of course,corruption is not new to Western democracies, but it does appear that theproblem has worsened in recent years, and that political parties have begunto appear particularly susceptible to corrupt behaviour.

This article investigates the problem by examining a particular theoreticaltradition in political science – the “economic” tradition – and the way itanalyses problems associated with the production of government as a publicgood. It examines the contribution of economic theorists to the study of twofields – political corruption and political parties – and attempts to bring thesecontributions together with the aim of shedding light on the involvement ofparties in political corruption.

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The “political economy” approach to corruption and the logic ofcollective action

Economic theories of politics1 have acquired great prominence in politicalscience over the last two decades. Few areas of study have not been exam-ined from an economic standpoint, although many economic theorists haveconcentrated on the problems most amenable to this type of approach. Bothcorruption, and the behaviour of political parties as collective actors, havebeen examined from an economic perspective. It therefore seems worthwhileto examine how the relationship between them can be addressed within aneconomic framework.

The “political economy” approach2 to the study of corruption takes theeconomic assumption that political actors act rationally in order to maximisetheir utility (generally defined in terms of material self-interest), and analysesacts of corruption as hidden exchanges between two actors – for example apublic official and an entrepreneur – which benefit both at the expense of thepublic interest the official is supposed to be serving. The entrepreneur canbribe the official to use her discretional authority in the interests of the formerrather than the public, thus “privatising” the resources of public office.3 Thecorrupt exchange is restated in terms of principal (or superior)-agent analysis:

While superiors would like agents always to fulfil the superior’s objectives,monitoring is costly, and agents will generally have some freedom toput their own interests ahead of their principals’. Here is where moneyenters. Some third person, who can benefit by the agent’s action, seeks toinfluence the agent’s decision by offering him a monetary payment whichis not passed on to the principal.4

Rose-Ackerman limits her definition of corruption to those exchanges whichare illegal. However, in view of the widely differing legal definitions ofcorruption across European democracies, here I adopt a broader understandingof the phenomenon as that form of exchange which “violates public, legaland ethical norms and sacrifices the common good to private – personal,corporate, partisan, etc. – interests”.5

Although variations in the moral outlook and structural constraints of prin-cipals and third parties can have a major effect on the likelihood of thecorrupt exchange taking place, the arguments presented here will revolvelargely around the behaviour of agents. Moreover, agents will be viewed ascollective actors – organisations – as well as individuals. The behaviour ofindividual officials and legislators may on occasion be independent of theconstraints of political organisations, but here it will be argued that analysis

POLITICAL PARTIES, CORRUPTION AND DEMOCRACY 257

of the organisational dynamics of collective agents (such as political parties)can contribute to our understanding of recent cases of political corruption.6

Political parties, and other voluntary political organisations, can be analysedin terms of Mancur Olson’s famous “Logic of Collective Action”7 whichoffers an explanation for the production of public goods: broadly, goodswhich are collectively produced but which no-one can be excluded fromconsuming.8 Olson’s great insight was to realise that the apparent existenceof a common interest in the production of a public good does not automatical-ly lead to collective action in pursuit of that interest. Instead, the “free-rider”problem must be overcome. In a large group, the contribution of each individ-ual to the production of the public good is negligible, so each individual knowsthe good will be produced (or not) irrespective of the decision she makes.Since individuals cannot be excluded from consuming the good as punish-ment for not contributing, there is no incentive for a self-interested rationalactor to undergo the costs of contributing to collective action. According toOlson, individuals have to be offered selective incentives – private benefits(or sanctions for not contributing) – if they are to contribute to producingpublic goods.

In the Olsonian version of collective action, the public goods ultimatelyproduced are a “by-product” of individuals’ pursuit of private benefits. Theindividuals who get involved in collective action do so in order to obtain theprivate benefits available, not in order to produce the public good. But argu-ing that individuals participate in collective action in response to selectiveincentives requires that someone should be offering these incentives, actingas a kind of collective action broker. These brokers – the leaders of politi-cal parties – can be analysed as “political entrepreneurs”, who recognise thedemand for a public good and coordinate its production by distributing incen-tives for individuals to contribute.9 In principal-agent terms, they are agents,who produce public goods on behalf of a principal – the potential consumersof the good.

The political entrepreneur as agent ensures the free-rider problem is over-come by arranging the distribution of selective incentives to the principal.But unless the entrepreneur is a “secular saint” (to use Laver’s ironic term10)her own involvement in the action must also be explained. Economic theoriesdeny that the prospect of consuming the public good can itself be sufficientmotivation for undergoing the costs of leading collective action, so some typeof selective incentive must be identified. For Downs, political entrepreneursare motivated by the “income, prestige and power which come from being inoffice”11, whilst for Schlesinger

Attending meetings and running for office are costly, and will be doneonly by those with a personal stake (...): those with ambitions for office.

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Their payoffs, both substantial and personal, are worth the costs oforganisation.12

Political office is regarded by many economic theorists as being an effectiveselective incentive for political entrepreneurs. “Power-seeking” or “office-seeking” models of political behaviour13 have often been used to explain whyrational self-interested individuals should undergo the costs of organisingcollective action. The next section will examine the theoretical coherence ofthis model and its implications for political corruption.

The payoffs of political entrepreneurship

The principal-agent approach to political leadership is a useful way of resta-ting the economic theory of collective action in such a way as to identifypotential difficulties that may arise from the concentration of responsibilitiesin the hands of political entrepreneurs. The kinds of classic collective actionproblems studied by economic theorists can sometimes be resolved throughanarchy14, but often the delegation of authority to a political entrepreneuris the only means of producing public goods. As Strom points out, “delega-tion has a down side – the risk that the agent may not faithfully execute theintentions of the principal”, given that “the agent typically has interests andincentives that differ from those of the principal”.15 This conflict of interestsderives from the free-rider problem: a political entrepreneur will only undergothe costs of producing public goods in exchange for significant private bene-fits, and these private benefits are often most easily generated at the expenseof consumers of the public good.

The “moral hazard” facing political entrepreneurs as agents can take variousforms. Agents can “shirk”, by failing to put sufficient effort into producingthe public good, thus “shortchanging” the principal.16 Political entrepreneurscan also use their position to secure substantial material advantage by takinga “profit” out of the contributions potential consumers make to the productionof the public good. This possibility was identified by Laver in his earlier work:

A group will often collectively value a good more than the cost of providingit. If the sum of the individual utilities attached to the good by eachmember exceeds the cost of providing it, then a potential surplus existsfor anyone who can arrange to provide the good to the group in exchangefor contributions from them.17

At such an abstract level, it is difficult to establish how close this kind ofsolution comes to corruption, although the potential for the public interest tobe subsumed to the private interests of the entrepreneur is clear enough. In the


real world of politics, political leaders already have salaries to recompensethe private costs of producing public goods, and it seems intuitively correctto suggest that taking any further “cut” from consumers’ contributions wouldamount to corruption. The definition of corruption given earlier referred to“sacrificing the common good to private interests”, and in this case the com-mon good would best be served by reducing consumers’ contributions ratherthan enriching the political entrepreneur.

A third form the moral hazard can take is the classic corrupt exchangeinvolving third parties who stand to gain or lose by the action of the agent,an obvious example of which is the bribing of a public official in exchangefor some favourable decision.18 Again, Rose-Ackerman provides a concisedefinition:

its essential aspect is an illegal or unauthorised transfer of money or anin-kind substitute. The person bribed must necessarily be acting as anagent for another individual or organisation since the purpose of the bribeis to induce him to place his own interests ahead of the objectives of theorganisation for which he works.19

The classic example of this is where a bribe is paid for a firm to a public officialin order to guarantee adjudication of a public works contract. The third party(the firm) obviously has much to gain from adjudication, and the agent (theofficial) gains monetary benefits above her salary. The principal loses out,as the proper mechanism for ensuring value for money in the expenditure ofpublic resources – competition between bidding firms to offer the best deal –is sidestepped.20

All of these forms are unpalatable in their implications for the quality andhonesty of government. “Shirking” leads to the provision of expensive, poorquality public services, whilst the political entrepreneur’s “surplus” and bribeare clear examples of the common good being sacrificed to private interests.Within an economic framework, corrupt or at best exploitative behaviourwould appear the most obvious source of payoffs to political entrepreneurs.Given the free-rider problem, the propensity of agents to succumb to “moralhazard” appears prima facie to be disturbingly high.

In view of these uncomfortable but logical developments of the economictheory, attempts have been made to theorise other kinds of entrepreneur-ial payoffs which would combine rational, self-interested political actionwith integrity in political leadership. The “power-seeking” model, whichregards political power as a benefit in itself, is a useful defence for economictheorists.21 But “power for its own sake” is a problematic concept for theeconomic theory, and it has been argued that the pursuit of political pow-er is as paradoxical as any consumer’s participation in the production of a

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public good.22 The most powerful political offices are those which involvemost responsibility for the production of public goods, so in economic termsit is not clear why rational individuals should take on such responsibility.Attempts to use the “power-seeking” model in studies of coalition formationhave found it difficult to distinguish between the intrinsic and instrumentalvalue of political office.23 If political power is to mean anything, then it shouldmean the ability to influence the process whereby public goods are produced,and this leaves political office subject to the free-rider dilemma.

So what other payoffs are available to political entrepreneurs? Downs men-tions “income and prestige” as other benefits of political office.24 Income asa benefit fits in with the economic model, and can be effectively integratedinto a theory of propensity to engage in corrupt exchange. The point at whichthe entrepreneur’s income reaches such a level as to make corruption unlikelyis difficult to establish: too low and politicians may feel justified in “top-ping up” their salary by corrupt means, too high and “adverse selection”25

could result. In any case, transparency is important in preventing suspicionsof profiteering from the free-rider dilemma. Prestige is socially defined anddifficult to integrate into a strictly economic theory of political corruption.This leaves us with the material benefits – either from the salary and relatedperks of office or from involvement in forms of corruption – as the principalmotivation for political action in the economic theory.26 Although a steadyincome may be enough for some entrepreneurs, there is nothing in this analy-sis to suggest why entrepreneurs should not take the opportunity to enrichthemselves corruptly.

Political entrepreneurs and the party as “business firm”

Up to now, the discussion has focused on the basic motivations behind polit-ical action in the economic theory. It has been suggested that the emphasison selective incentives in this theory points towards a high propensity tocorruption amongst the political entrepreneurs who direct collective action.However, a ceteris paribus clause must be attached to this. A series of con-straints on political entrepreneurs’ ability to engage in corrupt behaviour mustnow be considered.27

Foremost amongst these constraints is competition from other potentialentrepreneurs. As Laver explains, political entrepreneurs will inevitably befaced with

rival politicians who would dearly like to win for themselves the contractto supply political services. This contract must by definition be profitable,otherwise the incumbent would not have accepted it in the first place.


It will thus be coveted by others who (...) can credibly offer competingproposals to the public in the hope of attracting their patronage. Thispossibility will force incumbent politicians to shirk less and to deliverpolitical services at a higher level than they otherwise would.28

Competition therefore impels politicians to govern well, and honestly, in orderto salvage their reputations, enabling them to beat off their rivals and maintaintheir access to the payoffs associated with political office. Embezzling largesums of money from contributors to public goods and taking bribes to thedetriment of the quality of these goods are sure ways of inviting reprisals fromthose involved in the collective action. An alternative political entrepreneurpromising greater honesty would be in a position to take over leadership ofthe action.

In order best to assess the role of competition, it is worth placing the ratherabstract concepts of political entrepreneurship, contributors/consumers andpublic goods inside a framework which more closely approximates the realworld. In contemporary Western democracies, collective action and publicgoods correspond to the broad notion of government, political entrepreneursare simply politicians or political leaders, and contributors/consumers arecitizens, and most importantly, voters. Competition between politicians takesplace in the framework of elections, and in this context incentives exist forindividual politicians to band together in political parties.29 At this stage inthe analysis, political entrepreneurs are taken to be collective actors, and thedynamics of parties as organisations become important.

The first point to note about the economic theory of parties is that it seesthem as essentially opportunistic power-seekers. Only by achieving politicalpower can parties distribute the material benefits of office to their mem-bership. Winning power therefore takes precedence, and this has importantconsequences for the types of public goods parties produce once in office.Downs’s famous statement neatly illustrates the point:

politicians in our model never seek office as a means of carrying outparticular policies; their only goal is to reap the rewards of holding officeper se. (...) Parties formulate policies in order to win elections, rather thanwin elections in order to formulate policies.30

This is consistent with Olson’s theory of the public good as a by-product –politicians have no intrinsic concern for the nature of the public good, andproduce it only as a means of obtaining private benefits. The only restrainton the formulation of policy is that constant changes in party programmesundermine the party’s credibility, and risk confusing the electorate.31

It follows from the economic theory that parties will be composed of power-seeking individuals, who contribute to the upkeep of the party organisation in

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order to achieve election to some official position. Membership of politicalparties will therefore be a function of opportunities for election to politicaloffice – successful parties will attract members, unsuccessful parties willlose them. Members not motivated by the prospect of political office willbe so few and unreliable as to be insignificant to the running of the party.32

Party membership, in short, will be subject to market pressures: if a party’sprospects of power decline, members will massively opt for exit in favour ofa more promising party, rather than loyally seeking to help the party recoverfrom within.33

What kind of party organisation is likely to result from this kind of politicalaction? Although there is likely to be a core of activists – the leadership of theparty at the various levels of government – who can aspire to a stable career inpublic office, outside that core, party membership is likely to be limited andwill fluctuate according to the party’s fortunes. This poses serious questionsabout the party’s ability to find the basic resources necessary for its function-ing. Parties, particularly in competitive environments, have to campaign forsupport from voters. Campaigning involves, primarily, transmitting a politicalmessage in order to win votes, and three obvious ways of doing this can beidentified. First, party members and sympathisers can volunteer for the task.This is the “traditional”, labour-intensive model of campaigning, which hastended to be idealised in Western democratic countries. Unfortunately, thiskind of voluntary action is hard to square with the economic model of polit-ical behaviour: free-riding is an irresistible temptation. The only economicsolution for labour-intensive campaigning is to pay individuals to transmitthe party message.

Two further, more capital-intensive, campaigning methods can be identi-fied. First, technological advances in the field of mass communications havemade it possible for political parties to transmit a message without huge num-bers of party workers having to knock on doors. Highly sophisticated waysof arguing the party’s case have become available. They are, however, expen-sive, and require parties to spend large amounts of money. Finally, it is worthmentioning patronage politics, clientelism and bribery of voters – the “voteof exchange” – which self-evidently require a major outlay of material goods.What all these campaigning techniques have in common is their expense –parties, if they are to win political power, need large amounts of money tofinance their campaigns. As if this were not enough, parties also “formulatepolicies in order to win elections”: their programmes are designed in such away as to maximise electoral support. Programme design requires extensiveknowledge of the range of preferences held by voters. In the absence of theall-hearing grassroots party memberships of Western democratic folklore,parties will have to pay for surveys of electors’ views to be carried out.


The kind of political party described here – which can be referred to asthe “business firm” model of party organisation34 – is a top-heavy organisa-tion which requires substantial financial resources in order to function. In aneconomic framework, it is difficult to see how such a party can raise mon-ey, unless it engages in the kinds of morally dubious fund-raising methodssuggested earlier: taking a “cut” of taxes raised for the production of publicgoods, or taking bribes from individuals with a private interest in decisionsaffecting the public sphere. Corruption appears a likely solution to the fund-raising problem in the absence of public-spirited volunteers who participatein politics for altruistic motives. Wealthy individuals may donate money toparties, but the economic theory stipulates that they would expect somethingin return, in terms of favourable public policy decisions or similar private ben-efits. Certainly competition between political parties may be able to reducecorruption to a minimum, but parties need to draw some material benefit outof political power, if only to pay for the costs of organisation. Of course, ontop of these costs, rational self-interested individual politicians may insist onsome further personal material advantage in order to make political activityworthwhile.

What is emerging from this analysis is a picture of party organisation basedon systematic corruption, or at best the favouring of special interests andsquandering of public resources. The economic theory of political actionpoints squarely in this direction, and competition between parties only mit-igates the problem rather than eliminating it. Certainly, the argument so farhas been conducted on a rather abstract level, and few would argue thatthe unadulterated economic theory provides a faultlessly accurate account ofpolitical behaviour. But the economic theory can be a useful heuristic toolfor the analysis of empirically observable patterns of political behaviour.35

Whilst taking into account the effects of other variables, the logical connec-tion identified here between political action motivated by self-interest and thepropensity of politicians to engage in corrupt exchanges suggests a potentiallyuseful interpretation of the emergence of corruption. The value of this analysiswill depend on how closely political party behaviour in the real world followsthe patterns envisaged by the economic theory. With this in mind, the nextsection examines the relationship between the economic theory of politicalparties and contemporary developments in studies of party behaviour.

Party organisational change

Ever since the late 1960s, political scientists have paid great attention to thesupposed transformation of Western European party systems, party organi-sations and electorates.36 This debate emerged from Kirchheimer’s famous

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“catch-all” thesis37, which argued that political parties in Western Europewere moving away from the traditional model of the “mass party”38 or “partyof social integration”39, tied to a particular social class, and becoming “catch-all” parties, anxious to maximise their electoral support from all social groups.This phenomenon has had major implications for party organisations. Kirch-heimer identified five characteristics of the catch-all party: the abandonmentof ideological baggage, the concentration of organisational power around theparty leadership and the downgrading of the role of the grassroots member-ship, de-emphasis of the classe gardee, and the establishment of contactswith a variety of interest groups, in order to generate financial support andmobilise different sectors of the electorate. Although Kirchheimer did notcarry out a systematic empirical study, it is generally accepted that thesecharacteristics have been detected to some degree in most, if not all, WesternEuropean democracies in the last three decades. Disappointingly, however,there have been few attempts to establish empirically the true extent of thisorganisational change;40 most of the research effort has been concentrated onchanges in mass electoral behaviour and the dynamics of party systems.

The theme of party organisational change has been developed in two ways ofinterest to the discussion here, both of which, like Kirchheimer’s work, stressthe decline of the “mass party” model. Panebianco’s important work41, aswell as providing useful theoretical tools for the study of party organisations,identified the emergence of a new type of party: the electoral-professionalparty. This party type is very similar to Kirchheimer’s catch-all party, butPanebianco attributes greater importance to the increasing professionalisa-tion of party organisations – the growing role of experts and technicians,such as public relations consultants, pollsters, and marketing specialists. Theelectoral-professional party allows these professionals a central role in partyactivity, reflecting the decline in the role of the mass membership identifiedin Kirchheimer’s catch-all theory. The other characteristics of this new partytype are taken directly from Kirchheimer’s work: the emphasis on leader-ship, the absence of ideological concerns, the weakening of links with theelectorate, and the close ties to interest groups.

Katz and Mair42 agree that the mass party model has declined, but offer adifferent interpretation of the characteristics of its successor. In their work,the key feature of organisational change is the relationship between the party,civil society and the state. Whereas mass parties represented the attempt bysectors of civil society to influence and control the state, Katz and Mair’s “car-tel party” is relatively detached from civil society, and becomes “absorbed”by the state. Instead of using interest groups to mobilise support and providefinancial help (as the catch-all party does), the cartel party turns to the statefor financial backing and the means of transmitting its message. This link


with the state encourages cartel parties to collude in order to protect theirprivileged position and prevent new entries, reducing the intensity of elec-toral competition. Otherwise, the cartel party has much in common with theelectoral-professional party: a high level of professionalisation of the par-ty organisation and increased use of capital-intensive campaigning methods(thus downgrading the traditional grassroots activist), and an emphasis onmanagerial ability rather than ideology or links to a specific social group inappealing for support. Whilst not overplaying the autonomy of party leaders(different sectors of the party elite are held to be independent of each other),Katz and Mair suggest that parties’ mass memberships play an insignificantrole in the party’s activity beyond contributing to a “legitimising myth”.

So what is the contribution of economic theory to the understanding of thisprocess of change in party organisations? An answer to this is suggested byPanebianco’s theoretical proposal. Panebianco interprets the development ofparty organisations as a movement from the party as a “system of solidarity”to the party as a “system of interests”.43 In the initial stages of its existence,solidarity between party members is the main motive for participation in theorganisation. As the party institutionalises, this solidarity fades and partymembers begin to see their involvement in the party in terms of their ownpersonal advantage.44 Whilst there is still solidarity between participants,collective incentives – the promise of the achievement of shared goals – aresufficient reason for participation in a political party. As solidarity declines,maintaining participation requires the distribution of selective incentives:party members will only continue to contribute to the maintenance of theorganisation if it results in some personal, private gain for them.

Whilst Panebianco postulates a shift in patterns of participation in the life-cycle of each individual party, Pizzorno argues that this shift takes place atsocietal level rather than within individual party organisations, and that partiesfounded on solidaristic participation are characteristic of a particular momentin European historical development:

A general explanatory hypothesis can be offered that “integration” parties,stable electoral cleavages, and clear alternatives in party program are morelikely to be found in periods of intense social change and of consequentstrong pressures by new categories of interests to enter into the politicalsystem. If this hypothesis is true, strong parties, with clearly delineatedprograms and integrated membership, are a temporary phenomenon. Theyemerge both to strengthen and control the access of the new masses intothe political system and become redundant once both entry and controlare achieved.45

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By this token solidaristic participation in political parties, and the mass partyas the political arm of a cohesive social group, are the exception rather thanthe rule, the product of peculiar historical circumstances.46 The mass parties’“encapsulation” of their social bases has since been undermined by two broadfactors. On the one hand, their entry into government, and their consequentinvolvement in the compromises and ambiguities of power, has renderedappeals to ideological loyalties and promises of sweeping social change lesscredible.47 On the other, rapid economic and social change in the post-warperiod, leading to unprecedented prosperity and considerable social mobility,has blurred the boundaries between social classes, undermining the sense ofcollective solidarity which underpinned mass parties’ electoral and politicalbases. An increasingly well-educated, economically secure and autonomouspopulation is less susceptible to calls for class solidarity and ideologicalattachment.48

This movement from solidaristic to self-interested participation in politicssuggests a new relevance for economic theories of political party behaviour.The catch-all and electoral-professional models of party organisation (and toan extent also the cartel party model) have striking similarities to the deduc-tively generated “economic” or “business firm” model of party outlined earlierin this article. Mass membership is neither an important practical support nora source of social identity, leadership is more or less dominant, electoralcampaigning is increasingly professionalised and opportunistic. New sourcesof finance have to be sought, either from sectional interests (catch-all) or bytaking a “cut” of taxation in the form of state subsidies for political parties(cartel). In view of the decline of solidaristic, identity-based politics, polit-ical participation becomes increasingly focused on attaining political office.As parties are only tenuously attached to social groups, an important meansof policing the behaviour of political leaders – “screening” and monitoringby an ideologically-driven mass membership49 – is lost. Politicians are freeto collect their selective benefits from political office, with only the periodicopportunity for the electorate retrospectively to punish them in favour of othersimilar politicians.

In sum, if parties begin more and more to resemble the business firm modelof party organisation, then this implies a new relevance for the economictheory. Economic theories have not so far enjoyed an overwhelming recordof empirical success50, and it is unrealistic to expect them to provide compre-hensive explanations of complex political phenomena. However, the theorycan be used to suggest possible consequences of empirically observed devel-opments in party organisation, such as the decline of ideological identities,the concentration of power around party leaders, and the increasing strategicflexibility of parties. If real political parties begin to acquire characteristics of


the business firm model, it can tentatively be hypothesised that certain kindsof corrupt and unethical behaviour will result.

Corruption in Southern European socialist parties

Establishing the empirical validity or otherwise of the above hypothesis is acomplex task which lies beyond the scope of this article. In this section I aimto do no more than establish some interesting parallels between developmentsin some Western European socialist parties and the theory of party politicalcorruption I have proposed. The following analysis should be seen as anillustration of the theoretical points made earlier, rather than a serious attemptat empirical confirmation.

Southern European socialist parties are in one sense an appropriate casestudy of political corruption, in another sense quite inappropriate. All havebeen embroiled to a greater or lesser extent in corruption scandals, particu-larly the Greek, Italian and Spanish parties. On the other hand, the evidenceof corrupt practices in all types of parties in these countries makes it diffi-cult to establish that organisational changes rather than, say, changes in thelevel of public-spiritedness of the wider population51, are responsible for theemergence of corruption. In view of this caveat, the conclusions drawn willbe tentative.

Southern European socialist parties are particularly interesting in that theyall, to a greater or lesser extent, failed to achieve the levels of institutionalisa-tion as mass parties characteristic of their Northern European counterparts.52

This meant that they have always been more vulnerable to the kinds oforganisational pressures analysed earlier in this article. That being said, themove towards catch-all modes of organisation can still clearly be detectedin the post-war period. The Italian Socialist Party (PSI) is paradigmatic inthis regard. Whilst it had never truly “encapsulated” the Italian working classand peasantry, in the immediate post-war period the party’s organisation col-lapsed as the Communists (PCI) launched a much more effective drive formass mobilisation.53 As a result, the history of the PSI in the post-war periodis one of struggling to find a role in the political system, as a relatively smallparty sandwiched between two much more powerful rivals, the PCI and theDC (Christian Democrats).

Denied a cohesive social group to adopt as a classe gardee, the PSI wasforced into “catch-all” patterns of behaviour to secure its political survival.The most important feature of PSI strategy was its involvement in governmentas a junior coalition partner after 1963. This allowed it to build up an elec-toral clientele by distributing state largesse: this was reflected in its relativedecline in the industrial North and its gains in the South, and the increasingly

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heterogeneous social profile of its electorate.54 The distribution of materialbenefits to voters was matched by a growing emphasis on such benefits forparty officials. Whilst the trend set by the DC was partly responsible for this,organisational changes in the PSI facilitated the pursuit of material benefitson the part of activists.

These organisational changes stemmed from the party’s electoral failure in1976 and the election of Bettino Craxi as party leader. Craxi believed thatthe decline of traditional party identifications (to the PCI and DC) providedthe PSI with an opportunity to restructure the party system around its pivotalposition on the centre-left.55 In order to exploit strategic openings, Craxiconcentrated internal authority around himself, creating a “presidentialist”party: party congresses were reduced to cosmetic shows of unity, the partyprovincial federations were neglected and allowed to decline, and the nationalassembly was expanded to include representatives of various interests fromall sectors of society.56 Along with these changes, the party’s ideologicalidentity was deliberately blurred, in an attempt to expand support beyond itstraditional base.

This openly “catch-all” organisational and electoral strategy was com-plemented by characteristics of the “electoral-professional” model of partyactivity. As Pasquino explains,

Italians had become available, almost totally so, for a new kind of mobil-isation. The axis of this mobilisation was accordingly shifted: away fromtraditional party organisations and their networks of activists towards the(dynamic, growing, “immediate”) role of the mass media. The image isthe message. There was no need to persuade through endless meetings,but rather to attempt to reach large and growing groups of individual(atomised) voters through a homogeneous message and the image of theleader. (...) The party organisation as a working structure of roles andoffices was destroyed and never replaced with anything else.57

What had replaced the traditional party organisation, it subsequently becameclear, was a party of “business politicians”58, whose behaviour appearedstrikingly similar to that of the political entrepreneurs theorised earlier inthis article. Party activists had the primary aim of winning political office,and once achieved, would use this political office to generate material goods(money) to pay for party activities and to finance their own careers. Theprevalence of this kind of political action within the PSI in its later yearsis well documented59, and although it resulted from a number of differentcauses, the changes in the nature of party organisation, generated in turn byunderlying social change, at the very least facilitated the PSI’s degenerationinto a “profit-making organisation”.


The PSI is the most extreme case of the move from mass party to “businessfirm”, but other Southern European socialist parties show signs of a similartransformation. The PSOE (Spanish Socialist Workers’ Party), though hin-dered in its development by the patchy presence of an industrial workingclass in Spain, had become a mass party by the 1930s, with solid implantationin industrialised areas (Madrid, Barcelona, Asturias, the Basque Country), astrong trade union link and a vibrant party press.60 The long period of dictator-ship practically wiped out the PSOE’s presence in Spain, but when democracyreturned the party was revived by a small group of youthful activists. The taskof reorganisation took place in a social context which made the reconstruc-tion of a mass party organisation difficult, if not impossible: the type of socialchange to which Kirchheimer attributed the growth of the catch-all model hadalso taken place in Spain, and by the mid-1970s was very advanced. Moreoverthe legacy of the dictatorship was a population – in part through apathy oreven distaste for party politics, in part through fear – reluctant to becomeformally involved in political parties. The short time available for mobilisa-tion before the first electoral challenges of the new democracy suggested thata more “electoral-professional” type of party organisation was necessary, atleast in the short term.61

This is reflected in the fact that the PSOE, like all the other parties, hadan extraordinarily small membership (by Western European standards): in1977 it was estimated to have 51,552 members, by 1981, just before winningpower, only 107,000.62 The difficulties of establishing a mass party forcedthe socialist leadership to look to other means of electoral mobilisation, andthe attractive personality of Felipe Gonzalez was astutely used to win overcentre-left voters.63 The party was also helped by logistic and financial sup-port from the German SPD, facilitating the electoral-professional style ofmobilisation. The PSOE’s electoral success at parliamentary level affordedthe party important resources under Spain’s system of state party finance,and further electoral successes at regional and local level pointed towardsthe establishment of a “party of local councillors” (to use the derogatoryphrase Nenni had applied to the PSI64). The state became the party’s organi-sational backbone: political office provided committed party activists with asalary to reward their participation, whilst control of the state’s administrativeapparatus (particularly after 1982) permitted membership expansion on thebasis of patronage.65 The electoral-professional character of the party wasbolstered by its abandonment of Marxism as a doctrinal source in 1979, andits subsequent ideological drift to the right.66

With a small membership driven by the pursuit of political office and mater-ial advantage, voluntary financial contributions were always going to be insuf-ficient to sustain the PSOE’s increasingly professionalised party apparatus.

270 JONATHAN HOPKIN

Moreover the huge amounts of money invested by business sectors in variousprojects to inflict an electoral defeat on the PSOE meant that campaigningbecame increasingly expensive, and state subventions came nowhere near tomeeting these costs. It has become clear in the last few years that the PSOEovercame this problem by using political office to demand bribes from privatecompanies in exchange for lucrative government contracts. Various scandals– Juan Guerra, Siemens, Filesa to name the most prominent – were revealedby hostile sectors of the press, severely damaging the party’s credibility.67

The difficulties involved in establishing a grassroots membership based onvoluntary, ideologically-driven political action, left the party with few otheroptions for ensuring the functioning of the organisation.

Conclusions

It has been argued here that the changes in the nature of party organisationsover the last two or three decades suggest a new relevance for economictheories of democracy. With the decline of class and ideological identities,more private motivations become important in political participation. In thesecircumstances, the economic theory is well equipped to interpret the way inwhich politicians interact, and political parties’ involvement in corruption.

This is not to say, however, that the economic theory can “explain corrup-tion”. In order to do this, research must be oriented to explaining why, andunder what conditions, political actors behave as rational, self-interested utili-ty maximisers. This requires an explanation of the decline of identity politics,which has undermined parties’ ability to mobilise voluntary, public-spiritedparticipation in politics. It also requires an explanation of some politicians’refusal to be satisfied with the salary attached to public office. A promisingapproach to this problem has been proposed by Della Porta and Pizzorno: thenotion of “moral cost”, and the extent to which social recognition dependson adherence to civic values.68 The theoretical tools used in this article canbe integrated into a more comprehensive theory of political behaviour whichtakes on board social variables. Green and Shapiro closed their critique ofeconomic theories with the plea that researchers should ask themselves “howdoes rationality interact with other facets of human nature and organisation toproduce the politics we seek to understand?”69 The conclusion to this articleshould be read in that spirit: economic explanations, in combination withother kinds of explanations, can make a useful contribution to the study ofcorruption in political parties.


Acknowledgement

I would like to thank Colin Hay, David Marsh, Leopoldo Moscoso, JamesNewell, Caterina Paolucci and Dan Wincott for their helpful comments onthis article. They are not, of course, responsible for its shortcomings.

Notes

1. The term “economic” will be used in this paper to refer broadly to theories of poli-tics founded on methodological individualism, rational calculation and the self-interestaxiom. Useful introductions to economic theories of politics can be found in: J. Elster,“Introduction,” in J. Elster (ed.), Rational Choice (New York: University Press, 1986); P.Dunleavy, Democracy, Bureaucracy and Public Choice (London: Harvester Wheatsheaf,1991); and M. Laver, Private Desires, Political Action. An Invitation to the Politics ofRational Choice (London: Sage, 1997). Critical overviews include: K. Monroe (ed.), TheEconomic Approach to Politics. A Critical Reassessment of the Theory of Rational Action(New York: Harper Collins, 1991); L. Lewin, Self-Interest and Public Interest in West-ern Politics (Cambridge: University Press, 1991); P. Self, Government by the Market?The Politics of Public Choice (Basingstoke: Macmillan, 1993); and, most prominently, D.Green and I. Shapiro, Pathologies of Rational Choice Theory. A Critique of Applicationsin Political Science (New Haven: Yale University Press, 1994).

2. S. Rose-Ackerman, Corruption. A Study in Political Economy (New York: AcademicPress, 1978).

3. D. Della Porta and A. Vannucci, Corruzione politica e amministrazione pubblica (Bologna:Il Mulino, 1994), p. 20.

4. Rose-Ackerman, Corruption. A Study in Political Economy, cit., p. 6.5. D. Della Porta and Y. Meny, “Introduction: Democracy and Corruption,” in D. Della Porta

and Y. Meny (eds.), Democracy and Corruption in Europe (London: Pinter, 1997), p. 4.A similar definition of corruption – “behaviour in office that is motivated by a desire forpersonal material gain” – can be found in A. Rogow and H. Lasswell, Power, Corruptionand Rectitude (Englewood Cliffs, N.J.: Prentice Hall, 1963), p. 2.

6. It should be stressed at this point that this variable can only ever offer a partial explanationof the emergence of corruption; the arguments presented here suggest how variations inparty organisation can have an effect on corruption, all other things being equal.

7. M. Olson, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press,1965).

8. Public goods are also indivisible: consumption by one individual has no effect on itsconsumption by others. A good example is clean air: no-one can be prevented frombreathing it, and neither does one individual’s breathing reduce the amount available toothers (see for example T. Sandler, Collective Action. Theory and Applications (London:Harvester Wheatsheaf, 1992), ch.1). The classic exposition of the properties of publicgoods is P. Samuelson, “The Pure Theory of Public Expenditure,” Review of Economicsand Statistics, 1954 (40), 387–390.

9. For the most developed formulations of the theory of the political entrepreneur, see:N. Frohlich, J. Oppenheimer and O. Young, Political Leadership and Collective Goods(Princeton: University Press, 1971); M. Laver, “Political Solutions to the Collective ActionProblem,” Political Studies, 1980 (28), 195–209; and M. Laver, Private Desires, PoliticalAction, op. cit.

10. Laver, Private Desires, Political Action, op. cit.11. A. Downs, An Economic Theory of Democracy (New York: Harper & Row, 1957), p. 28.

272 JONATHAN HOPKIN

12. J. Schlesinger, “On the Theory of Party Organisation,” The Journal of Politics, 1984 (46),368–400 (p. 387).

13. See for instance K. Strom, “A Behavioural Theory of Competitive Political Parties,” Amer-ican Journal of Political Science, 1990 (34), 565-598. A classic example of work based ona “power-seeking” model of political action is E.S. Wellhofer and T. Hennessey, “PoliticalParty Development: Institutionalisation, Leadership Recruitment and Behaviour,” Ameri-can Journal of Political Science, 1974 (18), 135–165.

14. Key works in this tradition are: M. Taylor, Anarchy and Cooperation (London: Wiley,1976); M. Taylor, The Possibility of Cooperation (Cambridge: University Press, 1987); andR. Axelrod, The Evolution of Cooperation (Harmondsworth: Penguin, 1990). A concisesummary can be found in Laver, Private Desires, Political Action, op. cit., ch. 3.

15. K. Strom, “Democracy, Accountability, and Coalition Bargaining. The 1996 Stein RokkanLecture,” European Journal of Political Research, 1997 (31), 47–62 (p. 48).

16. Laver, Private Desires, Political Action, cit., p. 76.17. Laver, “Political Solutions to the Collective Action Problem,” op. cit., p. 205.18. E. Banfield, “Corruption as a Feature of Governmental Organisation,” The Journal of Law

and Economics, 1975 (18), 587–606.19. S. Rose-Ackerman, “The Economics of Corruption,” Journal of Public Economics, 1975

(4), 187-203 (p.187) (citation taken from Della Porta and Vannucci, Corruzione politica eamministrazione pubblica, op. cit., p. 17).

20. For a careful analysis of this kind of dynamic in the Italian case, see Della Porta andVannucci, Corruzione politica e amministrazione pubblica, op. cit., chs. 3–5.

21. For an assessment of this and alternative models of party behaviour, see K. Strom, “ABehavioural Theory of Competitive Political Parties,” American Journal of Political Sci-ence, 1990 (34), 565–598 (pp. 566–570).

22. A. Pizzorno, “On the Rationality of Democratic Choice,” Telos, 1985 (63), 41–69.23. For instance E. Browne and M. Franklin, “Aspects of Coalition Payoffs in European

Parliamentary Democracies,” American Political Science Review, 1973 (67), 453–469;more recently, M. Laver and N. Schofield, Multiparty Government. The Politics of Coalitionin Europe (Oxford: University Press, 1990), Ch. 3.

24. Downs, An Economic Theory of Democracy, op. cit.25. Strom, “Democracy, Accountability and Coalition Bargaining”, op. cit., p. 49.26. “Shirking” could also fit into this schema, as the political entrepreneur could claim the

salary associated with political office whilst making little effort to produce public goods.However in practice there would appear to be easier ways to find the quiet life than a careerin politics. Moreover the salaries attached to some public offices seem scarce reward forthe costs of putting oneself forward as a political entrepreneur – free-riding would be amore rational option.

27. Here I will concentrate on the constraints imposed by the political entrepreneur’s need towin the approval of those contributing to the production of public goods in order to maintainher position. A number of other variables also affect opportunities for corrupt activity, suchas the supply of potential corruptors: see della Porta and Vannucci, Corruzione politica eamministrazione pubblica, op. cit., ch. 2.

28. Laver, Private Desires, Political Action, op. cit., p. 77.29. Laver, Private Desires, Political Action, op. cit., p.85.30. Downs, An Economic Theory of Democracy, op. cit., p. 28.31. Laver, Private Desires, Political Action, op. cit., p. 116.32. Schlesinger, “On the Theory of Party Organisation,” op. cit., p. 387.33. A. O. Hirschman, Exit, Voice and Loyalty (Cambridge, MA: Harvard University Press,

1970).34. This expression is inspired by Ilvo Diamanti’s description of Silvio Berlusconi’s Forza

Italia party as a partito-azienda (I. Diamanti, “Partiti e modelli,” Almanacco di Politica edEconomia, 1995 (January), 71–81), and by Della Porta and Pizzorno’s notion of the “busi-ness politician”(D. Della Porta and A. Pizzorno, “The Business Politicians: Reflections


from a Study of Political Corruption,” in M. Levi and D. Nelken (eds.), The Corruption ofPolitics and the Politics of Corruption (Oxford: Blackwell, 1996). The use of the businessfirm analogy seems appropriate to the model of party implied by the work of economictheorists such as Downs and Schlesinger. For a more detailed exposition see J. Hopkin,“New Parties and the Business Firm Model of Party Organisation: Cases from Italy andSpain,” paper presented to ECPR Joint Sessions, University of Oslo, April 1996.

35. H. Ward, “Rational Choice Theory,” in D. Marsh and G. Stoker (eds.), Theory and Methodsin Political Science (Basingstoke: Macmillan, 1995), p.-93.

36. Key works in this field include: H. Daalder and P. Mair (eds.), Western European PartySystems: Continuity and Change (London: Sage, 1983); S. Bartolini and P. Mair (eds.),Party Politics in Contemporary Western Europe (London: Frank Cass, 1984); T. Dalton,S. Flanagan and P.A. Beck (eds.), Electoral Change in Advanced Industrial Societies:Realignment or Dealignment? (Princeton: University Press, 1984); S. Wolinetz (ed.),Parties and Party Systems in Liberal Democracies (London: Routledge, 1988); S. Bartoliniand P. Mair, Identity, Competition and Electoral Availability: The Stabilisation of EuropeanElectorates 1885–1985 (Cambridge: University Press, 1990); P. Mair and G. Smith (eds.),Understanding Party System Change in Western Europe (London: Frank Cass, 1990); andS. Wolinetz, “Party System Change: The Catch-All Thesis Revisited,” West EuropeanPolitics, 1993 (16), 113–128.

37. O. Kirchheimer, “The Transformation of Western European Party Systems,” in J. LaPalom-bara and M. Weiner (eds.), Political Parties and Political Development (Princeton: Uni-versity Press, 1966).

38. M.Duverger, Political Parties (London: Methuen, 1954).39. S. Neumann (ed.), Modern Political Parties: Approaches to Comparative Politics (Chicago:

University Press, 1956).40. As pointed out by Peter Mair, “Party Organisations: From Civil Society to the State,”

in R. Katz and P. Mair (eds.), How Parties Organise. Change and Adaptation in PartyOrganisations in Western Democracies (London: Sage, 1994).

41. A. Panebianco, Political Parties: Organisation and Power (Cambridge: University Press,1988).

42. R. Katz and P. Mair, “Changing Models of Party Organisation and Party Democracy. TheEmergence of the Cartel Party,” Party Politics, 1995 (1), 5–28.

43. Here Panebianco makes use of the work of A. Pizzorno, “Introduzione allo studio dellapartecipazione politica,” Quaderni di Sociologia, 1966 (15), 235–287.

44. Panebianco, Political Parties, op. cit ., p. 18.45. A. Pizzorno, “Interests and Parties in Pluralism,” in S. Berger (ed.), Organising Interests

in Western Europe (Cambridge: University Press, 1981), p.272, cited in P. Mair, “Latrasformazione del partito di massa in Europa,” in M. Calise (ed.), Come cambiano ipartiti (Bologna: Il Mulino, 1992), p. 106.

46. P. Mair, “La trasformazione del partito di massa in Europa,” cit., p.106.47. Kirchheimer, “The Transformation of Western European Party Systems,” op. cit., p. 182–

183.48. P. Mair, “La trasformazione del partito di massa in Europa,”, op. cit., p. 105.49. Strom, “Democracy, Accountability and Coalition Bargaining,” op. cit., pp. 49–50.50. See Green and Shapiro, Pathologies of Rational Choice Theory, op. cit.51. See Della Porta and Pizzorno, “The Business Politicians: Reflections from a Study of

Political Corruption,” op. cit.52. See for example Panebianco, Political Parties, op. cit., ch. 6 for the French and Italian

cases; also E. Berntzen, “Democratic Socialism in Spain, Portugal and Greece,” and A.C.Jungar, “Italian Socialism: A Century of Trial and Error,” both in L. Karvonen and J.Sundberg (eds.), Social Democracy in Transition. Northern, Southern and Eastern Europe(Aldershot: Dartmouth, 1991).

53. F. Spotts and T. Weiser, Italy: A Difficult Democracy (Cambridge: University Press, 1986),p. 72.

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54. D. Hine, “The Italian Socialist Party,” in T. Gallagher and A. Williams (eds.), SouthernEuropean Socialism (Manchester: University Press, 1989), pp. 112–113.

55. G. Pasquino, “The PSI Between Gamblers and Entrepreneurs,” West European Politics,1986 (9), 120–141 (p. 122).

56. Hine, “The Italian Socialist Party,” cit., pp. 118–119; Pasquino, “The PSI Between Entre-preneurs and Gamblers,” cit., pp.124–125. For a detailed account of changes in the party’sdecision-making structures, see O. Massari, “Changes in the PSI Leadership: The NationalExecutive Committee and its Membership (1976–1987),” European Journal of PoliticalResearch, 1989 (17), 563–582.

57. Pasquino, “The PSI Between Entrepreneurs and Gamblers,” op. cit., p. 133.58. Della Porta and Pizzorno, “The Business Politicians,” op. cit.59. Della Porta and Pizzorno, “The Business Politicians,” op. cit. Della Porta, Lo scambio

occulto, op. cit., Della Porta and Vannucci, Corruzione politica e amministrazione pubbli-ca, op. cit.

60. R. Gillespie, The Spanish Socialist Party. A History of Factionalism (Oxford: ClarendonPress, 1989), ch. 1.

61. R. Gunther, G. Sani and G. Shabad, Spain after Franco. The Emergence of a CompetitiveParty System (Berkeley: University of California Press, 1986), ch. 2.

62. J.R. Montero, “Partidos y participacion politica,” Revista de Estudios Politicos, 1981 (23),33–72 (p. 44).

63. Gillespie, The Spanish Socialist Party, cit., pp. 326–327.64. Pasquino, “The PSI Between Entrepreneurs and Political Gamblers,” op. cit., p. 123.65. P. Heywood, The Government and Politics of Spain (London: Macmillan, 1995), p. 197.66. See S. Julia, “The Ideological Conversion of the Leaders of the PSOE, 1976-1979,” in

F. Lannon and P. Preston (eds.), Elites and Power in Twentieth Century Spain. Essays inHonour of Sir Raymond Carr (Oxford: Clarendon Press, 1990).

67. P. Heywood, “From Dictatorship to Democracy: Changing Forms of Corruption in Spain,”in Della Porta and Meny (eds.), Democracy and Corruption in Europe, op. cit.

68. Della Porta and Pizzorno, “The Business Politicians,” op. cit., pp. 89–90.69. Green and Shapiro, Pathologies of Rational Choice Theory, op. cit., p. 204.

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Political parties, political corruption, and the economic theory of democracy