China's Trapped Transition_ The Limits of Developmental Autocracy - Minxin Pei [23]
Many scholars believe, however, that decentralization can increase corruption for several reasons. Given the low wages paid to local officials, increased political discretion as a result of decentralization is likely to lead to more corruption.80 If decentralization should lead to the breaking of arm’s-length relationships between clients and government agents, it can cause corruption to rise, especially in cultures where interpersonal connections play an important role. Newly empowered local bureaucrats are thus more likely to reward family friends with various forms of rents.81 Decentralization may exacerbate corruption if it occurs in the context of weak government. When the political authority of the government is weak across the board, decentralization can create independent monopolists who have every incentive to maximize the collection of bribery at the local level.82 On balance, the argument that decentralization can lead to more corruption is more persuasive because its proponents adequately account for the agency problem, while the same problem is simply assumed away by those who believe that decentralization can reduce corruption.83
The distinction between centralized and decentralized predation notwithstanding, the central point of the predatory state perspective is self-evident : without effective political institutions or structural constraints that curb the predatory appetite of the state, a state that is sufficiently strong to promote economic development unhindered by parochial interests is also strong enough to prey upon society without much restraint. The consequences of unrestrained state predation are dire. In such a state, the ruling elites distort markets, create rent-seeking opportunities for self-enrichment, and loot the wealth of society. Sustained economic development under such a state is impossible. The hope that economic development would eventually lead to democratic transition is only wishful thinking because the predatory state and economic development are, logically, mutually exclusive.
Why Decentralized Predation May Emerge during Transition
Research on transitions in the former socialist states indicates a significant increase in decentralized predation immediately following regime changes. Joel Hellman’s study of reform in the former Soviet bloc countries suggested that the ruling elites were able to capture the state and reap all the benefits of partial economic reforms.84 Michael McFaul and Federico Varese found that the communist ruling elites in the former Soviet Union were able to use their institutional privileges and exploit the loopholes in property rights laws to steal public assets in the privatization process.85 In an insightful analysis of the collapse of the former Soviet Union, Steven Solnick showed that transitions that decentralize authority tend to lead to an increase in the number of thefts of state assets.86
Theoretically, the type of post-transition state predation observed by country specialists and journalists is qualitatively different from that which occurred during the pre-transition era. In pre-transition communist countries, state predation was centralized. Two characteristics defined centralized predation under communist rule. First, the aggregate amount of revenues generated was large, reflected in the government revenue as a share of GDP. Second, a significant amount of the revenues was used to provide public goods, mainly national