When a political party comes to power and becomes the ruling party, many of its members expect to be rewarded. A quick way to reward members is by appointing them to take up positions in government owned entities. Political appointments can span from village chiefs to board members in agencies and government-owned companies. Party henchmen help sway decisions to favour their political party and strengthen their power grip.
During good times, when party members and common citizens enjoy economic growth, political patronage is largely ignored. When the economy takes a dive, it is the grassroots communities that feel the impact first and they will turn against the government. When a ruling party loses touch with the common citizens, the cost of maintaining support becomes higher. No matter how wealthy a ruling party is, if it does not take care of the welfare of the people, it will eventually collapse as seen in the last general elections.
There comes a point when corruption is systemic and when citizens and the small and medium enterprises ("SMEs") find it difficult to overcome lobbyists and middlemen planted by politicians. They become tough gatekeepers that stand between citizens and public services.
Runners, lobbyists are party loyalists with little academic background but are trusted lieutenants of politicians and high-ranking government officers who can show the ropes to powers that be. They are savvy and sometimes do not care about public interests. Many have become misguided in their moral principles, often taking corruption as legitimate norms of doing 'business'.
A government controlled entity that gets involved in major businesses to fund a political party will eventually compete with the industry. Industries provide employment to the public. When their businesses are affected, their employees will also get affected. Employees are made aware of the harm a government is doing to them. Eventually, government is pressured to employ people instead. In the long run, due to government monopoly, productivity and competitiveness will decline. In past situations, government could always use Petronas to churn out more income or give mining, logging licenses and highway concessions to keep the money flowing. Today, petroleum, mining and logging have depleted and highway concessions are burdening the nation. Ironically, the richest Malaysian oil states have also become the poorest.
There are many occasions when a Government collaborates with friendly tycoons who would happily oblige to push out competition with their newfound law-bending partners. When competition dies, many SMEs would also get squeezed. They had to rely on cheap foreign labours. Increasing minimum wages will kill the SMEs first.
SMEs cannot afford R&D and innovate to compete with foreign companies. The responsibility on large scale innovations rest on the shoulders of the government and large corporations. In Malaysia, many R&D grants went to political appointees with little real innovation to show. They are meant to oil the party machinery, again.
The consequence is prolonged income disparity, talent diaspora and influx of low cost foreign labours. Therefore, political patronage is a huge threat to democracy.
When corruption is deep-rooted in the system, it is difficult to remove them without causing major disruptions. A new government is tempted to take over the patronage system it inherits from the previous government as a quick fix. Maintaining the patronage system can win opposing supporters to switch sides to continue with their 'livelihood'. This minimises disruptions and strengthens the new government.
Lucrative contracts made by the previous governments to fuel systemic corruption would need to be reformed. The public knew little about them and these projects did not undergo proper study and consultation. This also proves tricky because the new government may be seen as a renegade government in the eyes of international business communities. It is a serious dilemma because allowing the deal to continue as it is would mean allowing political patronage to continue to feed leaders of the past government. Cancelling it would offend our main trading partners.
Perhaps the best option would be continue with the projects after revamping the governance of these organizations.
