The Corrupt Republic

The conviction of former Austrian Interior Minister Ernst Strasser on corruption charges earlier this year (not yet effective) has justly attracted international attention. The MEP for the conservative People’s Party was sentenced to four years imprisonment after being secretly filmed as he promised two Sunday Times journalists posing as lobbyists to influence EU legislation in the European Parliament to their benefit.

However, Strasser’s case is by no means unique. A glance at the list of those currently under investigation in Austria on charges of corruption reveals ten—mostly respectable and highly placed—figures from the world of politics and business. And indications are that the list is not complete. Apart from Strasser, another random example of a prominent figure under prosecution is that of Karl-Heinz Grasser, Finance Minister between 2000 and 2006. In fact, there are reasons to believe that in all the privatizations of state companies that took place during his era and under his aegis, in his capacity as the owners’ representative, there were irregularities which benefited his friends or subsequent business partners. However, investigators have recently also been looking into the current Social Democratic Chancellor Werner Faymann. During his terms as federal Transport Minister, and previously Vienna city councilor for home construction, his employees had allegedly placed expensive advertisements on behalf of the ministry primarily with the tabloid press, securing positive coverage for Faymann.

In Austria, as in all other countries struggling with bribery, corruption affects society as a whole. Its impact translates into concrete figures: the Kepler University in Linz has calculated that in 2012 corruption caused €27 billion damage to the economy.

Not that Austria hadn’t been plagued by corruption scandals before. With hindsight one might even say that since the restoration of the Austrian Republic in 1945 each decade had its own major corruption scandal. They differed only in scope, the number of people involved, and especially in terms of the amount of publicity they have received. Naturally, in the present-day era of electronic media, affairs of this kind are under far greater scrutiny than in the past. Nor should we forget that until the early 1970s all the Austrian media championed almost exclusively— whether covertly or overtly—the interests of individual political parties. These days, however, the public—prone to pouncing on and dissecting the tiniest leaked detail—can exert much more pressure to ensure that illegal activities of high-ranking politicians have quite specific consequences, and that they are forced to step down, at the very least.

The root causes of Austria’s past and present corruption affairs are often very similar. Indirectly they all derive from the political system established after World War II, whose main philosophy consisted in reaching consensus and maintaining it at all costs, both in the realm of politics— for example, between the country’s two major parties, the Social Democrats and the conservative People’s Party—as well as in the social and economic arena. This was driven by the desire to avoid the kind of polarization that had prevailed in Austria in the interwar period, culminating in a brief but nonetheless bloody civil war in the 1930s. The result was the institutionalization of the so-called social partnership, whereby employer and employee representatives would meet regularly to agree on wages or, in the early post-war years, also on the prices of basic foodstuffs.

These meetings were held behind closed doors, which was highly conducive to making deals and counter-deals, along the lines of “you scratch my back, I’ll scratch yours.” Recalling these meetings, their direct participants—who certainly cannot be retrospectively accused of having ulterior motives (such as personal profit)—often wax nostalgic about the fact that „in those days verbal agreements still meant something even if they were sealed only by a handshake (“per Handschlag”).” Admittedly, this system ensured that the country, particularly in the 1950s, enjoyed a great deal of political stability, which helped it withstand communist coup attempts.

On the other hand, this has brought about a de facto half-way split into a Social-Democrat (red) and conservative (black) Austria. Whereas the „reds“ were backed by the large-scale state ownership of industry, over which they enjoyed almost unlimited control, the “blacks” controlled Austria’s countryside, particularly through the agricultural sector. Both sides relied on the leverage of professional chambers with membership that is to this day mandatory, and as a result there was no escaping the influence of the two parties. Their bosses bribed their members and supporters by means of real or imagined privileges, particularly job security and stable income. In return they demanded loyalty and, most importantly, regular electoral support. The system worked well until the turn of the 1980s and 1990s when state companies began to experience economic difficulties due to their lack of efficiency, bad managerial decisions, and as a result of the disintegration of East European markets.

Suddenly, layoffs became necessary, and the constituents voted with their feet: In the next election both parties lost about 15 to 20 per cent of their supporters. The privatization and subsequent crisis of state-owned steelworks and engineering plants also created great potential for corruption. It is no accident that most of the privatizations between 2000 and 2006 were tainted by suspicion of corruption or that the choice of buyers may not have been motivated solely by the greatest possible benefit for the seller, i.e. the state.

At the same time, the small number of major companies in which the state has retained a majority shareholding have tried to stay on good terms with the two major parties. The most blatant example is Austrian Telecom (AT), which is under investigation as well. When a painstaking investigation uncovered a sophisticated system of links to specific politicians, it turned out that representatives of all parliamentary parties, with the exception of the Greens, had been on AT’s unofficial payroll. In most cases the payments were made in the form of (usually excessive) fees for alleged consultancies. In their turn, politicians obliged the company’s managers by amending the legislation on the pay of state company managers. Most recently AT management has come under suspicion of abetting the manipulation of the company’s shares so that management members could claim special bonuses.

Another phenomenon that has contributed to Austria’s corruption is the lack of clear rules for funding political parties, which are not even obliged to publish their annual accounts. The existence of such rules would force the parties—particularly the two major ones—to come clean about their indirect sources of funding, which are channeled through various affiliated organizations or associations, and lack transparency. In spite of all their differences and mutual rivalry, the Social Democrats and the People’s Party have so far managed to find ways of preventing the adoption of this kind of legislation. It is symptomatic that they have instead come up with proposals for fighting corruption and exposing its causes that are dubious to say the least. For example, last year as part of the fight against bribery Chancellor Faymann’s government was planning to introduce a highly “original innovation“ to the criminal code, namely the so-called diversion option. Under this law those suspected of serious offences, such as abuse of their official power or bribery, could redeem themselves by paying a kind of fine. The investigation would be closed and nobody would ever be able to shed light on anything linked to the case. Incidentally, in proposing the draft law the government argued that this legal provision would greatly reduce the burden of the courts. Eventually, in the face of fierce opposition on the part of experts and public opinion the coalition decided to withdraw the bill.

Although the days when Austria was a monarchy are long gone, some patterns of behavior from the distant days when Vienna’s Hofburg was the seat of the Emperor still survive in society. For example, for many years decisions taken by top politicians were not commonly discussed, let alone opposed, because citizens have accorded public servants as well as elected representatives an undeservedly high degree of authority.

Another key factor that is not exactly conducive to general openness is the powerful Catholic legacy and the related traditional hierarchical order of society. Nor should one ignore the question of how, or rather where, Austria’s social and political elites are recruited and the degree of social mobility in Austrian society. In the old days aristocratic origin guaranteed high social status and this hasn’t really changed even though aristocratic titles were officially abolished with the establishment of the Austrian Republic in 1918. In real life the “right pedigree“ still provides an excellent springboard to a professional career and respected social status. Similarly long-lived is the tradition of student fraternities at universities, be they Catholic (Cartellverband) or German-nationalist (Burschenschaft). Bonds forged in these associations often bear fruit later in life, as people who have come to know each other well are willing to make allowances for each other and in some cases are bound by discretion which, in extreme cases, also facilitates corrupt behavior.

An interesting aspect of the recent corruption or embezzlement affairs is the fact that most of them have taken place on the national stage. Until very recently, the provinces have been out of the spotlight, for political systems in individual Austrian states are even more rigid than their national counterparts. All the factors listed above (institutionalized consensus, closed elites, traditional hierarchies) occur in an even more concentrated form in the provinces.

For example, for many years the former Interior Minister Ernst Strasser, whose recent conviction has been mentioned above, has been politically linked to the powerful People’s Party regional politician Erwin Pröll, who has served as Landeshauptmann (regional prime minister) for Lower Austria for twenty years. He has basically been the region‘s absolute ruler, having commanded an absolute majority in several consecutive elections. Pröll doesn’t really need to worry about opposition— partly because, in line with the constitution, all political parties are proportionally represented in the regional government, which wipes out the difference between government and opposition. Since this system works in most Austrian states, it is not difficult for any Landeshauptmann to acquire the reputation of a “politician who is above political parties,” a “kindly regional father” (gütiger Landesvater), in effect making them immune to criticism. And those who, nevertheless, dare to point out any shortcomings, risk being labeled whistle-blowers or, even worse, enemies of the fatherland.

The greatest virtuoso of this kind of spectacle, apart from Pröll, was the former Carinthian Landeshauptmann, the right-wing populist Jörg Haider. For a long time, Haider had proclaimed himself the only just man and fighter against all evil arising from the long rule of the Social Democrats and the People’s Party, including the appointment of fellow party members to key offices (“Freunderlwirt schaft“) and corruption. However, by the time Haider’s party joined the government coalition in 2000, it was quite actively involved in the system it had criticized. Its members received seats on state company boards or were able to exert considerable influence on their operations, which threw open the gates to potential corruption.

It wasn’t until Haider’s tragic death in 2008 that the truth many had suspected came out. Over almost ten years of uninterrupted rule in Carinthia he had treated the state’s public finances like a customer in a well-stocked supermarket, helping himself to whatever he fancied and whatever might have helped raise his profile even further. The corruption affairs currently under investigation by Austrian courts involve no less than five of Haider’s close associates.

To sum up, most Austrians nowadays regard corruption as an elemental problem. This is a significant shift compared to the past, since bribery has long been considered a normal part of life, even a kind of chivalrous misconduct or a “lubricant without which no engine can run.” The question is whether the current critical mood in society will have a radical impact, for example, on this autumn’s parliamentary election. It would, however, be rash to expect everything in Austria to change from one day to the next. The tracks of Austrian consensus are too well-worn to allow that.