Lecture 4: The role of the state Flashcards
Definition: State
The monopoly on the legitimate use of force (Weber): territorial control, centralized authority, and sovereignty
The murder rate is lower in
State societies than non-state societies
The state reduces
Internal violence by disarming citizens, licensing arms, and punishing violence
3 reasons why a centralized state is essential for development
- Maintaining peace
- Enforce institutional rules (e.g. inclusive economic and political institutions)
- Delivering public services
How are centralized states formed?
Through war (Tilly) - offering money for protection, centralized structure to collect the money
The predatory state - 5 points about the role of the state
The state is the problem:
1. Extractive economic institutions
2. Captured by private, elite interests
3. Corruption, patronage
4. Keeping people poor to maintain control
5. The state lacks autonomy from political pressures (politicians and bureaucrats)
Key concept in the predatory state
Patrimonalism: power centralized around a single ‘big man’, personal relations and violence
The bloated state
A kind of predatory state with:
1. Patronage recruitment enlarged buraucracies (state expands and expands, extracting more money to pay bureaucrats)
- Extracting resources from the rural poor
- Subsidies/import substitution allow inefficient industries to survive
How is the predatory state for development
Bad!
Monopsony
Only one buyer - in predatory state, the buyer is the government who can set a very low price
Definition: neoliberalism
The idea that free markets and a small non-interventionist state promote development
The neoliberal state: role of the state
The state is the problem
The neoliberal state: What is the solution to the state problem - 4 points?
- Insulating the state from political influence
- Getting the prices right to allocate resources
- A smaller state
- Minimalist interpretation of inclusive economic institutions (do the minimum to achieve it)
The Washington Consensus was imposed through
Conditionalities for loans in the 1970s oil shocks and debt crises
2 specific ways the Washington Consensus failed in developing countries?
- Median growth in developing countries in 1980s was 0%
- Social disaster as social spending (education, infrastructure, health) were cut
Is there a relationship between property rights and growth?
Not if we exclude Western countries; suggests growth leads to market institutions and not the other way around
What went wrong with the neoliberal state - 5 points?
- Free markets were not enough to support investments (didn’t decrease risks of investment)
- Small states lacked capacity to make the markets work (e.g. preserving competition, coordinating investment) and protect citizens from transitional costs
- A rent-seeking state can’t shrink itself - only the already rich and corrupt bureaucrats could buy things being sold by privatization, thus keeping them in power
- IMF and WB pursued neoliberalism ideologically, meaning as an end in itself, not a means to development, and social consequences were thus overlooked
- Maintaining political support for reform is necessary, not an afterthought
Definition: the developmental state
A state where markets are coordinated and guided by an active, interventionist, disciplined state
3 points about the role of the state in the developmental state
The state is the solution:
1. Economic institutions remain inclusive (protected property rights, markets as engine of growht)
- State is more capable and active in promoting investment and delivering public services
- Maximalist interpretation of inclusive economic institutions
2 typical characteristics of the developmental state
- Bureaucrats stop subsidies to slow-growing firms
- Bureaucrats regularly hold private meetings with the country’s wealthiest industrialists
3 characteristics of growth-enhancing governance
Policies combine an ‘active’ state with a ‘disciplined’ state:
1. Temporary subsidies to growing sectors
2. Conditional import-substitution (until sector becomes competitive)
3. Coordinating investments and technology transfer
The dilemma of the developmental state
A large, active state is needed to promote investment, but they are vulnerable to political pressure and can easily relapse into the predatory state.
How to solve the dilemma of the developmental state
Through autonomy from political pressures:
1. A rational, Weberian bureaucracy
2. Meritocracy in recruitment, promotion
3. Impartial rule-based procedures
But sometimes autonomy is not enough (India) - what do we need then?
The state needs to be embedded in society to gather information and coordinate investments, have links to the private sector
But too much embeddedness generates
Corruption, clientelism, and rent-seeking (Brazil 1990s)
How do we solve the autonomy vs. embeddedness problem?
Through ‘embedded autonomy’ -> state is connected to the public and private sector, but have autonomy to prevent corruption
What 4 political conditions generate states with ‘embedded autonomy’?
- A history of Weberian bureaucracy and indigenous state-building
- Disempowerment of large landowners (e.g. WW2)
- A dominent, cohesive elite
- External threats that align elite interests with development (threat of invasion/survival)
Thus, for embedded autonomy we need a specific type of
Political relationship between the state, elites, and society
