The Role of the State Flashcards
Definition of the state
The monopoly of the legitimate use of force
- Territorial control
- Centralized authority
- Sovereignty
How does state creation affect internal violence and why?
As soon as we start creating states the homicide rate drops
- A 10-fold reduction from 1200 to 1984
- Disarming citizens
- Licensing arms
- Punishing violence and private war
Why is a centralized state essential for development?
- Maintaining peace
- Enforcing institutional rules
- Delivering public services
Where do centralized states come from?
- War makes states and states make war
- An extortion racket: “give us money and we will protect you”
How can conflict contribute to long run development? Where is this / this not the history?
- If it allows one faction to dominate and build a centralized state
- This is the history of Europe (many factions fighting until one faction has enough power to completely control its territory)
- This is not the history of Africa
– Artificial, arbitrary borders lumping together multiple (sometimes hostile) groups
Characteristics of the predatory state
- The state is the problem
- Patrimonialism
- The bloated state
- The state lacks “autonomy” from political pressures
How is the state the problem in a predatory state?
- Extractive economic institutions
- Captured by private, elite interests
- Corruption, patronage
- Keeping people poor to maintain control
What is patrimonialism in a predatory state?
- Power centralized around a single “big man”
- Personal relations and violence
What is a bloated state (predatory states)?
- Patronage recruitment enlarged bureaucracies
– Public salaries -> private salaries - Extracting resources from the rural poor
– eg. Kenya’s monopsony coffee purchases at low prices - Subsidies / Import substitution allowed inefficient industries to survive
Definition of neoliberal
The idea that free markets and a small non-interventionist state promote development
Characteristics of the neoliberal state
- The state is the problem
- Minimalist interpretation of inclusive economist institutions
- The Washington Consensus / Structural adjustment
What is the solution to the state being the problem (neoliberal state)?
Insulating the state from political influence
- A smaller state
- “Getting the price right”
– Leave it to the market
Requirements of the Washington Consensus / Structural adjustment
- Fiscal discipline
- Subsidies only for public goods
- Tax reform
- Market interest rates (float)
- Competitive exchange rates (float)
- Commercial liberalization
- Liberalizing FDI
- Privatization of state enterprises
- Deregulation
- Protecting property rights
Who implemented the Washington Consensus and when/why?
Implemented by World Bank and IMF
- Oil shocks and debt crises provided the opportunity to impose the Washington Consensus through conditionalites
How did the Washington Consensus fair?
But the Washington Consensus failed
- The “lost decade” of the 1980s
- Median growth in developing countries in the 1980s: 0.0%
Cochabamba Water War, Bolivia, 1992-2000 (Washington Consensus effects)
- Poor water supply
- Privatization
- Price rises
- Protests
- Continued poor water supply
What went wrong with the neoliberal state?
- Free markets were not enough to support investment
- Small states lacked capacity
- A rent-seeking state can’t shrink itself
- IMF and World Bank pursued Neoliberalism ideologically
- Maintaining political support for reform is necessary (not an afterthought)
Free markets were not enough to support investment (what went wrong with the neoliberal state)
- The absence of the state is not the market
- The risks for private investment were simply too great (low wages, but lower productivity)
- Protecting property rights is expensive
Small states lacked capacity to… (what went wrong with the neoliberal state)
- Make markets work, eg. regulating competition, coordinating investments
- Deliver public goods
- Protect citizens from the transnational costs
A rent seeking state can’t shrink itself (what went wrong with the neoliberal state)
Privatization generated new interests and rent-seeking
- … they could steal today much of what would have been skimmed off by future politicians
IMF and World Bank pursued Neoliberalism ideologically (what went wrong with the neoliberal state)
- As an end, not a means to development
- Social consequences were overlooked
Definition of the developmental state
A state where markets are coordinated and guided by an active, interventionist, discipline, state
Typical characteristics of the developmental state
- Bureaucrats stop subsidies to slow-growing firms
- Bureaucrats regularly hold private meetings with the country’s wealthiest industrialists
- ~Firms that lobby for policy benefits are accomodated (can be fine, watch out for predatory state behavior)
- The elite all went to the same school / university
How is the state the solution in developmental states?
- Economic institutions are still “inclusive”
– Property rights are protected
– Markets are still the engine of growth - But the state is more active in promoting investment and delivering public services
- East Asia suggests this is possible without democracy
- Maximalist interpretation of inclusive economic institutions
