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712 the role of the state in development

Demilitarization

Y/Pop

Fig. 39.1 The constraints on welfare imposed by political

institutions

Figure 39.1 provides a visual portrayal of the implications of this argument. The

vertical axis designates the level of demilitarization; the x-axis marks the level of

prosperity. People want higher levels of both: utility therefore increases as one moves

northeast in the plane framed by the two axes. The ﬁrst-best outcome would locate in

the upper right-hand corner, representing the achievement of both high income and

demilitarization. As suggested by the downward-sloping line, the cost of prosperity is

greater levels of military preparation; by the same token, the cost of demilitarization

is poverty. The political institutions of stateless societies, the ﬁgure suggests, thus

impose a trade-oﬀ between prosperity and security. Because development implies

higher levels of both, the downward-sloping line can also be viewed as a constraint

on the level of development that such societies can attain. The origin of this constraint

is the society’s political institutions. In their search for higher levels of welfare, people

in stateless societies are limited by the nature of their institutions.

3 Societies With States

.............................................................................

Thus far I have defended the thesis: “No state, no development.” By demonstrating

how power can be organized in a way that engenders both security and prosperity, I

now turn to the positive case for the role of the state in development.

To launch the argument, I introduce a ﬁgure, G (think “government”), who is a

specialist in the use of violence. In contrast to the private citizens, G does not secure

robert h. bates 713

his income from productive labor: rather, he secures it by using force. In seeking the

“primitive” conditions for the state, I seek the conditions under which G would ﬁnd

it preferable to earn an income by employing his command over the military arts to

safeguard rather than to seize the wealth of others.

Now there are three actors: G and the two private agents. Each values both leisure

and income. G can gain an income from predation or from payments made by citizens

in exchange for protection; the private agents, by working or raiding. To draw closer

to the conditions that deﬁne the properties of the state, I ask three questions:

1. Under what conditions would G choose to employ force to defend the citizens

rather than to prey upon them?

2. Under which conditions will citizens choose to disarm, leaving the government

to protect their life and property?

3. And when will these choices prevail as an equilibrium?

By equilibrium, is meant:

I. No private agent should be able to gain by raiding or refusing to pay taxes.

II. Nor should an agent be able to gain by altering the allocation of her resources

between work, leisure, and military preparation.

III. G’s threat to predate must be credible.

IV. And G must ﬁnd it optimal not to predate if the economic agents adhere to

their strategies.

The structure of repeated play helps to deﬁne this equilibrium for it opens up the

possibility of punishment should any player deviate. In the punishment phase, G

would earn his income from predation rather than protection; the citizens would

reallocate resources from production to defense and to leisure, the former so as to

deter those who might raid and the latter so as to render raiding unattractive. Society

would therefore be poor and its members insecure. As stated by Hobbes, the life of

man would be “poor, nasty, brutish, and short.”

To illustrate the conditions that support adherence to the equilibrium path of play,

I ﬁrst focus on the incentives that shape the choices of G, the specialist in violence. I

stress the incentives that prevail in equilibrium and those that arise should a deviation

occur (Figure 39.2). I then turn to the behavior of the citizens.

Equilibrium path

Deviation from equilibrium path

Shadow of the future

Discount rate

Payoffs

Fig. 39.2 The equilibrium path

714 the role of the state in development

G’s incentives to adhere to the equilibrium choice of strategies derive from the

revenues he can secure from taxation. To induce G to refrain from predation, the

level of revenues he earns from the provision of protection needs to be high enough

that G ﬁnds it optimal, given the private agents’ choice of strategies, to refrain from

conﬁscating the agents’ wealth if they pay taxes. But the revenues must also be

suﬃciently low that private agents prefer to purchase the services of G rather than

to incur the costs of providing their own security. The level of revenues must satisfy

both G’s and the citizens’ participation constraints, where the latter is deﬁned by a

capacity to revert to the private provision of security and to the taking up of arms.

G’s willingness to adhere to the equilibrium path also depends upon his payoﬀsin

the punishment phase. The magnitude of these payoﬀs constitute the shadow of the

future, to use Axelrod’s phrasing (Axelrod 1984). This shadow will be the dimmer and

the punishment phase therefore less of a deterrent to predation should G be assured of

a prosperous future even should the state break down. Should, for example, G be able

to retain control over oil ﬁelds, gold mines, or other assets, then he need not fear the

loss of taxes, should he abandon his role as a guardian. The shadow will dim as well

should G more heavily discount the future and thus the losses during the punishment

phase. Should his future become less certain or his level of impatience rise, then G

will come to weigh the prospects of immediate gain more highly than future pain.

He will ﬁnd the immediate rewards (even given the attendant punishment) from

predation more attractive than the steady but moderate future ﬂow of earnings from

the provision of protective services. Both the magnitude of these rewards in the

punishment phase and the degree to which the payoﬀs are discounted thus determine

the strength of G’s incentives to behave like the government of a state rather than like

awarlord.

I have focused on the incentives facing G. But note too the behavior of the private

citizens. If public revenues decline, then, understanding G’s incentives, the citizens

might fear their government’s behavior. They might expect the specialist in violence

to begin to behave as a predator, using his power to extract resources from the private

economy. So too if G’s hold on power becomes less secure: the citizens might then

fear that their government—now facing greater prospects of the loss of power—

would now begin to despoil rather than to protect the private economy. And should

a major new source of wealth arise—a resource boom, say; or discoveries of oil

or mineral deposits—comprehending the incentives that shape the choices of the

specialist in violence, the citizens might anticipate a change in the conduct of their

government. They might anticipate that the government would forswear costly eﬀorts

on their behalf and turn instead to consuming the bounty created by the bonanza. In

anticipation of the transformation of the specialist’s role—his change from protector

to predator—the citizenry would itself then alter its behavior: it would return to the

private provision of security.

The conditions that yield the possibility of the state also imply that the state is

developmental. That they do so provides closure to my argument.

³ For proofs of these arguments, see Bates, Greif, and Singh 2002.

robert h. bates 715

When G is willing and able to punish those who engage in raiding, then private

citizens need no longer divert resources from productive eﬀort.AndwhenGcangain

a higher income by protecting the creation of wealth than by engaging in predation,

citizens need not fear that increases in prosperity will trigger political expropriation.

Given the security of their property and the fruits of their labors, citizens will there-

fore be willing to shift resources into productive endeavors. The citizens will enjoy

security and their incomes will grow.

If G is little tempted to deviate from its role as guardian, then it can be shown that

as the rate at which he discounts the future declines, the level of taxes necessary to

secure his services approaches “0”(Bates,Greif,andSingh2002). Put another way,

as the rate at which G discounts the future declines, fewer resources need be diverted

from the private to the public economy to keep the society on the equilibrium path,

and the magnitude of the distortions created by the need to pay for the services of G

therefore declines. The fewer the distortions, the greater the total product.

The properties of these political arrangements thus contrast with those that charac-

terize stateless societies. People in the society can enjoy both security and prosperity.

Society can reach regions in the space described in Figure 39.1 which previously were

unattainable. The conditions that lead to the possibility of the state lead as well to the

possibility of development.

4 State Failure

.............................................................................

The conditions that support adherence to the equilibrium path and the possibility

of the state also deﬁne the circumstances under which states will fail. When these

conditions fail to hold, specialists in violence become warlords and civilians take up

arms. For evidence of the plausibility of my argument, I turn to the literatures on state

failure.

One branch of this literature addresses the political costs of democratization.

As noted by Snyder (2000), when authoritarian regimes face the prospect of being

overthrown, they then turn predatory; in response, political challengers then seek

to mobilize the citizenry. Because the Third Wave rendered authoritarian regimes

insecure, Snyder (2000) argues, it therefore produced not only democracy but also

nationalism, ethnic conﬂict, and state failure. Snyder’s argument is echoed by Chua

(2003), Zakaria (1997), and defended more rigorously by Hegre et al. (2001)andothers

(e.g. Goldstone et al. 2003). It suggests that, in keeping with my argument, as the

future becomes uncertain, the possibility of the state declines.

A second relevant literature addresses the so-called “resource curse.” Originally

coined to highlight a surprising lack of connect between natural endowments and

economic growth, the phrase has acquired political as well as economic meaning.

Through the work of Karl (1997), Ross (1999), and others, it has come to refer to trans-

formation of political incentives brought on by natural resource booms. Given access

716 the role of the state in development

to extraordinary opportunities for wealth, public servants turn from providers of

services to consumers of public revenues, these scholars contend; they use their access

to power to privatize the public domain. The state becomes a rentier state (Mahdavy

1970; Beblawi and Giacomi 1987; Chaudry 1994; Shambayati 1994), organizing the

consumption rather than the creation of wealth. And the non-resource economy

withers, not only as a result of macroeconomic distortions resulting from an ill-

managed boom but also from the ineﬃciency and corruption of the public services,

including those whose job is to secure rights in property. In its most pernicious form,

the resource curse takes the form of violence—a possibility investigated in the exten-

sive literature on “greed and grievance” (Reno 1995;Klare2002; Collier et al. 2003).

A last relevant portion of the literature on state failure focuses on the political

impact of economic decay. It focuses in particular on the impact of the late century

recession triggered by the oil price shocks of the 1970s, the Mexican default of 1982,

and the subsequent debt crisis (see, for example, Sachs 1989; Haggard et al. 1993).

One result was a sharp drop in the incomes of developing countries. A second was

a decline in public revenues. In the developing areas, economic activity moved from

the formal to the informal economy, where entrepreneurs could shed high ﬁxed costs,

employ ﬂexible modes of production, and avoid paying taxes (see MacGaﬀey 1991;

Soto 1990). While the private economy thus adjusted to the recession, it did so at the

expense of the public economy.

When starved of funds as a result of the recession, this literature shows, some

governments turned predatory. When civil servants were poorly paid, many turned to

corruption. If unpaid, soldiers mutinied or staged coups in protest against the erosion

of the salaries and conditions of service (Dianga 2002). When governments could no

longer aﬀord the transfers that bind powerful groups to the center, then those groups

rebelled. Thus Acemoglu and Robinson’s (2001)theoryofrevolutionandAzamand

Mesnard’s theory (2003) of regional succession (see also Centeno 2002). The result of

the crisis of public revenues was state failure.

These literatures—on the impact of resource booms, democratization, and global

economic shocks—thus address the changes in the very variables that circumscribe

the possibility for the state. That these literatures link changes in the values of these

variables to the failure of states provides support for my argument.

5 The Development of the State

.............................................................................

On the one hand, then, stand stateless societies, wherein security is traded oﬀ against

prosperity. On the other stand societies with states, wherein—under a speciﬁc set

of conditions—people can enjoy both. An additional question therefore arises: how

do societies move from the one set of institutions to the other and so enhance their

prospects for development? The literature oﬀers three diﬀerent approaches to this

question.

robert h. bates 717

5.1 Demand-driven Explanation

The ﬁrst answer stresses the importance of the welfare losses associated with the

lack of political order. These are depicted in Figure 39.1 by the region of desirable

outcomes that remain unattainable, given the constraint imposed by decentralized

political institutions. Historical accounts of state formation in medieval and early

modern Europe document the calls for order that underpinned the popularity of the

Angevin dynasty after the collapse of Norman rule in England (Bartlett 2002; Hyams

2003); the cries for the king’s justice that led to the propagation of instruments of

centralized rule—the courts, the bailiﬀs, and the rule of law—in medieval England

(Hyams 2003); and the demands for the extension of the king’s peace in the provinces

of France, wherein order had been disrupted by feuds between branches of the

aristocratic families (Duby 1987).

To marshal an additional example: in medieval England, back-country magnates

recruited muscular youths to their households, thereby providing protection for their

domains. These retainers formed liveried companies: bands of warriors bearing the

colors of their lords. But when attending parliament, the very magnates who had

formed these companies called for their disbanding (Hicks 1995). Aware of the vio-

lence and disorder they spread throughout the countryside, the magnates pleaded for

the king to suppress the liveried companies. Their behavior, I would argue, reﬂects the

nature of the payoﬀs that confront private citizens in stateless societies. Each magnate,

acting alone, had incentives to create a military band; but because all had the same

incentives, each devoted too many resources to protection and too few to production.

The role of the king was to coordinate the movement toward demilitarization—a

movement that was collectively desirable but privately perilous.

6 The Standard Account

.............................................................................

More common than accounts based on contract are those based on conquest. In

anthropology, the so-called “standard account” of state formation begins with fam-

ilies clustering in locations that have been richly endowed by nature: in the alluvial

soils near rivers, for example, or in rich volcanic highlands. When the productivity

of the region signiﬁcantly exceeds that in neighboring regions, then families will be

loath to exit the favored locale. And when those who possess political power seek to

increase their incomes, they therefore can extract tribute and services in exchange for

property rights and, in particular, rights in land. Stratiﬁcation based on diﬀerences

in wealth and power then replaces the rough democracy of kinship (e.g. Feinman

and Marcus 1998). In this way politics is transformed from one of decentralized,

egalitarian interaction to centralized and forceful redistribution.

⁴ See Carneiro 1970 and Feinman and Marcus 1998. For a powerful illustration of the use of this

reasoning, see Vansina 2004.

718 the role of the state in development

6.1 Competition, Security and Fitness

A third literature suggests an evolutionary account. The selection mechanism is

military competition and the level of ﬁtness is determined by the capacity to pay the

costs of warfare.

The followers of Hintze (Gilbert 1975) propose such an account. Military competi-

tion, as McNeil (1982) and others stress, inspires a search for new technologies, such

as the reﬁnement and casting of metals, the development of ships, and the creation

of instruments for navigation. As argued by van Creveld (1977), military competition

spurs economic change. Behind the “head” of every army trails a logistical “tail” that

provides clothing, shelter, food, and munitions. Without logistical support, soldiers

remained a part of the productive economy; i.e. they fed themselves. Armies therefore

disbanded at the time of planting and harvesting. A competitive advantage therefore

accrued to commanders who could feed their armies and so keep them in the ﬁeld

while their opponents disbanded. An advantage therefore accrued to those with a

strong economic base. Not only could they acquire better weapons but they could

also support a large body of unproductive labor: men who trained to ﬁght.

Warfare demands ﬁnance. Revenues have to be levied from the private economy,

thus requiring taxation. The tax base itself thus has to be nurtured, requiring the

selection of proper policies. By this account, the origins of the state lie in military

competition. And those that survive are those that are most ﬁt, i.e. those that are

developmental (see Levi 1988;Skocpol1979;Rosenthal1998).

7 Conclusion

.............................................................................

Arguing “no state, no development,” this chapter has sought both to cut deep and to

range widely. While seeking to provide a review of the relevant literature, it has also

sought to mount a distinctive argument. Just as economic historians have sought the

act of “primitive accumulation”

that fueled the growth of the industrial economy, so

too have I sought the “primitive conditions” that lead to the transformation of power

from a means of predation into a force for development.

The argument of this chapter highlights areas ripe for empirical investigation. One

is the politics that takes place on a knife edge from which some polities descend into

predation while others turn developmental. On the one side, the winning political

strategy is to extract wealth; on the other, it is to promote its creation. As in North’s

early work (North and Thomas 1973), much could be learned from historical research,

but in this instance focusing on states poised on the cusp. How did England draw

back from the chaos of Stephen and Matilda and transit to the relative order of

the Angevins—a lineage as much inclined to despoil as any other but who instead

⁵ The phrase of course comes from Marx 1906. See also Crouzet 1972.

robert h. bates 719

promoted order and prosperity? Much could be learned as well by investigating

the transformation of the Kuomintang, whose leaders behaved as warlords on the

mainland but who turned developmental in Taiwan.

I sketched out three paths that descend from the knife edge. Research into each

would yield bountiful rewards. To focus on but one, consider the evolutionary ac-

count. Much could be learned by comparing two regions, one with high levels of mil-

itary competition and another in which warfare has been suppressed. A comparison

between Europe and China would be apt.

So too would a study of economic devel-

opment in Africa, especially in the traditional states, before and after the imposition

of colonial “order.”

Such suggestions take as their premiss the argument of this chapter and respond

to the priorities that it implies. More valuable in the longer run, however, would be

a reformulation of that argument. I have in mind a program of research into what

could be termed “the industrial organization” of violence.

The production of coercion requires the inputs of labor and capital. By harnessing

a technology of violence (in the words of the old theory of the ﬁrm) or by forging a

“nexus of contracts” (in the words of contemporary theories), managers transform

these inputs into physical force. In doing so, they are subject to constraints (e.g.

mountainous terrain: Fearon and Laitin 2003); and they have to act in anticipation

of the best response of their opponent. The research program I endorse would view

conﬂict in this manner.

Adopting this perspective, consider the diﬀerence between decentralized and cen-

tralized societies. In the competition for scarce resources, one strategy might be to

disperse and to inﬁltrate (as in Sahlins 1961) while another might be to bunch up and

to invade. The ﬁrst response would lead to societies that appear stateless; the second,

to those in apparent possession of a state. To understand the manner in which such

choices are made, scholars might well turn to literature on industrial organization,

with its analyses of the strategic choice of competitive behavior, or to biology, with its

models of the conditions under which populations disperse or swarm.

Or, to return once again to history, consider the Thirty Years War.

On the one hand

stood (Albrecht Wenzel Eusebius von) Wallenstein. Recruiting, supplying, and mov-

ing large forces, he became one of the most formidable commanders in the conﬂict.

While successful economically and militarily, Count Wallenstein did not create a state.

He favored “spot contracts” for soldiers and supplies, abjured incomplete contracts,

and failed to build organizations that were longer lived than those that staﬀed them.

On the other stood Gustavus Adolphus, an equally formidable commander. While

receiving aid from France, Sweden was poor and the resources at his command paled

by comparison with those available to Wallenstein. But although facing the same

hostile terrain as Wallenstein, Gustavus Adolphus forged relationships that endured.

The political order he helped to forge outlived him and those he commanded. By

viewing the “contract” oﬀered by Gustavus Adolphus to his followers through the

⁶ Philip Hoﬀman and Jean-Laurant Rosenthal are undertaking such a comparison.

⁷ A more fruitful subject for this enquiry than others, such as the First World War, which political

scientists more frequently ponder.

720 the role of the state in development

lens of the modern theory of organizations, and by comparing its properties with

those oﬀered by Wallenstein, we could deepen our understanding of how coercion

can be organized—and thus of the properties of the state.

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