1. Markets and capitalism are very powerful, give them their due.Where are markets powerful? Only where there are coordination problems in the exchange of scarce goods such that preference and endowment diversity meets a Goldilocks condition and there are external economies of a certain type. However, wherever there is a coordination game, it is regret minimizing to hedge on a discoordination game. So the more 'powerful' markets are the more a countervailing power is likely to exist or else the market equilibrium becomes anything goes because of hedging and income effects. In other words, the thing is powerful if it is dangerous and innocuous otherwise.
If by Capitalism is meant the regime of residuary control rights over a factor of production, then the thing is only as powerful as the class that wields those rights. Suppose this class is, or becomes equivalent to, an ethnic monopoly. It may have no real power of its own or else that power may be repugnant.
2. Earlier in history, a strong state was necessary to back the formation of capitalism and also to protect individual rights (do read Koyama and Johnson on state capacity).Don't. It consists of shite like this-
State capacity describes the ability of a state to collect taxes, enforce law and order, and provide public goods.
The State of Manchukuo is generally described as a 'puppet state'. In the last century, there were many such. On paper, they collected taxes, enforced laws and provided public goods. But they had no capacity whatsoever. When the strings were cut, they collapsed.
People my age grew up thinking Ceaucescu's Romania had plenty of 'state capacity' of a certain type. But that wasn't the case. Indeed, Saddam Hussein's 'State Capacity' over large swathes of Iraq turned out to be illusory.
France, in 1939, looked like it had kick-ass State Capacity. A year later- not so much. Hitler or Mussolini went from exemplifying State Capacity, to dying like dogs.
It is pointless to gas on about State capacity. All one can say is 'that State looks kick-ass while that other State looks like it isn't capable of punching its way out of a paper bag. I mean, look at America at the end of 1941. It was a complete mess. Jews and Blacks were roaming free. The Japs had just bombed Pearl Harbor. America clearly had very little State capacity. Hitler was right to declare war on it. At the beginning of the War, the US military was smaller than that of Portugal- though it was slightly bigger than Bulgaria. Obviously, even if America introduced conscription, it would take decades before it got up to speed and had enough 'state capacity' to protect itself. But, to do that, it would have to eliminate Jews and Blacks and Gays and mouthy women and that theory of Relativity bullshit and animalistic Jazz and so forth.'
This notion of State capacity is Germanic and arises out of the 'liberalism of the officials'- beametenliberalismus- which initially embraced Adam Smith in the belief that the cool thing about the market's invisible hand was that it would tug at the State's dick till it turned ginormous. What was the ultimate result? The German State lost the capacity to prevent lots of people getting raped and killed. It lost a lot of territory and had to reconstitute itself, under alien occupation, as a country wholly without military capacity. Currently, the German army does rifle drill with broomsticks.
As a concept, it has its origins in the work of political scientists and fiscal sociologists (Tilly, 1975, 1990; Skocpol, 1985; Mann, 1986; Ertman, 1997) who in turn built on a tradition in German scholarship associated with Otto Hintze and Joseph Schumpeter.1 More recently, it has also entered the lexicon of development economists, international agencies, and mainstream economics (for a recent survey, see Bardhan, 2015)So we know the thing is stooopid.
2 This essay seeks provides a historical analysis of the rise of high-capacity states in Europe and the rest of the world. It further aims to better understand the relationship between state capacity and the emergence of modern economic growth.This is silly. Europe was a place where 'low capacity' states were gobbled up if the 'Balance of Power' permitted. Furthermore, there were strong mimetic effects. Thus 'high capacity' was not a endogenous, it was a mimetic or strategic, phenomenon. It is pointless looking at what was happening inside a country when whatever capacity it ended up with was based on something either imposed or imitated.
3 Understanding economic history is critical for comprehending the importance of state capacity.Sadly, to understand economic history, you have to understand economics. But, if you understand econ, then you can make a lot of money right now and help poor countries double their income every decade. So just do that already and then we'll listen to you if you want to gas on about the importance of economic history, or state capacity, or metachlorians, or drinking your own urine, or anything else you like.
In historical terms, the emergence of well functioning states is a relatively recent phenomenon.Nonsense! States precede History and Literature and the collective memory of Mankind.
For many premodern polities, even the term state is an anachronism: there was no state in much of Europe prior to the late middle ages.Rubbish! In no large contiguous part of Europe was this the case. Wherever you went, there was a Chief who himself had a Chief. Even if these guys were illiterate or pagan- as in Lithuania- there was a State. It may have been called a 'Nation' in Latin, but it was a State nevertheless. Shakespeare has Hamlet's Danes contend over what is 'terra nullis'-a little patch of ground/That hath no profit in it but the name - precisely because the thing could not exist in Europe. Whatever land existed must belong to a State because States were contiguous and in constant competition.
Otto Heinze observed that feudal rulers ‘lacked the attributes of sovereignty—that is, independence beyond its borders and exclusive rights within them’ (Hintze, 1906, 1975, p. 192).Hintze lived in a country with a lot of Kings who lacked the attributes of sovereignty. After the Kaiser fell, they were not able to reassert their authority. There used to be a lot more enclaves and 'sovereign orders' and various types of 'Liberties' and immunities within the borders of States. However, some continue to exist. There are Spanish enclaves in France. The Vatican is a mini-state. The Knights of Malta are a sovereign order. However, a more significant type of limitation of sovereignty is represented by the presence of foreign military basis which may, effectively, have extraterritoriality depending on the status of forces agreement with the host country.
In medieval Europe, characterized by fragmented political authority, overlapping and competing legal jurisdictions, and private armies—the modern concept of a state—has little empirical purchase (Strayer, 1970).One could say this with greater truth of the two German Republics after the war, or of the Warsaw countries. The fact of the matter is that few modern states don't have areas where 'private armies'- gangs- not the police, are in charge. At the margin, the authority of the state, like that of any other entity, is contested.
Concepts don't have much 'empirical purchase'. Economics is idiographic not nomothetic.
The word ‘state’ only came to acquire its modern meaning in English at the end of the sixteenth century (Skinner, 2009).From the fourteenth century onward, European countries were using a word of this provenance for a concept which already existed. In English law, it was the Norman Conquest which marks the notion that all land ultimately belongs to the Kings. No other estate is wholly allodial. No doubt, it was convenient to have a notion of limited monarchy. But the power of that monarch, if exercised with a scrupulous observance of limiting protocols, is absolute.
This was not merely a semantic change; when ‘the word ‘state’, l'etat, stato’ or Der Staat came into usage in the early modern period it was ‘a word for a new political experience’ (Oakeshott, 2006, p. 361).All experience of significant political change is a new experience for a given cohort. Indeed, my experience of middle age still feels like something new for me. But, though the experience is new, the concept is old.
State capacity can be thought of as comprising two components. First, a high capacity state must be able to enforce its rules across the entirety of the territory it claims to rule (legal capacity).So, the US does not qualify coz it can't enforce its rules re. drugs and homicide and so forth.
Second, it has to be able to garner enough tax revenues from the economy to implement its policies (fiscal capacity).Nonsense! It could be predatory, parasitical, or use royalties from mineral or other wealth. The Turks and the Mongols and so forth did not establish great Empires with a lot of 'State capacity' because their nucleus had fiscal capacity. On the contrary, their expansion was driven by the fact that they were as poor as shit. A stationary bandit would starve. By contrast, States which did have fiscal capacity- like a lot of Indian Kingdoms- stopped being independent States
Lack of 'fiscal capacity' is an explanation for how many modern states were created. The Franks had shit fiscal capacity, so they conquered France and gave it their name. Same with the Angles who created England and the Normans who created Normandy and the Lombards who created Lombardy and the Gujjars who created Gujerat and so forth.
State capacity then should be distinguished from either the size or the scope of the state. A state with a bloated and inefficient public sector may be comparatively ineffective at implementing policies and raising tax revenues.So a state with high fiscal capacity may have little executive or defensive capacity. Why not simply admit that capacity doesn't matter. What matters is whether a people are doing smart things or stupid shite.
Furthermore, historians agree that the eighteenth century British state had high state capacity even though it played a very limited role in the economy.Coz the Brits were doing smart, not stupid things- save in the case of how Mad King George handled some of the American colonies.
Similarly, state capacity requires a degree of political and legal centralization, but it should not be identified with political centralization per se.State capacity depends on its people's capacity to choose to do smart, not stupid, things.
The rulers of feudal society in which many legal and fiscal choices were devolved to local lords indeed had low state capacity. But the concentration of political authority in the center may cause inefficiencies and thereby undermine state capacity (Oates, 1999). As Weingast (1995), argues, federalized states have provided conducive environments for both effective governance and economic development.The US appeared to have little state capacity. But, because its people were smart, they could come together when attacked to very quickly become the mightiest nation on earth with vastly greatly state capacity than that of any combination of hostile powers.
We begin by surveying the history of state development first in early modern Europe and then in other parts of the world (Section 2). The path to high state capacity was different in different parts of Europe and we argue that these differences had important implications for subsequent economic and political developments.This is nonsense. Different parts of Europe did different types of stupid shite for idiographic reasons but, often enough, this did not really matter. There were mimetic and strategic reasons for convergence to models with sufficiently robust capacity to endure.
In East Asia, the failure of imperial China to invest in state capacity led in part to the economic and political disasters China experienced between 1850–1950, while the comparatively higher level of state capacity in Tokugawa Japan set the stage for that country's successful program of modernization and economic growth.Nonsense! The Chinese were slower to stop doing stupid shite. The Japanese were quicker off the mark in embracing mimetic effects. That's it. That's the whole story.
Notice China began to rise economically when it imitated South Korea and so forth. Thirty years on people would gas on about how the Chinese Communist Party did not have the capacity to control the economy and so China was bound to transition to Yeltsin type Demo-kakocracy
Meanwhile many of the problems that beset sub-Saharan Africa can be traced to weak and fragmented states.But those weak and fragmented states reflect the weak and fragmented condition of their people. The problems which beset Eritrea- whose people strike us as very smart- are similar to the problems which beset North Koreans- who, I assume, are as smart as South Koreans. Nobody would say Eritrea's or North Korea's problem is that the Government is not strong enough or lacks the capacity to fuck over anyone who does not get with the program.
Having established a correlation between the rise of state capacity and modern growth in Section 2, in Section 3, we evaluate possible causal mechanisms linking state capacity with modern economic growth.So, by doing some Junk Social Science and deriving some spurious correlations you get to talk worthless shite.
We provide several historical case studies in which the rise of more effective states in early modern Europe lead to greater market integration, better enforcement of the rule of law, and to the establishment of a common national identity.This is just a case of junk social science. Frequently, an American researcher publishes a silly paper. Then the actual historians, with expert knowledge, wades in and explains all the many different ways the ignorant American fucked up.
In Section 4, we explore what factors have enabled some societies to successfully build effective states.All that matters is that the corpses of predecessor states are hygienically disposed off. It's a dirty job. But someone has to do it or there will be tears before bedtime.
We connect the economic history literature on state capacity with the literature on the deep determinants of development. One insight from recent research on the deep determinants of sustained economic growth is that both geography and population level characteristics, such as the level of human capital or the degree of ethnolinguistic fractionalization, are important predictors of development and the effectiveness of political institutions.In other words, evidence of lack of capacity is a predictor of lack of capacity.
Finally, in Section 5, we conclude by pointing out areas for future research.One area for future research suggests itself immediately- viz. showing how evidence of evidence is a predictor that predictions will be made.
Returning to Cowen's crap post- we find the following equally valuable gem of wisdom-
Strong states remain necessary to maintain and extend capitalism and markets.The Singaporean State is so mighty that the Chinese Communist party decided to imitate the manner in which they had extended capitalism and markets. We must compliment the Singaporean State for not trying to conquer China- whose State was so weak.
Strong states may grab territory and resources. But they won't use free markets or globalized capitalism to control that territory or extract those resources. A weak State may do so. Indeed, that's a reason its citizens may want it to stay weak.
This includes keeping China at bay abroad and keeping elections free from foreign interference, as well as developing effective laws and regulations for intangible capital, intellectual property, and the new world of the internet. (If you’ve read my other works, you will know this is not a call for massive regulation of Big Tech.)All of this means an increase in interference by Government bureaucrats in the private sector. Increasing State Capacity means hiring more civil servants and increasing compliance costs for businesses. Keeping China at bay may mean more aircraft carriers and naval basis along key trade routes. At some point, a new nuclear doctrine will also be needed.
3. A strong state is distinct from a very large or tyrannical state. A good strong state should see the maintenance and extension of capitalism as one of its primary duties, in many cases its #1 duty.A state is strong or weak depending on its ability to maintain its territorial integrity and preserve a monopoly of legitimate coercive power within its boundaries. Extending capitalism may weaken a state and lead to its dissolution. It is a different matter that we may want to live in a state which can use its strength to do more of things we like. However, it is not the case that a state where more of that stuff is to be found is necessarily stronger.
4. Rapid increases in state capacity can be very dangerous (earlier Japan, Germany), but high levels of state capacity are not inherently tyrannical.Doing stupid shit is dangerous. Capacity is irrelevant. Of course, if you are weak, there's a lot more things which count as stupid shit.
Denmark should in fact have a smaller government, but it is still one of the freer and more secure places in the world, at least for Danish citizens albeit not for everybody.Denmark has a young, Left wing, Prime Minister. Even if one likes small government, it is good for a State to be able to ramp up or down its administrative capacity. It is regret minimizing not to be doctrinaire in this- or indeed any other- point of Political Economy.
5. Many of the failures of today’s America are failures of excess regulation, but many others are failures of state capacity. Our governments cannot address climate change, much improve K-12 education, fix traffic congestion, or improve the quality of their discretionary spending. Much of our physical infrastructure is stagnant or declining in quality. I favor much more immigration, nonetheless I think our government needs clear standards for who cannot get in, who will be forced to leave, and a workable court system to back all that up and today we do not have that either.The failures here arise largely because of preference falsification- people pretending to want stuff they don't really want- and good old fashioned stupidity. Econ contributes to this with its worthless academic cascades.
Those problems require state capacity — albeit to boost markets — in a way that classical libertarianism is poorly suited to deal with.No. These problems can only be tackled if you do away with virtue signalling and have better mechanism design. Often, this will mean eliminating perverse market based incentives and trusting professionals to do their jobs.
Furthermore, libertarianism is parasitic upon State Capacity Libertarianism to some degree. For instance, even if you favor education privatization, in the shorter run we still need to make the current system much better. That would even make privatization easier, if that is your goal.This is the trouble with Cowen's approach. He assumes that essentially ideological interests have an economic substructure. If this were really true, Marxism would have succeeded. The truth is people will allow institutions they depend on to turn to shit rather than compromise their 'principles'. Thus, what sensible people should be saying is 'ignore economists. They have ideologies. Their brains are full of shit. For forms of Government, let fools contest. Whatever is best administered is best.'
6. I will cite again the philosophical framework of my book Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.Cowen's book is silly. We don't know what sustainable growth is because we don't know the future. It is pointless to say we should mazimize this.
7. The fundamental growth experience of recent decades has been the rise of capitalism, markets, and high living standards in East Asia, and State Capacity Libertarianism has no problem or embarrassment in endorsing those developments. It remains the case that such progress (or better) could have been made with more markets and less government. Still, state capacity had to grow in those countries and indeed it did. Public health improvements are another major success story of our time, and those have relied heavily on state capacity — let’s just admit it.Only mimetics matters. China started imitating countries like South Korea and Taiwan. India started mimicking China- but had to give up. That's it. That's the whole story. Capacity did not matter. Either it came into existence because of a mimetic drive or it was useless.
8. The major problem areas of our time have been Africa and South Asia. They are both lacking in markets and also in state capacity.But, as Edward Lim of the World Bank noted, they are not lacking in 'activists' backed by International NGOs. Frustrating growth pays better than permitting it.
9. State Capacity Libertarians are more likely to have positive views of infrastructure, science subsidies, nuclear power (requires state support!), and space programs than are mainstream libertarians or modern Democrats.Cowen says this as if 'State Capacity Libertarians' are a large and easily distinguishable sub-species. I may say 'Nicaraguan horcrux Socioproctologists are more likely to have positive views about being nice.' But, no such beasts exist in nature. I'm just talking up my nonsensical creed is all.
Modern Democrats often claim to favor those items, and sincerely in my view, but de facto they are very willing to sacrifice them for redistribution, egalitarian and fairness concerns, mood affiliation, and serving traditional Democratic interest groups. For instance, modern Democrats have run New York for some time now, and they’ve done a terrible job building and fixing things. Nor are Democrats doing much to boost nuclear power as a partial solution to climate change, if anything the contrary.Modern Democrats, like Modern Republicans, are a bunch of fools or knaves or fools and knaves. So what? They can be fooled or entrapped into permitting sensible programs being implemented. Thus has it always been.
10. State Capacity Libertarianism has no problem endorsing higher quality government and governance, whereas traditional libertarianism is more likely to embrace or at least be wishy-washy toward small, corrupt regimes, due to some of the residual liberties they leave behind.Only fools endorse meaningless shite. Also, don't do regime change. The thing will turn around and bite you in the ass. Play with yourself if you want to feel you are a big man. Don't dick with small regimes because you think they could be less corrupt or misogynistic or should have a better looking leader with a Doctorate from Chicago.
11. State Capacity Libertarianism is not non-interventionist in foreign policy, as it believes in strong alliances with other relatively free nations, when feasible.Sheer stupidity. A relatively free country may want to enslave yours. A completely unfree country may want to fuck up that relatively free country. It may be expedient to ally with it.
The US was relatively freer than the USSR. India allied with the latter because the US was sponsoring a genocidal military regime in Pakistan.
That said, the usual libertarian “problems of intervention because government makes a lot of mistakes” bar still should be applied to specific military actions. But the alliances can be hugely beneficial, as illustrated by much of 20th century foreign policy and today much of Asia — which still relies on Pax Americana.Some parts of Asia and North Africa have been fucked over by Pax Americana. The US should concentrate on winning wars, not ensuring peace. Its Army can't and won't do 'Nation building'.
It is interesting to contrast State Capacity Libertarianism to liberaltarianism, another offshoot of libertarianism. On most substantive issues, the liberaltarians might be very close to State Capacity Libertarians. But emphasis and focus really matter, and I would offer this (partial) list of differences:This sounds reasonable. But the devil is in the detail. The fact is 'State Capacity Libertarians' are as stupid as shit. Their 'cold-hearted' comparisons evidence a head heated by foolish nostrums. Disintermediate the cunts.
a. The liberaltarian starts by assuring “the left” that they favor lots of government transfer programs. The State Capacity Libertarian recognizes that demands of mercy are never ending, that economic growth can benefit people more than transfers, and, within the governmental sphere, it is willing to emphasize an analytical, “cold-hearted” comparison between government discretionary spending and transfer spending. Discretionary spending might well win out at many margins.
b. The “polarizing Left” is explicitly opposed to a lot of capitalism, and de facto standing in opposition to state capacity, due to the polarization, which tends to thwart problem-solving. The polarizing Left is thus a bigger villain for State Capacity Libertarianism than it is for liberaltarianism. For the liberaltarians, temporary alliances with the polarizing Left are possible because both oppose Trump and other bad elements of the right wing. It is easy — maybe too easy — to market liberaltarianism to the Left as a critique and revision of libertarians and conservatives.But there is nothing here which isn't utterly facile. If a guy really is smarter than average let him make money and use that money in some socially beneficial way. Then we'll listen to him even if he calls himself a State Incapacity Fruitarian.
c. Liberaltarian Will Wilkinson made the mistake of expressing enthusiasm for Elizabeth Warren. It is hard to imagine a State Capacity Libertarian making this same mistake, since so much of Warren’s energy is directed toward tearing down American business. Ban fracking? Really? Send money to Russia, Saudi Arabia, lose American jobs, and make climate change worse, all at the same time? Nope.Warren is running for President. She is bound to say all sorts of things which are best ignored. What matters is jumping on the right bandwagon. Actual policy will be decided after the election. Manifestos mean shit.
d. State Capacity Libertarianism is more likely to make a mistake of say endorsing high-speed rail from LA to Sf (if indeed that is a mistake), and decrying the ability of U.S. governments to get such a thing done. “Which mistakes they are most likely to commit” is an underrated way of assessing political philosophies.The most common mistake a guy who calls himself a 'State Capacity' whatever, is likely to make is to be completely wrong about what is or isn't State Capacity and how it can or can't change things. By contrast, if everybody is saying 'That dude, X, sure transformed the Dept. of Motor Vehicles. It is a pleasure to renew one's license. Somebody should put X in charge of a bigger, more 'mission critical' Department.'
You will note the influence of Peter Thiel on State Capacity Libertarianism, though I have never heard him frame the issues in this way.Thiel made his own money. That is why people listen to him.
Furthermore, “which ideas survive well in internet debate” has been an important filter on the evolution of the doctrine. That point is under-discussed, for all sorts of issues, and it may get a blog post of its own.However, a superior alternative would be to judge people by their track-record in doing smart stuff rather than looking at the label they attach to themselves. I say this as a White Supremacist Lesbian seeking a soul mate. Strangely, such Frauleins as Skype me refuse to send me air-fare to get to them. Why? They feel a fat black bearded man isn't really the grand-daughter of Eva Braun. They express incredulity at my self-reported track-record of Sapphic encounters with Hollywood celebrities. Cowen may feel this dismal outcome is the consequence of the wrong sort of Libertarianism having gained currency. But there may be a simpler explanation. You can't fool all the people all the time. Just concentrate on shitheads who studied Econ, rather than something worthwhile, at Uni. Better still, concentrate on those who teach it there. To be an Economist means never having to say you are sorry, you have nothing sensible to say. The thing would be otiose.
Here is my earlier essay on the paradox of libertarianism, relevant for background.
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