The Principled Agent

Thoughts on development economics and impact measurement

The Danger of Top-Down State Development

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The political-economic challenges of foreign aid in conflict and stabile areas differ, but they share a common threat. In both cases, foreign aid policy focused on national ownership of development may catalyze civil violence and state instability by changing the terms of civil competition: decreasing the value of cooperating with local leaders and increasing the value of unproductive political competition.

State-building efforts are often predicated on the assumption that state legitimacy is the product of state power, rather than constraints on state power. The history of foreign aid and political development suggests the contrary, state legitimacy begins with limited acquiescence of resources by local autonomous elite leaders in order to engage a defined set of common problems, rather than the benevolent state provision of social services. While central government prerogative may grow over time, legitimacy is not dependent on the breadth or depth of the central government’s services, but on the provision of financial and political support by constituent elites in return for services rendered. Foreign aid channeled through the central government endangers this organic state-building process.

In theory, a state’s ruling coalition depends on its constituent parts for its financing, which acts as an accountability mechanism. Reality departs from theory when the central government develops a power base independent of its constituents. Central control of violence, justice, and finance are three of the most effective mechanisms for reducing central government dependency on its constituents. A central government with its own pocketbook does need to listen.

At the same time, foreigners may believe that central government support is necessary in order to fill local power vacuums that are open for exploitation by enemy forces. It is accepted that it would be imperialistic for a foreign government to fill this power vacuum itself. Yet a central government that is not dependent on the locality for its existence is no less foreign and imperialistic because it travels a shorter distance. To the extent the central government exists as an exogenous force it will not be legitimate in the eyes of the locals. While small increases in state power may not manifest instantly in illegitimate behavior, phase transitions may introduce large-scale, unpredictable changes in the behavior of the central government and the reaction of localities. In such a case, the relationship between civil actors is not stabile, and depending on the balance of power, society will tend toward the equilibrium of state predation or civil conflict.

By supporting central government capacity, a benevolent foreign power may not only destroy the central government’s incentive to cooperate locally, but also create a single, unrivaled treasure that induces increasingly fierce competition amidst local elites. A national government that might otherwise exist as a common platform for discussion and cooperation across localities may be transformed into a contest to monopolize access to foreign aid and legitimacy. Coalition-building to monopolize this prized access crowds out the process of local leaders pooling resources to address common problems.

Political and economic development aid can be designed to minimize its negative political-economic implications. In place of trickle-down central government support, budget support could be localized, with upwards flow dependent on the acquiescence of local leaders and communities. Community-based development is not a novel concept, but the typical size and scope of these efforts are too small relative to central government aid. Community-based aid may be pooled with another village to build a bridge, but its too limited relative to central government budget support to make the central government mindful of local concerns. A large shift in funding would make villages purchasers of government services, rather than passive recipients, dependent on the whims of a distant benefactor (though this may sound false, given the foreign funder’s greater physical distance). Building local capacity and augmenting communication between local leaders that share common problems in order to share or foster new solutions not only improves tactical capacity at the local level but provides the foundation necessary for stable political coalitions and meaningful state-building at the strategic level.

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Written by Chris Prottas

April 15, 2010 at 8:44 pm

Posted in Uncategorized

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