Productive specialization, peaceful cooperation and the problem of the predatory state: lessons from comparative historical political economy

Abstract

This paper reconceptualizes and unbundles the relationship between public predation, state capacity and economic development. By reframing our understanding of state capacity theory from a constitutional perspective, we argue that to the extent that a causal relationship exists between state capacity and economic development, the relationship is proximate rather than fundamental. State capacity emerges from an institutional context in which the state is constrained from preying on its citizenry in violation of predefined rules limiting its discretion. When political constraints are not established to limit political discretion, then state capacity will degenerate from a means of delivering economic development to a means of predation. In addition, we investigate two case studies of economic and political transition: the privatization of Russia following the collapse of the Soviet Union; and the political unification of Sicily with the Italian peninsula following the Napoleonic Wars. In each case, political and economic transition intended to secure well-defined and well-enforced property rights empowered the predatory capacity of the state. In each case, the attempt to redistribute property rights through political discretion only facilitated predation by the political elite.

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Notes

  1. 1.

    One potential objection that we should raise is one made by Anthony de Jasay (1985 [1998]), who argued that formal constitutions are either unnecessary because, when effective, they merely reflect the political values already accepted by a society. If constitutional constraints are ineffective, that is because the underlying values and norms of society legitimize the expansion of state power (see Pejovich 2003; Holcombe, forthcoming). However, our use of the word constitution does not necessarily imply a written document, but is broadly “conceived here as the set of institutions governing political decision-making—that is, the institutions or rules governing how policy choices are made, especially among alternative specifications of the economic system. All societies possess a constitution in this sense, whether or not they possess an explicit document called ‘the constitution’” (Weingast 1995, p. 2; emphasis added). Whether they are informal or formal, in order to understand the political decision-making process operating in a society, “the theorist has to assume that some rules already exist and are exogenous for purposes of a particular analysis” (Ostrom 1990, p. 52; emphasis added).

  2. 2.

    One must not overlook, however, as a matter of positive analysis, the role that ideology plays in legitimizing state predation and, therefore, what the subjects of the state will regard as predation or not (see Holcombe, forthcoming).

  3. 3.

    As Hayek (1960, p. 154; original emphasis) points out, the “true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, of the rule of leges in the original meaning of the Latin word for laws—leges that is, as opposed to the privi-leges.” Therefore, the meaning of “privilege” can be understood as “private law”, of the use of the law for one’s exclusive benefit, as opposed to a common means utilized for the coordination of the separate ends of individuals. It is in this sense that Buchanan refers to the law being “public capital” (see also Boettke and Candela 2014).

  4. 4.

    The political unification of Italy, and Sicily’s absorption into what became the Kingdom of Italy, underwent several phases, the first of which was Sicily’s absorption into the Kingdom of the Two Sicilies in 1816, south of the Papal States on the Italian peninsula. After 1861, the Kingdom of the Two Sicilies was absorbed into the Kingdom of Italy.

  5. 5.

    See Buchanan (1994), Buchanan and Yoon (1994, 1995, 1999, 2000) and Boettke and Candela (2017a) for a more developed discussion of generalized increasing returns.

  6. 6.

    See also the argument made by Batchelder and Sanchez (2013), which reinforces our point regarding analytic emphasis on initial conditions.

  7. 7.

    In The Power to Tax, Brennan and Buchanan (1980 [2000]) model the state as a revenue-maximizing Leviathan, but combining Buchanan and Olson, the development puzzle becomes one of finding the institutional configuration wherein the revenue-maximizing strategy for Leviathan is the wealth-maximizing one. That can occur only when the protective and productive state are empowered, and the predatory state is restrained in effective shackles.

  8. 8.

    As Varese (1994, p. 231) has written, “The monopoly over the means of production during Soviet times meant that autonomous suppliers of private protection did not emerge”.

  9. 9.

    See also Barzel (1989 [1997], pp. 128–138) for discussion of governmental (non-market) allocation of property rights.

  10. 10.

    Building on Brennan and Buchanan’s (1980 [2000]) model of a revenue-maximizing Leviathan, Gifford and Kenney (1984) contend that ownership of the means of production is the direct result of the government’s desire for larger current revenues.

  11. 11.

    Gambetta (1993, p. 28) argues similarly that the Mafia’s practice is to offer protection in return for withdrawing threats of extortion.

  12. 12.

    The same point is made by St. Augustine (1887, p. 66) in The City of God, in which he writes the following:

    Justice being taken away, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea he answered with bold pride, ‘What thou meanest by seizing the whole earth; but because I do it with a petty ship, I am called a robber, whilst thou who dost it with a great fleet art styled emperor’.

  13. 13.

    The report combines the separate accounts of Franchetti, entitled Condizioni politiche e amminstrative della Sicilia (“Political and administrative conditions of Sicily”) and Sonnino, entitled I contandini in Sicilia (“The peasants in Sicily”). All translations for this paper were provided by Rosolino Candela.

  14. 14.

    Interestingly enough, in The Politics of Bureaucracy Gordon Tullock (1965, p. 68) uses the Kingdom of the Two Sicilies as an example of ineffective bureaucratic administration: “Governments can follow inefficient policies for very long periods of time without being eliminated. The Kingdom of the Two Sicilies, for example, seems to have been governed atrociously for practically the entire period of its existence”.

  15. 15.

    For more detail on Italy, see Sabetti (1982).

  16. 16.

    King Ferdinand I previously had been Ferdinand IV of Naples and Ferdinand III of Sicily (Mack Smith 1968, p. 352).

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We wish to thank William Shughart and Mehrdad Vahabi for their valuable feedback and suggestions. We also thank the two anonymous referees for their comments, which helped improve and clarify the argument outlined in the paper. Any remaining errors are entirely our own.

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Boettke, P.J., Candela, R.A. Productive specialization, peaceful cooperation and the problem of the predatory state: lessons from comparative historical political economy. Public Choice 182, 331–352 (2020). https://doi.org/10.1007/s11127-019-00657-9

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Keywords

  • Constitutional political economy
  • Predation
  • State capacity
  • Economic development

JEL Classification

  • B53
  • H11
  • P26