Wealth-destroying states

Abstract

According to the contract theory of the state, individuals give up their freedom to a specialist in violence who then provides public goods, such as private property rights and collective defense. The predatory perspective views the state as expropriating what it can unless individuals develop institutions of collective action to limit the scope of the state. We extend these economic theories of the state by showing how the behavior of rulers depends on political stability, political constraints, self-governance, and foreign intervention. We use evidence from Afghanistan to illustrate how political instability and the absence of meaningful political constraints enables the predatory state. Foreign aid and foreign military intervention amplify the wealth-destroying features of political institutions. Customary self-governance provides public goods locally but is only a partial defense against predatory rulers and can be overwhelmed by predatory self-governing organizations, especially warlords and the Taliban.

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Notes

  1. 1.

    Ostrom (1990, 1994) showed that Buchanan and other like-minded thinkers dramatically underestimated the possibility of self-governance.

  2. 2.

    Boettke and Candela (2019) in this special issue articulate the significance of Buchanan’s constitutional political economy to understand the scope of the predatory state.

  3. 3.

    Knight (1946) was more optimistic ethics as a constraint on individual behavior. Indeed, Knight believed that democracy required ethics in order to functional effectively (Emmett 2009).

  4. 4.

    The Black Death undermined private property rights because enforcement became more costly with lower population densities, but also accelerated the decline of feudal institutions (Haddock and Kiesling 2002).

  5. 5.

    Hodgson (2017) points out that they place too much emphasis on this single change, especially because property rights existed for centuries before the Glorious Revolution.

  6. 6.

    Durrani literally means “pearl of pearls.” The Durrani is one of two major sub-tribes of the Pashtun tribal confederation. The other is Ghilzai. The vast majority of Afghan rulers have been Durrani Pashtuns.

  7. 7.

    In Afghan social relations, a khan is a local power broker but also a local self-financed public servant (Anderson 1978).

  8. 8.

    Qawm refers to one’s place in society and is a fundamental aspect of Afghan social identity (Roy 1990). The concept of qawm transcends ethnicity and is based in a shared history or experiences.

  9. 9.

    Even though the US was a predatory development state, legal reforms generally improved access to property ownership, and eventually the property regime has features of a public good (Cai et al. 2019). In contrast, many other contexts have property protection provided selectively, including Afghanistan where the state is able to assert its writ.

  10. 10.

    The fieldwork, which was mainly completed from 2006 to 2008, consists of 10–12 interviews conducted with local leaders and villagers in each of 32 villages in 17 districts across 6 provinces (for a total of over 350 semi-structured interviews completed). The interviews, which were done in local languages, included an equal number of men and women, with sites selected to ensure representation of Afghanistan’s ethnic and religious groups. The survey, completed in 2012, consists of a nationally representatives sample of 8620 Afghan households.

  11. 11.

    Focus group, Balkh Province, Dawlatabad Province, June 2007.

  12. 12.

    Coyne (2008b) explains the bureaucratic reasons for the failure of the state-building imagination.

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Acknowledgements

We benefitted immensely from conversations with Rosolino Candela, Meina Cai, Bryan Cutsinger, Samuel DeCanio, Colin Harris, Greg Caskey, Wanlin Lin, John Meadowcroft, Liya Palagashvili, Mark Pennington, Ennio Piano, Ben Powell, Louis Rouanet, Paul Sagar, Irena Schneider, David Skarbek, Henry Thompson, Werner Troesken, Andrew Young, and seminar participants at the Centre for the Study of Governance and Society at King’s College London. We thank two anonymous referees, Mehrdad Vahabi, and William Shughart for exceptionally valuable guidance on how to improve our argument and presentation of evidence.

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Murtazashvili, J., Murtazashvili, I. Wealth-destroying states. Public Choice 182, 353–371 (2020). https://doi.org/10.1007/s11127-019-00675-7

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Keywords

  • Contract theory of the state
  • Predatory theory of the state
  • Political institutions
  • Polycentricity
  • Spontaneous order
  • Self-governance
  • Foreign aid
  • Afghanistan

JEL Classification

  • B52
  • B53
  • H11
  • Q15