ECONOMY

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 illmanaged
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 extensive
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
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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.