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Urgent Need of Public Funding Study Incorporating State Capacity

5/29/2021

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  Public services did not always look like the privileges we enjoy today. To analyze the process of development in public services, in their critical analysis Inward Conquest, Ansell and Lindvall address two main goals: a) accounting for the sheer expansion of public services and b) analyzing political conflicts over emerging public services (Ansell and Lindvall 12). Ultimately, Ansell and Lindvall attempt to answer the question of “how public service is provided and by who” (Ansell and Lindvall 12). The authors observe data on legislation, government employment, proportion of the population that was incarcerated, attended school or were committed to mental institutions in 19 Western countries in the nineteenth and early twentieth centuries, with specific emphasis on police force, prison, public school, public library, mental institution, vaccination, and midwifery. In order to address the two paths to centralization and two dimensions of service delivery, the authors highlight the vertical dimension of power distribution among local, regional and central authorities and the horizontal dimension of public monopoly vs mixed provision (Ansell and Lindvall 12). 

  Ansell and Lindvall also acknowledge the importance of state capacity, especially the government’s role as providers, in developing public services. Ansell and Lindvall specifically state, “the relationship between the Government and the Providers – the public, religious, or private organizations that actually carried out and delivered public services – also mattered greatly for the political choices governments made” (Ansell and Lindvall 35). However, although multiple authors, such as Bates and Lieberman, emphasize the impact of public revenue on public services, Ansell and Lindvall voluntarily chose to omit the important policies and public services such as resource-extracting policies including taxation and resource-gathering policies such as poor relief, unemployment insurance, family benefits and pensions. (Ansell and Lindvall 17). The choice to omit the importance of resource-extracting policies directly concerns the extractive capacity of the state and generates a flaw in the authors’ argument of development. Therefore, although Ansell and Lindvall provide a strong analysis on the development of public services, the argument fails in the horizontal dimension of public service delivery and state capacity. 

  
Ansell and Lindvall place special emphasis on the state’s capacity to provide public services. According to Berwick, state capacity can largely be divided into three dimensions: extractive, coordination and compliance. The coordination capacity refers to the capacity of the “capable and efficient administration that can effectively coordinate collective action both among other state agents and ultimately among citizens” (Berwick). An example of coordination capacity would be a unified market with secure property rights (Toral slides) and bureaucratic institutions. The compliance capacity refers to the interactions between the “higher levels of the state and the lower-level agents.” In cooperation, the agents must “implement their agenda,” in particular, “the capacity to overcome dilemmas in the principal–agent relationship between state leaders and their public sector agents” (Berwick). An example of compliance capacity would be a successful vaccination campaign (Toral slides) or public school curriculum development. Last but certainly not least, the extractive capacity is the system between the state and producers that allow for the production of goods and services. An important and most common example of extractive capacity is the income tax (Toral, slides). 

  
Previous literature place emphasis on the importance of state capacity for state development. For example, Bates illustrates the three dimensions of state capacity in his book When things fall apart. Although he does not address public services directly, Bates studies political order in relation to the level of public revenues, the rewards from predation and the specialist’s rate of discount. Historically, political order generates political stability and increase in stability opens up the government’s availability to provide public services. Not only does the government have more resources to spend on public services, they are more willing to reward the citizens for increased revenue. Therefore, it is logical to make a connection between Bates’ study on public order in African states and state capacity, specifically the extractive capacity, in relation to the study portrayed in Inward Conquest. 

  The extractive capacity of the state focuses on the relationship between the “state seeking to acquire resources and the citizens who possess them” (Berwick). Extractive capacity such as the national income tax is directly correlated to economic development -- which leads to the development of services and infrastructures -- because it requires the government to gather correct information on citizen’s productivity and public revenue. Public revenue refers to the income of the government and in many countries taxation consists a large part of public revenue. Especially in Africa and other developing countries, “taxes constitute one of the most important sources of public revenue” (Bates 23). 

  When Bates observed late century African politics from 1970 to 1995, he noticed that a decline in public revenue was a significant reason for the decline of public order. The reduction caused the government in power to turn to means of violence and deviate attention from the protection of civilians (Bates 23). Especially during the time period referred to as the “oil curse,” a “sharp increase in the price of oil triggered a global recession” (23) and created a decline in overall public revenue for many African countries that relied on oil production as their main source of economic income. This decline in public revenue also “represented a decline in the rewards from public service” (Bates 23). As a consequence, the government no longer had the desire or resources to provide better public services for the citizens. As Bates observes African politics throughout the twentieth century, he repeatedly emphasizes the importance of public revenue in relation to public order and ultimately the quality of public services in the twentieth century. 

  In addition, predation, another area of Bates’ focus, is one of many forms of extractive capacity (Berwick).  Bates emphasizes the importance of state capacity and control because the “state presides over police, public prosecutors, and a prison system” and therefore can “transform the state into an instrument for predation” (27). When predation turns into violence and authoritarian control, political stability decreases and the state no longer has the availability to provide rewarding public services. In addition, the authoritarian ruler does not have the desire to please the citizens by providing public service. Therefore, state capacity, especially the extractive dimension of state capacity, is significant because the government can choose to violently extract resources for personal benefit or reward citizens in the form of development of public services. 

  In addition to Bates, Lieberman also argues the importance of the extractive capacity on public services. According to Lieberman, a study of taxation “provides insights into the development of modern state capacities to wield their authority over individuals and groups within society” (Lieberman 6). Taxation attests to the power of the government because it requires the government to gather data on citizens’ income and express power to yield their income. To further support Bates’ argument, Lieberman states that “states that regularly collect from a wide range of societal actors are generally also able to govern effectively in a range of other areas” (Lieberman 6). On the other hand, “the inability of a state to generate significant revenue through taxation is often a precursor to state failure or even collapse” (Lieberman, 6). If citizens are more likely to cooperate with the government’s power to yield taxes, they are also more likely to obey the government in other areas. However, conflict and disobedience between the government and citizens creates a system of violence that leads to the decline in reward in the form of public services.

  
In his article Race and Regionalism in the Politics of Taxation in Brazil and South Africa, Lieberman studies the differences in development, especially the politics of taxation, between Brazil and South Africa. Lieberman chose Brazil and South Africa for comparison because they share many similarities such as similar development strategies in the 20th century including industrialization and rapid economic growth, history of long authoritarian pasts, large state and similar government expenditures (Lieberman 3). However, South African states became one of the most effective collectors of income tax in the world meanwhile the “Brazilian state could barely collect 5 percent of GDP revenues” (Lieberman 4). In addition, it cost the Brazilian government approximately three times as much as it did South Africa to collect revenues (Lieberman 4). The difference in the effectiveness of taxation can be explained by observing the relationship between the government’s extractive policies and the citizens’ compliance. More specifically, Lieberman states that “the difference in taxation” is explained by “the politics of taxation in south africa has been characterized more by cooperation and in brazil, more by conflict” (Lieberman 6).

  
Lieberman also makes an important point that taxation affects development in an independent manner than all other factors. Not only does taxation affect economic development and political stability as an instrumental variable, taxation itself can generate development. Therefore, it is especially important to not disregard the importance of taxation in the development of public services. To provide evidence, Lieberman writes “patterns of taxation tend to reproduce themselves independent of other exogenous factors identified in the political community model” (Lieberman 20). Once certain taxation patterns of collection are regularized, the cost of change increases and therefore the level of obedience between the government and the citizens are stagnant and less likely to change. At this moment, the governments that benefited from obedient citizen compliance gain the skills to enforce compliance in later periods, however the governments that developed a system of violence and disobedience with the citizens suffer from inefficient extraction of taxes.
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  In harmony with Bates, Lieberman emphasizes the importance of taxation in development, including the development of public services. Lieberman emphasizes the importance of the relationship between the provider (citizens) and the extractor (government) in generating resources and revenues. This relationship has a direct impact on development as cooperative relationships create effective taxation policies and violent relationships hinder development. In agreement, Bates emphasizes the importance of extractive state capacity, such as taxation, in the process of development of public services. Although Bates puts less emphasis on the importance of a cooperative relationship between the government and the citizen, Bates places special emphasis on political order and public revenue. Bates observes the relationship between the increase in public revenue that correlates to the increase in public services in the form of reward. 
  
    
References
​Ansell, Ben W., and Johannes Lindvall. Inward Conquest: the Political Origins of Modern Public Services / Ben W. Ansell, (University of Oxford), Johannes Lindvall, (Lund University). Cambridge University Press, 2021. 
Bates, Robert H. When Things Fell Apart: State Failure in Late-Century Africa. Cambridge University Press, 2009. 
Berwick, Elissa, and Fotini Christia. “State Capacity Redux: Integrating Classical and Experimental Contributions to an Enduring Debate.” Annual Review of Political Science, vol. 21, no. 1, 2018, pp. 71–91., doi:10.1146/annurev-polisci-072215-012907.
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