no good having huge tax revenues if they then have to be spent on
things that benefit everyone: your supporters will have no reason to
stay loyal if they are rewarded no better than anyone else. So you
must trade off high taxation against higher accountability. Econo-
mists like to set out choices as decision problems in which somebody
is trying to maximize something: a firm might be trying to maxi-
mize profits, or an individual to maximize happiness. Indeed, crude
as it is, this is what gives economics its enormous potency: we can
work out what choices would be made if people were actually try-
ing to maximize. Crucially, we can then work out how their choice
would change if the world they are facing changes. Generally these
predictions are not a bad approximation to reality, and that is what
keeps economists in business.
I realized that the corrupt politician’s choice could be set up as
a simple decision problem: choose the tax rate that maximizes what
you are free to embezzle. A very low rate is no good because there
is no revenue to embezzle, and a very high rate is no good because
although there is plenty of state revenue, it is defended against em-
bezzlement by the scrutiny that the taxation has provoked. From
the perspective of the corrupt leader there is an ideal rate of taxation,
and it might well be quite low. We can also use this framework to
infer how much beneficial public expenditure takes place under the
rule of the corrupt leader: it is not zero. The corrupt leader would
like it to be zero: from his perspective spending on what ordinary
people want is a waste of public money that he would prefer to use
for patronage. But, having set the tax rate at the level that maxi-
mizes patronage money, the leader has to live with whatever level
of scrutiny that opposition to taxation has provoked. If, say, the level
of scrutiny enables him to embezzle one-third of the state revenues,
that still leaves two-thirds that are spent properly. The overall reve-
nues are lower than they should be because the leader has kept taxa-
tion artificially low so as to depress scrutiny. So citizens are hit twice
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over: they only benefit from two-thirds of the revenue, and the level
of revenue is lower than they would like. They still get some public
goods, but this is not a sign that the ruler had some goodness in him
after all.
Th i s s k e t c h o f h ow ac c o u n ta b i l i t y and a sense of nation evolve provides a rudimentary explanation for the political problems of the bottom billion: they are stuck. The state is ineffective
partly because it would not be in the interests of leaders for it to
be more effective, and partly because the supply of public goods is
impaired by the lack of a sense of common identity. Based on the
analogy with the formation of effective states in Europe, the solu-
tion would be greater state military rivalry. As states felt less secure
against one another they would need to raise more taxation and this
would provoke greater accountability. It would also presumably
generate a strong sense of national identity.
I am going to argue that this is not an acceptable solution, but
before we discard it I will set out a little evidence in its favor. Among
the leaders of the bottom billion, President Museveni of Uganda has
been unusually effective. When he came to power in 1986 the so-
ciety was quite literally in ruins: it had taken less than a quarter
century of independence to pass from peace and growing prosperity
to mass violence and impoverishment. Uganda was, indeed, not a
bad approximation to what Britain must have gone through after
the Romans pulled out. Kampala, like fifth-century London, was
reverting to the bush. President Museveni has achieved a remark-
able transformation. Despite being landlocked and resource-scarce,
Uganda has been one of the fastest-growing of Africa’s economies.
He has consistently placed the interests of economic recovery above
the patronage and populism that have been so common elsewhere
on the continent. What was the driving force behind him: what was
his ambition as a leader?
State Building and Nation Building
183
I got to know President Museveni and I came to have great
admiration and respect for him: I came to realize that he was not
only a statesman but he was a military leader with ambitions for
changing the political architecture of Eastern and Central Africa.
For this he wanted a strong army. The man whom he most despised
was his predecessor, President Amin. Amin had not only wrecked
the Ugandan economy, he had suffered the ignominy of being de-
posed through an invasion by Tanzania, whose army had routed his
own. One lesson that I believe President Museveni drew from this
was that without a strong economy there could be no strong army. I
think this was the bedrock that underpinned economic reform.
He not only rebuilt the economy, he conducted Africa’s only
truly successful campaign against AIDS. His leadership of this cam-
paign, Zero Grazing, was decisive because it persuaded ordinary
Ugandans to change their sexual behavior. Helen Epstein brilliantly
describes it in her book The Invisible Cure. What she doesn’t reveal is the key step in convincing Museveni to act. Given that his army was
his priority, Museveni arranged with Fidel Castro that his officer
corps should be sent to Cuba for training. Once in Cuba his officers
were given medical checks. The message came back from Cuba: do
you realize your officer corps is overwhelmingly HIV positive, they
are going to die of AIDS? I suspect that Uganda’s AIDS campaign,
like its economic reforms, was in part motivated by President Mu-
seveni’s military ambitions.
Uganda certainly has not gone all the way to being an account-
able polity, but it is nevertheless a genuine example of increased state
effectiveness. A similar story is Rwanda since 1994. The govern-
ment of Paul Kagame, like President Museveni a successful rebel
military leader, is currently the leading African example of effective
state building. Museveni and Kagame jointly invaded and occupied
Zaire, whose army had collapsed under the state-destroying patron-
age of Mobutu. They then fell out, and their mutual penchant for
the military turned into an arms race against each other: I recall the
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outrage of Clare Short, at that time the secretary of state in charge of
Britain’s aid program, on receiving a letter from President Musev-
eni justifying yet another increase in Uganda’s military budget on
the grounds that Kagame was plotting to invade Uganda. So there
are two examples of military ambition and rivalry leading to state
strengthening.
However, I balk at the notion that the societies of the bot-
tom billion need to go through the same process as Europe. Even
if the solution eventually worked, it would be at enormous cost.
Europe tore itself apart with wars, and
I do not wish to see the
bottom billion do the same. War is even bloodier now than it was
when Europe was fighting. There simply has to be a better way of
building an effective and accountable state because the war route
is utterly appalling. But I do not want to be guilty of believing
something because it is so much more attractive than the alterna-
tive. Self-deluding thinking has bedeviled issues of development
for decades. We have to work within the world as it is, rather
than the world we would wish. So, while the appalling cost of the
historical route is a good reason for hoping that there is a better
alternative, it is not a good reason for thinking that there is one.
Soon I am going to set out my basis for believing that there is a
better way. But first let me stay in destructive mode and explain why
I think that even the historical route is no longer an option. If I am
right in this but wrong in thinking that there is a better way, then
the implication would be that the bottom billion would persist: there
simply would not be a route to accountable and effective statehood.
Some thoughtful people assert just that. Michael Clemens, writing
in the highly influential journal Foreign Affairs, concluded that the bottom billion had no chance of development within our lifetime.
So why is the historical route now closed off? Partly because the
manifestly high costs of international warfare and military rivalry
make it politically unrealistic: neither the societies of the bottom
billion, nor the international community, would let it happen. But,
State Building and Nation Building
185
over and above these concerns, it would not work. Even if the bot-
tom billion went through a long process of warfare against one an-
other, they would not end up with effective and accountable states.
The key reason is that many of the governments of the bottom bil-
lion now have huge revenues from natural resources. There are too
many countries in the financial position of the Hapsburg Empire.
They could inflate their military spending for many years on the
back of their natural resource revenues without recourse to domes-
tic taxation. Indeed, the government of the bottom billion that set
its military spending at the highest level was Angola, which for a
while was spending 20 percent of GDP on the military. Yet it had no
domestic taxation and is one of the least accountable governments of
the bottom billion.
So what are the realistic options? Surely the best is the route
taken by President Nyerere in Tanzania: political leadership
that builds a sense of national identity. Astonishingly, Nyerere
achieved this without resorting to the notion of a neighboring
enemy: indeed, he emphasized a Pan-African as well as a na-
tional identity. In our guilt-ridden enthusiasm for multicultur-
alism we may have forgotten that the rights of minorities rest
on systems that depend upon the prior forging of an overriding
sense of common nationality.
In a very few societies the political process of ethnic polariza-
tion may have gone so far that separation into independent states is
indeed the only answer. However, it is a path that could easily lead
to the proliferation of tiny states. Consider the latest candidate for
statehood, Kosovo, which is a landlocked, resource-scarce, tiny, war-
scarred territory. Three tiny territories in the vicinity of Kosovo are
also claiming statehood and would presumably use it as a precedent:
Abkhazia, population 200,000; South Ossetia, population 70,000 and
landlocked; and Transdniestra, population 550,000 and landlocked.
Globally, at the last count there were seventy such claims. Most of
them make Yorkshire look huge.
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If nation building is not feasible, then perhaps Canada and Bel-
gium offer an alternative. These are both strong states in societies
in which the sense of national identity is weak relative to the sense
of subgroup identity. There is so little common national feeling that
both of these societies periodically teeter upon the brink of breaking
apart as states. Yet both countries function brilliantly: Canada is at
the top of the Human Development Index and Belgium is among
the richest countries in Europe. Their intense subnational identities
are made manageable within a single state by robust accountabil-
ity: checks and balances keep the federal state impartial despite the
intergroup contest. Instead of a shared sense of belonging, the state
functions because its component groups are suspicious of each other
and can use the institutions of accountability to prevent being disad-
vantaged. Such societies may not be cozy, but they are viable.
But here is the problem: Canada and Belgium work because they
each have robust systems of accountability. How did they acquire
accountability despite the problems that are usually encountered in
generating public goods in divided societies? Given their locations,
cultural affinities, and size relative to their neighbors, I think that
the most likely explanation is that they adopted the neighborhood
norm of accountability. In effect, they were free-riding on the norms
developed in neighboring societies that had forged a stronger sense
of nationhood. The societies of the bottom billion are not in neigh-
borhoods that have the norm of accountability. Given their neigh-
borhoods and their internal divisions, they have not been able to
generate the robust systems of accountability that would be needed
for them to function like Canada and Belgium. The sequence of
introducing elections before either accountability or nation building
has been fundamentally flawed. In the now-mature democracies the
sequence was reversed: critically, accountability was in place well in
advance of competitive elections.
In the absence of accountability electoral competition actually
impedes its subsequent supply. The society becomes more polar-
State Building and Nation Building
187
ized and incumbents use strategies of power retention that require
them to keep accountability at bay. Unless the states of the bottom
billion can forge themselves into nations they will need some deus
ex machina that introduces accountability. But where might such a
deus ex machina be found?
C h a p t e r 9
B E T T E R D E A D T H A N F E D ?
It is time for that deus ex machina. The key idea is that a
minimal international intervention could unleash the powerful
force of the political violence internal to the bottom billion as a
force for good instead of harm. As such it recognizes the reality that
the scope for robust international action is very, very limited.
Even minimalist international intervention needs justification,
and so I start with the case for the international supply of key public
goods. I will focus on the two that are surely the most important: ac-
countability and security. They are, however, by no means the only
public
goods that will need to be supplied internationally. Account-
ability and security are vital: without them a country cannot develop.
The societies of the bottom billion have not, individually, been able to
supply either accountability or security. The path of building supply
from within the society is hard. While its heroes who are engaged in
this struggle deserve our support, we should be far more forthcoming
with international supply. I will argue that a minimal degree of inter-
national intervention could spring the trap. Once the trap is sprung,
domestic supply could and should replace it: international assistance
in the supply of accountability and security need only be a phase.
There are two distinct reasons that these public goods should be
supplied for the societies of the bottom billion internationally, rather
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than by their own national government. One is that such internal
supply has not proved feasible: as you have seen, these societies are
usually too fragmented to achieve the necessary collective action.
Now I want to introduce a further reason. Because the typical coun-
try is so small, many of the externalities that are the basis for public
goods cannot be internalized at that level because they spill over to
the neighborhood. Indeed, since the pertinent scale of a country for
the supply of public goods is its economy rather than its population,
the typical country of the bottom billion is far smaller than it might
appear. The national income of Luxembourg, the joke tiny country
of Europe, is around four times that of the average country of the
bottom billion. Public goods that are national in most other soci-
eties are regional across the bottom billion. What can be supplied
nationally in India would need to be supplied regionally among the
plethora of states that make up West Africa or Central Asia.
The most critical missed scale economy due to small size is se-
curity. In the countries that are now high-income, the Darwinian
process of state selection through violent contest produced countries
that were large enough to supply security. Following their economic
growth, most of these countries are now also large enough to sup-
ply a wide range of public goods at the level of the nation-state. In
contrast, the countries of the bottom billion are mostly too small to
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