Many years ago, Tim Besley (LSE) had a "crazily simplistic" idea to categorise states by their capacity, and in his early work he suggested three groups. When ten years later, he gave an algorithm some data on the measures of state capacity, and left it to categorise states, it also found three groups. Which states are in which groups barely changes. Does that make a country's group its destiny? In the latest VoxDev Talk, based on his lecture in the IGC-BREAD series on political economy, Besley tells Tim Phillips why it does not. But he also explains why giving citizens the power to vote doesn't necessarily help solve the problems that create weak states. The lecture behind this episode: Besley, Tim. 2026. "State Capacity, Conflict and Development." Lecture 4, BREAD-IGC virtual PhD-level course on political economy, 29 September. Lecture slides. Watch the recording: [LECTURE RECORDING URL]. The research behind this episode: Besley, Timothy, Chris Dann, and Torsten Persson. 2021. "Pillars of Prosperity: A Ten-Year Update." CEPR Discussion Paper 16256. Gated. Besley, Timothy. 2020. "State Capacity, Reciprocity, and the Social Contract." Econometrica 88 (4): 1307-35. Besley, Timothy, and Torsten Persson. 2011. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton: Princeton University Press. Besley, Timothy, and Torsten Persson. 2010. "State Capacity, Conflict, and Development." Econometrica 78 (1): 1-34. To cite this episode: Phillips, Tim, and Tim Besley. 2026. "Why democracy alone does not build effective states." VoxDev Talks (podcast).About the guestSir Tim Besley is School Professor of Economics and Political Science and W. Arthur Lewis Professor of Development Economics at the London School of Economics and Political Science. He is known for research spanning political economy, development economics and public economics, with a focus on how governments can design and deliver economic policy more effectively. He served on the Bank of England's Monetary Policy Committee from 2006 to 2009 and was an academic director of the LSE-Oxford Commission on State Fragility, Growth and Development. He is a past president of the Econometric Society, the Royal Economic Society, the European Economic Association and the International Economic Association, and is affiliated with the Centre for Economic Policy Research. Research cited in this episodeState capacity. In Besley's work, state capacity has three dimensions. Fiscal capacity is the breadth of the tax system, legal capacity is the ability to enforce contracts and property rights, and collective capacity is the ability to provide services such as health and education. Besley and Persson (2011) built the first two on Adam Smith's recipe for prosperity, "peace, easy taxes, and a tolerable administration of justice". Quasi-voluntary compliance. Margaret Levi's term for what happens when people pay tax because they accept the arrangement, and not only because they fear punishment (Levi, Margaret. 1988. Of Rule and Revenue. Berkeley: University of California Press). Besley (2020) models this as a reciprocal contract; citizens pay their taxes and the state provides public goods. Circular causation. Gunnar Myrdal, who shared the 1974 Nobel Memorial Prize in Economic Sciences with Friedrich Hayek, described development as a system in which "if one changes, others will change in response" (Myrdal, Gunnar. 1974. "What Is Development?" Journal of Economic Issues 8 (4): 729-36). Besley uses the idea as a metaphor for state capacity and development. One does not cause the other; common processes lie behind both. Institutions. Acemoglu, Johnson and Robinson used differences in European settler mortality to estimate the effect of institutions on income (Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation." American Economic Review 91 (5): 1369-1401). Besley's addition is that state capacity moves more slowly than political institutions, and accumulates like a form of capital. Three kinds of state. Common interest states are peaceful and have strong capacities in every dimension. Special interest states, which Besley, Dann and Persson (2021) call redistributive states, are repressive and have some capacities; Besley's example is China. Weak states are conflictual and have weak capacities. Finding the clusters. Besley, Dann and Persson (2021) use six variables for 67 countries in 1990, 2000 and 2016. These are the income tax share of total tax, a legal quality index, a collective capacity index, the share of years since 1975 in repression, the share in civil war, and GDP per capita. They summarise the data with principal components and then apply hierarchical clustering, which lets the algorithm choose the number of groups. Eight of the 67 countries changed cluster between 1990 and 2016. Elections or executive constraints? Besley separates two stories of democratisation. One is the extension of the vote, which in Britain ran through the Reform Acts of 1832, 1867 and 1884 and the votes for women in 1918 and 1928. The other is the limit placed on what those in power can do. In the lecture slides, all three kinds of state score above 90% of years at maximum openness between 1950 and 2016. At maximum executive constraints, weak, special interest and common interest states score about 15%, 35% and 93%. Besley stresses that this is a correlation. Why rulers accept limits. Besley gives two accounts. In the first, elites give up power under the threat of revolution (Acemoglu, Daron, and James A. Robinson. 2006. Economic Origins of Dictatorship and Democracy. Cambridge: Cambridge University Press). The second is about ideas. Besley describes an early-stage paper, presented in Chicago, which finds common elements between speeches in the House of Commons and John Locke's Two Treatises of Government. War and common purpose. Besley and Persson argue that common interest public goods, such as fighting external wars, encourage investment in state capacity (Besley, Timothy, and Torsten Persson. 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics." American Economic Review 99 (4): 1218-44). Besley's post-war example is the National Health Service, founded on 5 July 1948 and kept by the Conservatives when they returned to power. He develops the wider argument in Besley, Timothy. 2021. "Is Cohesive Capitalism Under Threat?" Oxford Review of Economic Policy 37 (4): 720-33. Civil society. Besley's point that effective states are built from the ground up draws on Robert Putnam's study of Italy's regional governments, which links their performance to a tradition of civic engagement (Putnam, Robert D., with Robert Leonardi and Raffaella Y. Nanetti. 1993. Making Democracy Work: Civic Traditions in Modern Italy. Princeton: Princeton University Press). Pivotal moments. Besley was an academic director of the LSE-Oxford Commission on State Fragility, Growth and Development, whose 2018 report Escaping the Fragility Trap looked at moments of potential change, such as the end of a conflict. His example is Rwanda since the genocide, where he sees real progress while acknowledging that many questions will be raised about it. More VoxDev Talks episodesArmed groups as states: Taxation, security, and civilian support. Raul Sanchez de la Sierra on eastern Congo, the case Tim puts to Besley, where militias do much of what people expect from a state. Taxation, civic culture and state capacity. Besley's earlier VoxDev Talks episode on why people pay their taxes, and the reciprocal contract behind high compliance. No taxation without administration: What makes tax authorities work. Anders Jensen and Jonathan Weigel on how tax authorities are organised and staffed; their paper is on the reading list for Besley's lecture. Related reading on VoxDevState capacity and development clusters. Besley, Dann and Persson on 25 years of data, and why countries form persistent groups according to their levels of internal peace and state capacity. Does low state capacity set a ceiling on tax rates? Evidence from the DRC. Augustin Bergeron, Gabriel Tourek and Jonathan Weigel report the kind of field experiment on tax that Besley wants the next generation to run.
