The concept of state capacity – “the ability of a state to collect taxes, enforce law and order, and provide public goods” – was developed by political scientists, economic historians, and development economists to illuminate the strong institutional contrast that parallels the economic contrast between rich and poor countries. Rich countries are all distinguished by having large, strong, and relatively capable states; poor countries, by contrast, are generally characterized by weak and frequently ineffective states, while those polities dysfunctional enough to be characterized as “failed states” are among the poorest and most miserable on Earth. 

The experience of the COVID-19 pandemic, however, has challenged the easy association of rich countries with high state capacity. The United States and western Europe failed to contain, much less suppress, the virus with public health measures, while a number of poorer countries in East Asia performed much better. And here in the United States, the fumbling public health response was only the latest in a string of spectacular governing failures during the 21st century: most prominently, the intelligence breakdowns that led to the Iraq war, the ensuing bungled occupation of Iraq, the botched evacuation of New Orleans after Hurricane Katrina, and the meltdown of the highly but inappropriately regulated financial sector. 

In light of these sobering experiences, it has become clear that high state capacity is not something we can take for granted. Like beached fish suddenly appreciating the existence of water, we have come to recognize the crucial importance of state capacity because of shocks caused by its absence.

Here at the Niskanen Center, we see growing deficits in state capacity over recent decades as a matter of fundamental importance. At stake is not just the prospect for effective public policy in a wide variety of important domains; at this point, the legitimacy and continued vitality of liberal democracy are implicated as well. The fact is, around the world the fortunes of liberal democracy rise and fall with its perceived effectiveness in improving the lives of ordinary people. The economic catastrophe of the Great Depression was accompanied by the rise of fascism and democratic retreat; Allied victory in World War II and the ensuring postwar boom in the “free world” brought a wave of democratization; the collapse of the Soviet Union and its communist empire while the United States enjoyed another strong boom in the 1990s brought another, even stronger democratic wave; and most recently, the global financial crisis and the years of economic stagnation that followed have catalyzed the rise of authoritarian populism and deepening doubts about liberal democracy’s future.

Here in the United States, we have seen this same dynamic play out as declining state capacity has led to declining trust in government – and a growing impatience with the often messy and muddled workings of democracy. During the middle decades of the 20th century, a time we now look back on as a high-water mark for American state capacity (World War II mobilization, Manhattan Project, Marshall Plan, Berlin airlift, construction of the interstate highway system, Project Apollo), large majorities of the American public expressed trust in their government to do the right thing; beginning in the 1960s, public trust started spiraling downward and today has sunk to abysmal lows. Since the 1970s, after the disillusioning shocks of Vietnam and Watergate and the dispiriting end of the postwar boom years, almost every successful presidential candidate has adopted the pose of an outsider who will take on and clean up the growing dysfunction in Washington. In 2016, Americans got their monkey paw wish: A genuine outsider, with zero prior experience in government and zero attachment to the values, norms, and institutions of liberal democracy, squeaked into the White House with a decisive margin of support coming from people who disapproved of him but nonetheless voted for him “to shake things up.” Whether American liberal democracy will survive Donald Trump’s subsequent transformation of the Republican Party into its current nihilistic form remains an open question.

Motivated by this sobering assessment of the current situation, the Niskanen Center is launching a new Project on State Capacity to identify and analyze the key drivers of government dysfunction and propose institutional remedies. Our analysis implicates substantive issues of public policy, but the focus is deeper: the underlying ability of American government to formulate and execute policy in a competent fashion.

Read the full paper here.