State capacity

State capacity is the government’s practical ability to organize and administer public power: to raise revenue, enforce law, uphold property rights, and support economic activity. In the book’s account, capacity is distinct from the size of government and from the mere existence of formal institutions. Its development depends on who controls the state, how officials operate, and whether public resources sustain effective administration or serve narrow political interests. The English state’s transformation after 1688 illustrates how political pluralism could make greater capacity possible; comparisons with Spain, Sierra Leone, and other societies show that extraction or weak central authority could instead blunt its benefits.

Capacity, centralization, and political control

State capacity is closely linked to political centralization: inclusive institutions require a state able to maintain order, enforce law, protect property rights, and invest in public services when necessary. But capacity is not simply a matter of concentrating authority. The book emphasizes the political conditions under which the state is built and used. Before 1688, Parliament resisted making the English state more effective and better resourced because it could not control the state. After authority shifted toward Parliament, that opposition changed: representatives who could influence state policy had reason to strengthen the institutions that implemented it.

This link also clarifies why states can remain weak even when a more capable government could support economic development. In societies without political centralization, traditional elites and clans may resist central authority because change could redistribute power. In absolutist regimes, rulers may likewise resist changes that threaten their position. The resulting limitations are consequential: the book identifies Afghanistan, Haiti, Nepal, and Somalia as examples of states unable to maintain even rudimentary order, where economic incentives are gravely impaired. State capacity therefore involves both administrative means and a political settlement that allows those means to be created and exercised.

Parliament and the English fiscal state

After the Glorious Revolution, Parliament continued the political centralization begun under the Tudors and expanded the state’s capacity in multiple directions. The change was not only a larger budget or a different set of regulations. It altered who made decisions, what the state spent money on, and how effectively it could collect and administer revenue. With Parliament in control of spending, it was more willing to raise taxes for purposes it valued, including strengthening the navy to protect members’ overseas commercial interests. Parliamentary control also supported property rights and a more pluralistic political order, though participation remained severely restricted: in the eighteenth century, less than two percent of the population could vote, and those voters had to be men.

The fiscal expansion was substantial. State expenditures soon reached about 10 percent of national income, supported particularly by excise taxes on a wide range of domestically produced goods. The book compares this scale with Colombia, whose state budget reached a similar relative size only in the 1980s, and with Sierra Leone, where the state budget would remain much smaller relative to the economy without large foreign-aid inflows. These comparisons make the English development striking, but the account’s central point is not simply that the state spent more: it acquired the means to raise revenue and administer it across the country.

Administration in practice

The growth of administrative capacity can be seen in the expanding excise bureaucracy. Its staff increased from 1,211 people in 1690 to 4,800 by 1780. Inspectors were stationed throughout England, while collectors toured districts to measure and check production of goods subject to excise, including bread and beer. This was a system of routine oversight, not a one-time fiscal initiative.

The records of Supervisor George Cowperthwaite show how that oversight worked on the ground. Between June 12 and July 5, 1710, he traveled 290 miles in the Richmond district of Yorkshire. He visited 263 victualers, 71 maltsters, and 20 chandlers, as well as one common brewer; he made 81 measurements of production and checked the work of nine excisemen. Eight years later, in the Wakefield district, he averaged more than nineteen miles of travel a day and worked six days a week, typically inspecting four or five premises. On Sundays he entered his books, contributing to an elaborate system in which officers kept three kinds of records that were expected to match. Tampering with them was a serious offense.

This scale of measurement and record keeping made the state’s reach more than a formal claim. It enabled the government to monitor production, collect revenue, and supervise officials. At the same time, the state increasingly relied on talent rather than political appointment and developed a stronger administrative infrastructure. The book contrasts this operation with what governments in many poorer countries can achieve, noting that the English system’s reach in 1710 exceeded that of most such governments even in the present.

Comparisons: capacity and extraction

Spain’s trajectory shows that political centralization alone does not ensure an effective fiscal state. After the monarchy defeated the Comunero Rebellion and progressively weakened the Cortes, it became harder to raise taxes, even through direct negotiations with individual cities. The Spanish state moved away from effective administration: it sold offices, sometimes making them hereditary, relied on tax farming, and sold immunity from justice. In contrast to England’s developing tax bureaucracy, absolutist control in Spain coexisted with difficulty in mobilizing revenue and with economic institutions that obstructed secure property rights and commercial activity.

The contrast extends beyond Europe. Under colonial rule in Sierra Leone, the British used indirect rule, relying on paramount chiefs to collect taxes, distribute justice, and maintain order. The Sierra Leone Produce Marketing Board, established in 1949, was presented as a way to protect farmers from fluctuations in world commodity prices. In practice, the board paid farmers less than the world price and used the difference for its expenses; the gap grew into heavy taxation of agricultural producers. After independence, these arrangements persisted and worsened. The example distinguishes the existence of revenue-collecting institutions from public capacity directed toward broad provision: extraction could strengthen political control without delivering services or building incentives for productive investment.

The book makes a related distinction through the regime of Joseph Mobutu in Congo. Mobutu’s extractive economic institutions impoverished citizens while enriching the ruler and his associates. The counterfactual that a more prosperous Congo might have provided Mobutu with even greater wealth and power fails because growth can redistribute both income and political influence. Institutions that encourage economic progress may make those already in power worse off. State power and the capacity to administer it are therefore not automatically aligned with the public’s prosperity.

Capacity as a political achievement

The English case is presented as part of a wider argument about institutional change. Inclusive institutions do not arise on their own: they emerge through conflict between established elites and groups seeking to limit elite power. When pluralistic arrangements take hold, they can generate positive feedback and make institutional persistence or expansion more likely. A capable state can enforce rules and support economic activity, but the distribution of authority shapes whose interests those functions serve and whether the institutions can be challenged or captured.

The distinction is also important when assessing economic policy. Ghana’s poorly sited factories and other economically irrational projects were not, the book argues, simply the product of ignorance: leaders and advisers had access to informed economic counsel, but policies were shaped by the need to secure political support. Similarly, Busia’s attempt to implement reforms under pressure from international institutions culminated in currency devaluation, unrest in Accra, and his overthrow by the military. The obstacles to adopting growth-promoting policies lay in political incentives and constraints, not merely in a lack of knowledge.

Across these cases, state capacity is neither a synonym for prosperity nor a technical quality detached from politics. It concerns the state’s ability to act, but also the institutional arrangements governing that action: who authorizes revenue collection, which interests shape expenditure, how officials are supervised, and whether the state protects rights or entrenches extraction. The English fiscal bureaucracy demonstrates how central authority could become more effective when Parliament controlled it; Spain and Sierra Leone show how state functions could be weakened or redirected; and the broader comparisons explain why effective public administration depends on political institutions as well as administrative machinery.