State capacity

The Washington Consensus had little to say regarding the internal functioning of the state beyond recognising the importance of securing property rights and general policies, such as ‘broadening the tax base’. The past decades have seen significant advances towards understanding the determinants of state capacity. In this chapter we do not attempt to provide universal prescriptions, but identify a few general principles that we believe apply in all countries, irrespective of wealth or level of development. Effective governance requires more than merely setting correct policies; it demands a state’s ability to implement, adapt, and learn over time. Drawing from historical and political economy perspectives, as well as contemporary managerial approaches, we examine the evolution and variation of state capacity, focusing on sectors like tax administration and health. State capacity is a process, not an event; hence medium-term commitment is critical, as is acting in the understanding of long-term constraints and environment. That process should begin with diagnostics of a particular place and goal, not universal prescriptions. Building state capacity involves a continuous process of, adaptation, and systemic learning; empowered agents, citizen-state trust, and iterative improvements are often key components of success. Ultimately, enhancing state capacity requires not only technical solutions but also alignment with political incentives and stakeholder motivations, recognising that a capable state is foundational to enabling citizens and markets to thrive.