The new Franz Oppenheimer?

by on November 25, 2013 at 2:30 pm in Economics, History, Law, Political Science | Permalink

Here is the fascinating job market paper by Raul Sanchez de la Sierra of Columbia University, entitled “On the Origin of States: Stationary Bandits and Taxation in Eastern Congo.”  The abstract is this:

The state is among the greatest developments in human history and a precursor of economic growth. Why do states arise, and when do they fail to arise? A dominant view across disciplines is that states arise when violent actors impose a “monopoly of violence” in order to extract taxes. One key fact underlies all existing studies: no census exists prior to the state. In this paper, I provide the first econometric evidence on the determinants of state formation. As a foundation for this study, I conducted fieldwork in stateless areas of Eastern Congo, managing a team that collected village-level panel data on current armed groups. I develop a model that introduces optimal taxation theory to the decision of armed groups to form states, and argue that the returns to such decision hinge on their ability to tax the local population. A sharp, exogenous rise in the price of a bulky commodity used in the video-game industry, coltan, leads armed groups to impose a “monopoly of violence” in coltan villages. A later increase in the price of gold, easier to conceal and hence more difficult to tax, does not. Results based on two alternative identification strategies are also consistent with the model. The findings support the hypothesis that the expected revenue from taxation, in particular tax base elasticity, is a determinant of state formation.

Hire him!

Arjun November 25, 2013 at 3:34 pm

“A sharp, exogenous rise in the price of a bulky commodity used in the video-game industry, coltan, leads armed groups to impose a “monopoly of violence” in coltan villages.”

Oh wow. I have long had a hypothesis that the demand for minerals from multinational tech companies is directly linked to the rise of violence in the Congo, but I didn’t expect to see an actual paper that explores this link first thing in the morning. This, to me, affirms an argument from Slavoj Zizek that I recall hearing a while back–that far from being removed from the global order, the Congo (and the anarchy, civil war, and violence that has been the norm for the past two decades) is a crucial part of global capitalism, as a key supplier of metals that are powering modern technologies.

Doug November 25, 2013 at 4:00 pm

I’m pretty sure that the Congo’s natural resource output would be far higher without a massive and brutal civil war If Global Capitalism (aka “The Man”) is keeping Congo violent to keep the metal flowing, The Man is pretty stupid. I can certainly see how Pinochet and his ilk might be supported by the The Man over multiparty democracy, but it makes no sense for The Man in all his omnipotence to prefer Eastern Congo.

Simple test do natural resource prices go up or down when major supplier nations suddenly plunge into political instability. A cursory examination of the record, or even common sense, will reveal the right answer.

Arjun November 25, 2013 at 4:23 pm

Lol, just to be clear I am not trying to argue that “The Man” is keeping Congo down (although the brutality of colonial structures and the decades-long imposition of extractive regimes in the region is certainly a key factor historically for the current situation). But rather, that the demands of the global market can generally facilitate violence in a region with lots of natural resources but weak institutions. Its questionable whether Rwanda and Uganda would have invaded Eastern Congo if it wasn’t for the spike in metal prices in the 90s due to the emerging tech boom in the West.

Also, I’m not actually sure its a given that metal prices would be cheaper if the situation were different; the current chaos and violence is largely directed against the general population, which has created a large pool of extremely cheap labor that can be put to use by various governments/corporations/militias in the mines. I think its up in the air whether the savings from violently repressed wages (that is: slavery) is greater than the increased production that would result from an economy of scale that is only accessible with lots and lots of capital investment (something possibly only in a situation of stable governance).

Thor November 25, 2013 at 9:02 pm

Pray tell, how utopian and blissful was life in the Congo in the ten thousand years preceding colonial structures?

And: couldn’t one make the case that the Congo didn’t get enough colonial structures (civil service, administration, etc)?

roland November 26, 2013 at 12:38 pm

Oh my, if by “enough colonial entities” you mean King Leopold of the Belgians, for whom the Congo was a personal fiefdom, then it is fair to say that the preceding 10,000 years were rather idyllic. And it was natural resources (rubber) that fueled colonial rule..

Mark Thorson November 25, 2013 at 9:14 pm

I wonder how much money these non-state entities (preferred term to the emotion-laden “warlord”) need to secure an area rich in desirable minerals? Of course, the cost would be higher when there’s competition, for example when the area in question has known recoverable reserves of easily marketed minerals like gold and coltan.

If you want to get ahead of the curve, it should be a mineral which is not so widely perceived today as valuable, such as hafnium. According to Wikipedia, Malawi has hafnium. And they have a lot of ethnic groups, the largest being less than a third of the population. And they’re poor, mostly agricultural. You know, I’ve thought for a long time that Malawi is like an African Yugoslavia — sort of a prison of nations.

If some freedom fighters need a little help to get the ball rolling, maybe this would be suitable project for a Kickstarter campaign. The unresolved questions: who are these people and how much do they need? Supporting legitimate aspirations toward national self-determination is a good thing! And if there’s a payoff down the road, that’s a good thing too!

Rahul November 25, 2013 at 11:37 pm

Why did he say “video game industry” and not electronics industry? Tantalum capacitors are hardly video game specific.

FC November 26, 2013 at 8:52 am

“Call of Duty: Eastern Congo”

Doug November 25, 2013 at 3:42 pm

“A later increase in the price of gold, easier to conceal and hence more difficult to tax, does not.”

So the crypto-anarchists are essentially correct. Shifting to easy-to-conceal hard-to-track economic activity like Bitcoin would measurably weaken the state. Snow Crash proves prophetic.

Willitts November 25, 2013 at 11:17 pm

Not really. The role of the state is protection of property. Bitcoin can conceivably protect some property, but it obviously can’t protect real property. The state’s role is assured, although its scope is not universal.

Adrian Ratnapala November 26, 2013 at 1:30 am

Perhaps you are agreeing at cross purposes.

You can simultaneously believe that (a) one of the useful things states do is protect property, while (b) states evolve from ancient robber bands who arise only when they can extort property.

Now imagine bitcoin, and whatever somehow make a critical mass of wealth easy to hide. States might become impoverished relative to citizens. A total collapse would weaken property rights over all, but there is no axiom that guarantees Nozickian rights-holders could successfully band together to prop up the system.

dearieme November 25, 2013 at 3:45 pm

“The state is … a precursor of economic growth”:how would we know?

Joe Smith November 25, 2013 at 4:24 pm

“how would we know?”

Because in thousands of natural experiments conducted over hundreds of years, economic growth has never spontaneously arisen without the existence of a state. Further we have a number of natural experiments where a state was externally imposed on an impoverished area and economic growth then arose (see Hong Kong, Shanghai and other cities with similar histories).

dearieme November 25, 2013 at 5:23 pm

“economic growth has never spontaneously arisen without the existence of a state”: hundreds of years is the bat of an eye. You might as well say that for the last three hundred years, economic growth has never happened without the influence, direct or indirect, of Britain. History is longer than that. Move back a while and you could delete Britain and insert Italy.

“where a state was externally imposed on an impoverished area and economic growth then arose (see Hong Kong, Shanghai…” : but there were states there already, it’s just that they were incompetent ones.

Willitts November 25, 2013 at 11:14 pm

The state allows for the protection of accumulated wealth. Rule of law that protects property rights foments growth.

So that pretty much tells you where socialism leads.

The Anti-Gnostic November 26, 2013 at 8:25 am

Yes. One giant tragedy of the commons. It’s unbelievable you still encounter people who say it just hasn’t been done right.

Joe Smith November 26, 2013 at 11:04 am

dearieme – I meant to use Singapore, not Shanghai as my second example. I said “hundreds” of years but I could just as easily have said ten thousand years. I agree that it is important that the state be “competent”.

Adrian Ratnapala November 26, 2013 at 1:35 am

Of course Hong Kong and Shanhai were part of a the Chinese state before their rise. Agriculture, wealth accumulation and the state co-evolved in a complicated fashion that probably varied over the face of the globe. To the extent that any of these was a precursor to any of the others, the state probably came last. And according to the theories above, the state (initially) appeared, not as a way of fostering growth, but as a way to rob it.

Joe Smith November 26, 2013 at 11:11 am

As indicated above, I meant to use Singapore, not Shanghai as an example.

According to Wikipedia, when the British took Hong Kong in 1841 there were about 7,500 people living on Hong Kong island as fisherman and charcoal burners. Being part of the Chinese state had not brought economic development to Hong Kong. Having the British Navy impose local peace and security at gun point, did.

gbz November 25, 2013 at 5:11 pm

What’s new? Don’t we know this already? Anyone who paid any attention to warfare in the pre-industrial era knows wars were fought to increase the tax base. I struggle to see what’s new here except the math modeling.

Thor November 25, 2013 at 9:04 pm

Wars were that, indeed, but they were also fought to secure land to reward loyal soldiers. Which is perhaps yet another, slightly different way of increasing the tax base.

Willitts November 25, 2013 at 11:12 pm

It’s far more basic than that. Any accumulation of visible, valuable goods attracts theft. Criminals learn quickly to band together to create overwhelming force, and property owners form groups to protect what they’ve got. Ethnic, religious, racial, and other arbitrary distinctions and similarities serve as uniforms to delineate opposing sides; they are a fig leaf for what the objective really is – possession of property.

Rinse, repeat.

chuck martel November 26, 2013 at 2:33 am

Wars have changed through time with the increasing sophistication of the state. Their origin, however, is actually in the necessity of directing the destructive energy of pre-state teen-age boys away from their own clans and toward strangers. This problem continues to exist.

Willitts November 25, 2013 at 11:06 pm

I learned the same thing watching The Seven Samurai.

Jake November 26, 2013 at 12:04 am

Fascinating stuff, though I have to admit I am still mainly think of coltan as an ingredient in building Terminators.

Willitts November 26, 2013 at 12:06 am

Maybe they are.

prior_approval November 26, 2013 at 12:37 am

‘Hire him!’

To fill a life long, tax payer supported position.

Adrian Ratnapala November 26, 2013 at 1:38 am

Ok. Hire him! And then privatise your education system.

Tim Worstall November 26, 2013 at 5:58 am

It’s not coltan it’s columbo tantalite. It’s not in video games (as above) it’s in capacitors and thus all electronics.

” I have long had a hypothesis that the demand for minerals from multinational tech companies is directly linked to the rise of violence in the Congo ”

It’s the other way around. The ore in E Congo is incredibly rich and easy to mine. Just lying around on the surface (no, really, that’s why they’re able to mine it with bucket and spade). However, it’s only supplying 4-8% of global demand (depends upon who you want to believe) and there are Australian and Canadian mines closed down because the Congo material is so cheap. The Congolese armed groups are indeed making money out of the mining. But the big tech companies aren’t driving it.

dearieme November 26, 2013 at 6:24 am

Aw, Tim, must you drag facts into the simple, imaginary world of economists? No wonder you deny being one.

Matthew November 26, 2013 at 12:44 pm

“Origins” may be a bit of a grandiose title, since the paper ignores all the historical and archaeological research. Historians would point to, for example, the desire of people to start living in cities and the need for centrally planned granaries and irrigation systems as key progenitors of the concept of “state.” Indeed, the earliest archaeological remains from cites like Uruk and Eridu show no direct evidence of social stratification or “taxation” as we know it–though they do have tons of evidence of a governing bureaucracy. We don’t know all the things these bureaucrats did, but they probably coordinated the constructions of irrigation systems and rationed the water from them to crop fields. They probably also were responsible for all the early monumental (and apparently communal) architecture we find. But a big part of their role seems to have been to personally verify economic transactions and contracts by, for example, sealing containers and storerooms so that recipients can be certain they contained what the suppliers claimed. There is a long strand in economic thought that emphasizes the need for trust in the functioning of systems of commerce, and the archaeological evidence seems to confirm that this need for trust fueled the development of the earliest governments.

The paper starts with an extremely modern and fully-developed concept of state, and then talks about “origins,” which is totally unwarranted here. That’s not to say that the results from this paper aren’t valid; my point is only that these results have little relevance to the actual origins of the concept of “state.”

dwayne stephenson November 26, 2013 at 1:29 pm

I don’t know how one would go about demonstrating general principles about state formation, but I do know if I already believed that the origins of the state were based on violence and theft, the Congo would be a fine place to look for examples to confirm my preexisting biases.

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