State capacity refers to the ability of any state to successfully deliver what are generally considered to be public goods and services to its citizens. State capacity is considered by many public policy experts to be the major factor that explains why some countries are rich or developed while other countries remain underdeveloped.
The most common way in which the capacity of a state to deliver on its commitments is measured is by the way of its ability to collect a sufficient amount of tax revenues. This is because any state requires tax revenues to deliver public goods and services. By this measure, countries with a higher tax to GDP ratio, which typically turn out to be rich countries, may be considered to possess greater state capacity than other countries with lower ability to generate tax revenues. Many also urge developing countries like India to boost their tax to GDP ratio so as to build state capacity.
Power in numbers
Public policy experts may also look into other indicators such as the number of people employed by a certain state to measure its capacity. So, for example, the number of police officials per capita could be seen as an indicator of the capacity of the state to maintain law and order. States with a very low number of police officials per capita, it is believed, may be unable to establish monopoly of violence in their territory, leading to instability that adversely affects their economy. Similarly, the number of courts and judges per capita can be seen as an indicator of how well a state can deliver justice to citizens.
Some critics, however, caution against the definition of state capacity in terms of the ability of a certain state to collect tax revenues or the number of staff it can hire to deliver essential public goods and services to its citizens. This is because more efficient states may be able to deliver essential public goods with lower taxes and fewer staff than less efficient ones. Critics, therefore, argue that the number of people employed by a certain state and the amount of taxes collected by it only reflect its size and not the state’s effectiveness in delivering essential public goods and services.
Critics such as U.S. economist Bryan Caplan also point out that state capacity, as defined by the size of the state, is claimed by public policy experts to be the reason behind the success of certain countries without establishing the necessary causal link between the two. In other words, they argue that the success of rich countries is tautologically attributed to strong state capacity the same way that the failure of poor countries is attributed to weak state capacity. They point out that it could well be that strong economic growth allowed developed countries to fund states that are large in size; in that case, the economic success of the developed world cannot really be attributed to a larger state. A better way to measure state capacity, critics believe, is to gauge the ability of a certain state, regardless of its size as measured by its tax collections or headcount, to uphold the rule of law by delivering efficient justice to citizens.
