Fixing Fragile States

Stephen DeAngelis

October 10, 2008

Globalization has both its proponents and opponents. Its proponents point to the fact that globalization has helped billions of people climb up the economic pyramid and out of poverty’s grasp. Opponents note that it doesn’t seem to be helping the remaining 1.4 billion people still locked in poverty’s grip. Most of these so-called “bottom billion” are trapped inside nation states that have little going for them except a recognized international border. These states have variously been labeled, failed, failing, weak, and fragile. Seth Kaplan, a business consultant and entrepreneur who has run multinational firms and founded successful local corporations in Asia, Africa, and the Middle East, believes there is a difference between failed, weak, and fragile states. Kaplan also believes that past efforts to support such states have not recognized the differences nor the idiosyncratic circumstances each such nation faces. In a new book, Fixing Fragile States, Kaplan provides his prescription for addressing the challenges that keep such states from progressing.

 

Kaplan believes that “fragile states are a menace unlike any other, endangering international security, while ruining the lives of hundreds of millions across the globe.” The only way to reduce these dangers, he insists, is reduce the number of such states. On this point, Kaplan agrees with my colleague Tom Barnett, who asserts that such states almost exclusively exist in the geographical region he calls the Gap. Tom, too, believes that the grand strategy the global community should embrace is to “shrink the Gap.” Kaplan writes:

“If we are to transform failed and failing states in Africa, Latin American, the Middle East, and elsewhere, we need to adopt innovative policies that challenge conventional wisdom. In particular, we need to embrace a new way of thinking about development.”

Kaplan believes like I do that one must take a holistic view of development. As a result, Kaplan’s approach “blends political, science, economic, sociological, and business theory” to explain why states fail and how that can change. Specifically, Kaplan believes that too many of those involved in development fail to appreciate the importance of local conditions, culture, and circumstances. As a result, Kaplan believes that they have tried to press cookie cutter solutions in situations where they simply won’t work. As proof that historic approaches haven’t worked, Kaplan cites a World Bank report that laments the fact that the number of fragile states has grown from 17 in 2003 to 26 in 2006. He also notes some of the common shortcomings that analysts point to as the causes of state failure: “weak governance, ill-conceived policies, and feeble institutions.” These institutional shortfalls, Kaplan notes, mean that “fragile states are unable to garner anything but the paltriest fruits from globalization. … As a result, fragile states typically export no more than a handful of commodities, often produced in protected enclaves that limit opportunities for embezzlement and violence.”

 

Although he doesn’t use the term “sovereignty gap” preferred by Ashraf Ghani and Clare Lockhart, Kaplan recognizes that such a gap is a critical characteristic of fragile states [see my post entitled More on Dealing with Failed States. Kaplan writes:

“Most experts agree that any country where the government is unable to deliver even the most basic public services — such as territorial control and security — to a significant portion of the population is failing. … Fragile or weak states, however, encompass a much wider group of territories where the national government operates, but has institutions so dysfunctional that they perform many of their tasks badly — or not at all. … The state is so incapacitated that it cannot provide many essential services: public schools and hospitals barely operate in many places, police and judges are beholden to the rich and the powerful, and the black market trumps moneymaking activities.”

Kaplan believes that old approaches to helping fragile states have failed because they have concentrated almost exclusively on helping ill-conceived and illegitimate government bureaucracies build capacities. That top down approach, Kaplan asserts, won’t work as long as the institutions that need support are not recognized or utilized by the local population. “The cure for fragile states,” Kaplan asserts, “is development.” On that point, Kaplan and I agree. Kaplan, however, has a very interesting view of what constitutes development.

“Although usually equated with economic growth, [development] is really a process of transforming the system of how the members of a society work together. Although education and health care can better prepare individuals to participate in development, a country’s ability to advance is crucially tied to its citizens’ ability to cooperate — both among themselves and in partnership with the state — in increasingly sophisticated ways. A community’s capacity to foster progress is therefore highly dependent on its social cohesion and its set of shared institutions — especially its set of shared informal institutions in the early stages of development when strong, formal governing institutions are typically absent.”

Kaplan is correct that a lack of social cohesion prevents sustained development. Nothing demonstrates a lack of cohesion more than the civil wars that plague so many Gap states. One of the problems, analysts point out, is that states in the Gap are often “fake states” whose borders were drawn by colonial powers without regard for traditional tribal boundaries. Few of these fake states have ever managed to achieve the social cohesion that Kaplan discusses. Kaplan believes that social boundaries can be bridged by economic cooperation that spawns informal institutions whose capacities can then be strengthened to make them more formal. Here, however, Kaplan faces the development/security conundrum faced in what Tom Barnett calls the military/market nexus.

 

Kaplan admits that “investor’s money is the fuel that drives the wealth-creation process that is the prerequisite for any development.” But as I have stressed on numerous occasions, investor dollars are cowards. They flee any situation where risks outweigh rewards. No risk is a greater threat to investment dollars than violent conflict and instability. Kaplan’s bottom-up approach, which involves making governments “more relevant to their populations by interconnecting them with local, informal, internally driven political and economic processes,” does empower local societies, but it doesn’t address how to get over the initial security challenge so that the approach can work. Security is no small hurdle to progress. The marketing material for Kaplan’s book states, “Flawed governance systems, not corrupt bureaucrats or armed militias, are the cancers that devour weak states. The cure, therefore, is not to send more aid or more peacekeepers but to redesign political, economic, and legal structures–to refashion them so they can leverage local traditions, overcome political fragmentation, expand governance capacities, and catalyze corporate investment.” As I’ve stated time and again, security and development go hand-in-hand. I agree with Kaplan that sending peacekeepers into a fragile state without an accompanying development plan won’t put the state on the road to recovery. Both are required.

 

Take, for example, the Iraqi city of Samarra. Violence has been so frequent in that city that for the past two years people haven’t even been able to worship in their famous Askariya Shrine. Development projects during that time came to a complete standstill. Relative security in Samarra has finally returned and development is once again progressing [“As Bombs Fall Silent, an Iraqi City Rebuilds,” by Erica Goode, New York Times, 2 October 2008]. Goode writes:

“Yet the costs of greater safety are also apparent. At virtually every corner there are checkpoints staffed by members of the Iraqi security forces or guards from the Awakening, the citizen patrols that the American military paid and trained to fight the insurgents. Blast walls line the streets. And to stray outside the nine ‘safe’ neighborhoods that American military officials say have been secured by the Awakening guards is still to invite violent death. … Still, new reconstruction projects for the city are planned, including the building of a water treatment plant, the refurbishment of five schools and the repair of an asphalt factory. ‘Progress has been made, some of it has been significant, some of it has been slow, some of it has been mixed,’ said Lt. Col. J. P. McGee, commander of the Second Battalion, 327th Infantry stationed in the area, who added that there had been a ‘complete security transformation’ in Samarra. The local council is finally able to meet. A court has reopened, making it no longer necessary for couples who wish to marry to travel to another district to register. But the streets of newly opened shops are ringed by blocks of bombed-out buildings fronting on deserted sidewalks piled with broken glass, crumbled pillars, tin and rebar.”

My point is that Kaplan’s strategy for development, like all other plans, depends on a relatively stable and secure environment. Kaplan’s “paradigm for development” has ten parts.

1. Adopt Local Models — “States need to look inward for their resources and institutional models and adopt political structures and processes that reflect the history, complexity, and particularly of their peoples and environment. … Far more emphasis must be placed on seeking locally appropriate solutions for problems of governance, land resource, and knowledge transfer if development is ever going to become locally propelled and thus sustainable.”

I agree that local conditions must be taken into account when constructing any development plan. The more “buy in” a plan gets from the local population the greater its chances of success. The problem with “fake states,” however, is that some of them have few resources on which to draw and tribal biases are so ingrained that a collaborative approach to governance may take years (or generations) to establish.

2. Closely Integrate State and Society — “States need to be deeply enmeshed within the societies they are meant to represent if they are to be effective tools of governance and development. … State institutions constructed around identity groups can duplicate some of the important features of nation-states, leveraging traditional approaches to problems of political and economic order. … Cohesive identity groups are more likely to unify behind and discipline their own state structures (both formally and informally), ensuring that they work for the benefit of the group the structures represent.”

Kaplan points to the Kurdistan Regional Government as a local structure that is perceived as working more effectively for a particular group than the central government. The problem with using the KRG as an example is that while Kaplan argues for integrating state institutions with society, his example supports establishing autonomous regions. If such regions can be woven into a federated system, then the road to integration might work. But most autonomous regions believe they are only a step away from sovereignty, which doesn’t bode well for long-term integration.

3. Design Institutions around Identity Groups — “If people are to make effective use of their own histories and customs in fashioning institutions and laws that best reflect their particular needs, then state structures must be better aligned with cohesive identity groups where practical. Such reengineering will naturally foster greater legitimacy of the state and make it better able to integrate informal institutions into formal structures while increasing the ability of groups to leverage their built-up imbedded social capital to improve economic conditions.”

Kaplan is certainly justified in his fascination with ethnic, cultural, and religious identities. As he points out, even in developed nations issues surrounding ethnicity and religion rear their heads on a regular basis. Any plan for establishing a sustainable system of governance must ensure that all citizens feel they have a voice. As Kaplan points out, “most fragile states are centralized in ways that accentuate their difficulties.” Recent elections in Kenya are a good case in point.

4. Construct States Bottom-Up — “In many cases, the best chance for leveraging local capacities and institutions and improving governance will be to focus on building up local governments and tying them as closely as possible to their local communities. While in some cases (especially in rural areas and small cities) this may mean leveraging traditional identities and institutions, including chiefs and village elders where they retain strong legitimacy. In the case of many large cities whose populations are diverse and increasingly divorced from their traditional roots, the best way to introduce accountability into state organs is to structure them around greatly empowered administrations.”

Using a bottom-up approach requires walking a very fine line. Kaplan admits that local governments can be “afflicted by parochialism, factionalism, the danger of elite capture, inequity, and injustice.” One need only look at the situation in Afghanistan or in Somalia to see how powerful warlords have managed to co-opt large sections of those countries because the central government is weak or non-existent. Kaplan correctly notes that central governments are critical in providing the infrastructure necessary for the common good, but he believes that central governments have a difficult time fostering trust at the local level. Kaplan recommends strengthening local government institutions. He believes they can be strengthened in ways that make them both trustworthy and competent through the use of “accountability loops” and “oversight committees.” The idea is to create a more participatory experience for citizens.

5. Exploit the Advantages of Regionalism — “In regions populated by multiple pintsized fragile states, regionalism offers the best chance to overcome the poisonous and self-reinforcing nexus of identity divisions, weak administrative capacities, undersized markets, and limited human resources. Regional associations of small, poor countries — if allowed to fully leverage region-wide capacities and outside assistance, and if empowered with the necessary authority and staffed by [a] team of competent managers — could gradually transform the institutional environments and economic prospects of their member-states.”

In a post entitled The Rising “China Price”, I noted that rising transportation costs are shrinking the supply chains of many companies and placing more importance on regional economic systems. I concluded that “a regionalized economy will help impoverished nations, but regionalization (as a part of globalization) is a new twist that will take time to work out. Time, unfortunately, is often the enemy of economies in crisis.” The key to making Kaplan’s strategy work is the “team of competent managers” that fights corruption and creates trust.

6. Unify Disparate Peoples — “As state cohesion is a major predictor of state effectiveness, more emphasis should be placed on measures that unify disparate peoples in fragile states. This is especially important in countries where multiple identity groups are not concentrated in particular areas but are spread throughout the country, making pointless to introduce federalism and other territorial based institutional agreements. … In states containing combustible mixes of identity groups living side by side, such as Syria, formal bodies should be designed to institutionalize cross-group cooperation and to minimize the potential for ethnic, religious, tribal or clan divisions sparking verbal or violent conflict that undermines the state.”

Although Kaplan is absolutely right that every possible effort should be made to unify disparate peoples, he also knows that doing that is easy said than done. Look at the former Yugoslavia. People in that former Balkan “fake state” lived together in relative peace for nearly half a century under Tito. It took very little, however, to spark violence and civil war after Tito’s death. The eventual outcome was state disintegration. Kaplan recommends some form of “consociational government” be used to reduce “tensions by lessening or eliminating actual or perceived imbalances.” But one of the states to which Kaplan points as an example of such a governmental system — Belgium — is on the verge of separation [“With Flemish Nationalism on the Rise, Belgium Teeters on the Edge,” by Michael Kimmelman, New York Times, 4 August 2008]. As Kimmelman writes: “It’s about culture in the end. In its escalating dysfunction Belgium demonstrates the inextricable link between culture and nationhood.”

7. Supplement State Capacity — “In many cases, states are unable on their own to create and sustain some of the capacities necessary for them to promote stability development. Where institutional reengineering and other creative mechanisms are unable to overcome these deficiencies, outside assistance might be more helpful if it was directed at supplementing capacity rather than providing more cash or technical assistance.”

Kaplan notes that states with a history of internal strife might need outside security or law enforcement forces to maintain a secure environment (the same peacekeepers that Kaplan’s marketing material seem to eschew). In countries with highly exploitable resources, Kaplan says that “multinational companies could be mandated to provide security and education, health, and infrastructure improvements to local citizens in areas where those companies prospect for natural resources if a weak state is unable to do so.” In my discussions about Development-in-a-Box™, I have often recommended public/private partnerships as a good way to develop infrastructure when an emerging market country cannot provide it by itself. I have also recommended a system of mentors that can be used to train local citizens so that they can fully assume responsibility for local business and government activities. Kaplan notes that supplementing state capacities is cost effective and less prone to corruption than cash assistance.

8. Reinforce and Complement Local Processes — “At present, ‘much external action either undermines (local) governance structures or puts in place structures that are unsustainable.’ Instead of continuing to promote one-size-fits-all prescriptions, Western aid agencies and governments should make much more use of nonfinancial aid, put more emphasis on institutional reengineering, devote greater effort to reinforcing local processes in a bottom-up fashion, and work harder to ensure that the assistance provided actually helps lo
cal efforts to spur development.”

I believe that the heart of Kaplan’s approach — the point to which he returns time and again — is strengthening local capacities in ways that build on traditional structures. We know that this approach is viable because it is basically the approach promoted by Muhammad Yunus and his Grameen Bank. Any program that connects and empowers people also provides them a stake holding in the future.

9. Foster Private Investment and Competition — “Although they generally receive scant attention from the development community, businesses and private investment are actually the main engines of development and should be prioritized as such. Only companies can drive the self-sustaining wealth-generating process underpinning development forward; provide work to the armies of unemployed in the underdeveloped world; efficiently transfer better work skills to large numbers of people; increase productivity throughout an economy; lower the price of goods consumed by poor people; and provide the revenue necessary to fund education, health, and other public programs and to wean governments off of foreign aid.”

On this point, Kaplan and I are in complete agreement. Anyone who has followed my posts on Development-in-a-Box understands how passionately I believe that helping foster a growing and diverse economy that supports a sustainable middle class is the key to lifting millions out of poverty.

10. Creatively and Gradually Increase Accountability — “In states where rapid change may be detrimental to stability or may be obstructed by elites, emphasis should be given to encouraging gradual, incremental reform that introduces a variety of mechanisms to hold governments more accountable, to integrate them more closely with their societies, and to make them more dependent on their citizens.”

Here Kaplan is stressing that any development approach must be pragmatic. I agree. Any approach that is not pragmatic simply won’t work. Kaplan is also correct that eventually a government must operate transparently and with integrity. This is not only important for connecting the government with the governed, but to connect the national economy to the global economy.

 

Kaplan believes “these ten guidelines amount to a significant reconceptualization of the causes and problems of fragile states and of the best way to fix them.” I’m not sure I would go that far, but I do appreciate the fact that Kaplan is promoting a holistic approach to development. Kaplan concludes:

“Only by learning from the mistakes of the past and formulating policies that recognize and respond to local conditions can we construct a brighter future for the unfortunate citizens of fragile states — and bring greater security, stability, and prosperity to all the world’s citizens.”

I can certainly support that conclusion. I also believe he gets the priorities right — security, stability and then prosperity. For anyone interested in development, Kaplan’s book is a welcomed addition to the growing library of literature dealing with the subject. The competition of ideas is important for discovering what works and what doesn’t. Kaplan’s stress on using idiosyncratic approaches that match local conditions is important. On the other hand, the approaches utilized can’t be so unique that they isolate a developing country from the larger international community. In my post Explaining Development-in-a-Box™, I noted that connecting to the global economy requires an emerging market country to garner the trust of others and the fastest way to do that is to adopt internationally accepted standards and best practices. I wrote that “it makes no sense for each emerging market country to reinvent these standards and practices. They can be imported as ‘in the box’ solutions and, when necessary, be adapted to local conditions. Because they don’t have to be reinvented or rediscovered in each new situation, valuable time is saved and precious resources aren’t squandered.” The development community needs as many tools in its kit as it can find. Kaplan’s book provides a few more of those tools.