Francis Fukuyama Johns Hopkins University School of Advanced International Studies

Minimal Functions
Providing pure public goods Defense, Law and order Property rights Macroeconomic management Public health Improving equity Protecting the poor

Intermediate Functions
Addressing externalities Education, environment Regulating Monopoly Overcoming imperfect education Insurance, financial regulation Social Insurance

X-axis

Activist Functions
Industrial policy Wealth redistribution

Strength of State Institutions Scope of State Functions

Strength of State Institutions

Quadrant I

Quadrant II

Quadrant III

Quadrant IV

Scope of State Functions

Strength of State Institutions

France United States Japan USSR

Turkey

Brazil
Sierra Leone

Scope of State Functions

Strength of State Institutions

New Zealand 1995 USSR 1980 New Zealand 1981

China 2000

China 1978

Russia 2000

Scope of State Functions

Strength of State Institutions

Path I Path IV

Path III

Path II

Scope of State Functions

component Organizational design and management Institutional design Basis of legitimation Social and cultural factors

discipline management; public administration; economics political science; economics; law political science sociology; anthropology

transferability

high medium medium-low low

Central issue of all organizational theory is delegated discretion Underlying issue in socialism debate (Hayek), corporate structure (Chandler), federalism Contemporary approach brings this under a principal-agent framework

Ambiguity of goals Impossibility of erecting formal system of monitoring and incentives Inability to determine appropriate degree of delegation ex ante

High

Quadrant I

Quadrant II

Specificity

Quadrant III

Quadrant IV

Low
Low

Transaction volume

High

High

Aircraft maintenance Telecoms Central banking Railroads

Specificity

Highway maintenance
Foreign affairs University education Court systems Primary school teaching Preventative medicine Guidance counseling Low Transaction volume High

Low

Need to understand better where different public sector activities fall in the matrix
Seek to fix problems that are actually solvable

New approaches to activities for which there are no best practices Need to teach development differently

Need for metis (Scott) Does not necessarily imply leaving local institutions in place Requires rather contextual judgment about applicability of foreign models Need to think about the structure of decisionmaking rather than content of decisions

Japan: MacArthurs decision to keep the Emperor

versus the clean break in Germany

Iraq: disbanding the Iraqi Army

IFIs and donor community complicit in destruction of institutional capacity Contradiction between objectives of capacity-building and provision of services Need to rethink aims and emphasis of Phase II nation-building

Inevitable conflict between need to provide governance and early local ownership Recent cases of authoritarian state building
High representative in Bosnia, CPA in Iraq

Need to tolerate loss of control in the interests of local buy-in