The Social Origins of State Capacity: Organizations, Institutions and Late Development

Cases of successful developmental states constrained by democratic institutions pose challenges to the literature on the political economy of late development. On the one hand, the dominant view is that successful developmental states tend to rely on authority-based coordination mechanisms—corporatist arrangements, labor repression, professional bureaucracies insulated from popular pressures—to solve the social dilemmas created by state intervention in the economy. On the other hand, neo-institutionalist political economy argues that electoral competition should limit the incentives and capacity of rulers to create rents by using state authority to distort markets, transfer resources across private actors, and seek to plan and direct economic activities. Therefore, both of these lines of thought expect democratic developmental states to be rare, short-lived, and unsuccessful. Through a comparative historical analysis of Argentina, Mexico, France, and Sweden, this article expands neo-institutionalist arguments to show how democratic institutions actually made state-led development possible in cases where it was preceded by popular incorporation. However, democratic institutions only performed this coordinating function where the popular classes were also mobilized by internally democratic societal organizations. Where these conditions were present, popular organizations contributed to the success of state-led development by, first, monitoring state-business relations and preventing the capture of industrial policy by private interests; and, second, by maintaining popular support for the developmental program by extracting compensatory public goods that improved living conditions for the population.