In the previous section, we focused on the challenges to the state’s monopoly of violence, and put emphasis on violent entrepreneurs vis-à-vis the failed state. However, it should not be forgotten that even a failed state is a legitimate user of violence, a non-monopolist violence-managing agency, and it therefore has some ability to extract, manage and distribute resources within its borders. Moreover, scholars like Markus underline the fact that failed states, or more precisely the disorganized bureaucrats of failed states, employ predatory practices, using the state power vested in them to engage, illegally, in coercive appropriation of non-monetary property (e.g., companies) for their private gain.[1] Although it appears in different forms, predation is a common trait in failed and predatory states, that is, in two state types that are otherwise vastly different. After all, a predatory state not only maintains the monopoly of the legitimate use of violence but it is also a strong state, as opposed to a failed state that is weak.
Similar parallels between seemingly remote state types can be noticed. Maximum amplitude of arbitrariness is a common trait in mafia states and developmental states.[2] Indeed, when authors see a mafia states they often mistake it for a developmental state. For they focus only on this aforementioned aspect of “picking the winners” while missing the point that the respective state bears the characteristics of such states—clan, neopatrimonial, predatory and criminal state—that run on the principle of elite interest and not on societal interest or ideology implementation.[3] Another parallel is between the party state and the welfare state: both rely on the dominance of formal institutions and normative state action that targets groups and not individuals. Kornai goes so far as to call the Hungarian reform communist state a “premature welfare state,” drawing a parallel in universal entitlements.[4] Yet it is true of the classical Stalinist model as well (which the ideal type of communist dictatorship is based on) that it targets groups, namely classes in the process of nationalization and collectivization [→ 5.5.1].
To be able to see such similarities without the risk of confusing different state types, a comparative framework can be created. We develop this framework as an extension of an often-cited article by Timothy Frye and Andrei Shleifer, who attempted to situate 1990s’ Russia in a conceptual space of three ideal-type models of interaction of political and economic actors.[5] According to them, the state of oligarchic anarchy is the closest to the so-called “grabbing-hand model,” which is in contrast to the “invisible-hand model” (invoking the famous metaphor of Adam Smith). For under the invisible-hand model “the government is well-organized, generally uncorrupt, and relatively benevolent. It restricts itself to providing basic public goods, […] and some regulations, and it leaves most allocative decisions to the private sector.”[6] In contrast, in the grabbing-hand model “government is […] interventionist, but much less organized […]. The government consists of a large number of substantially independent bureaucrats pursuing their own agendas […]. [They] are scarcely guided by a unified public-policy stance, and they remain largely independent of courts, capable of imposing their will in commercial disputes, and empowered to impose on business a variety of predatory regulations.”[7] As for the third ideal type model, the authors identify—based on cases like China and South Korea—the “helping-hand model,” where“bureaucrats are intimately involved in promoting private economic activity: they support some firms and kill off others, pursue industrial policy […]. The legal framework plays a limited role in this model, because bureaucrats adjudicate most disputes. Bureaucrats are corrupt, but corruption is relatively limited and organized.”[8]
In our terms, Frye and Shleifer describe the failed state, the night-watchman (or perhaps the liberal welfare) state, and the developmental state by grabbing, invisible and helping hand, respectively. However, this framework can be refined to encompass six state types, including—beyond the previous ones—the welfare state, the (totalitarian) party state and the predatory state (Figure 2.4). To do this, we need to redefine the three “hands,” which can be done by focusing on the feature that all types of state—even failed states—share: that they use legitimate violence to extract, manage and distribute resources within their borders [→ 2.2.1]. True, they also all regulate for they all have laws and prescribe a legal framework [→ 4.3.4] but different state types do not all use different forms of regulations and therefore this is not the feature they can be differentiated by. Focusing on the aspect of resource extraction and distribution, however, we can distinguish states by (1) what kind of resources they distribute predominantly, namely whether they take over monetary property (as in taxation) or non-monetary property (as in predation or expropriation [→ 5.5.3]) most prominently, and (2) for what end they do so, which can usually be captured in terms of dominant principles of state functioning. In these terms, we may narrow the invisible-hand model to the night-watchman state, where the state takes over (1) monetary property (2) to maintain its own functioning. That is, a night-watchman state still finances itself from taxes, using its monopoly of violence to extract resources,[9] but it uses tax monies only to maintain its basic functions of police, courts and national defense. It neither favors certain actors and social groups, nor takes over non-monetary property in any way: it only controls violence and removes coercion from society. Thus, it indeed leaves most allocative decisions to the free market, that is, to the Smithian “invisible hand” (which in our discussion refers to the result of voluntary interactions of private actors).[10]
Moving on to the helping-hand model, it generally features taking over (1) predominantly monetary property, with the takeover of non-monetary property in the forms of eminent domain and nationalization remaining irregular and inessential [→ 5.5.3], and for the purpose of (2) promoting societal interest or ideology. In this case, the state does not remain a neutral actor that lets the invisible-hand process of voluntary decisions determine who gets to own what but steps in to help certain social groups or actors. In other words, the state finds that certain groups or actors would not receive enough resources if others had the right not to give them, and it intervenes to force those others to pool the right level of resources that can be redistributed to target groups or actors.
However, the helping-hand model applies to more than one type of state. At this point, we expand Frye and Shleifer’s framework, adding the aspect of dominant extra-market means. In light of the previous discussion, “market means” refers to voluntary interactions, whereas “extra-market means” refers to coercive interactions of actors. This is not to say that everything that is “market” or private is voluntary, or that everything “state” or public is coercive. A private employer can be coercive in our terms if his employees cannot get a job elsewhere (and therefore the threat of firing them is an existential threat [→ 2.2.1]), whereas states engage in voluntary transactions like trade and selling of state property (privatization). This is why we speak about market or extra-market “means,” that can be used by private as well as public actors.[11] Using the aspect of dominant extra-market means, we can distinguish the state types that belong to the helping-hand model by considering what we mentioned at the end of the previous paragraph: whether the targets are (a) predominantly social groups, like the lower or middle classes, or (b) individual actors, like certain entrepreneurs or companies “of national/strategic importance.” In the case of (a), the predominant extra-market means is normative state intervention, and we can speak about a welfare state; in the case of (b), the predominant extra-market means is discretional state intervention, and we can speak about a developmental state [→ 5.4].
Whether states that belong to the helping-hand model promote societal interest or ideology depends on whether they are autocratic or not, that is, whether the people’s basic rights and liberties are respected or not [→ 2.3]. In any case, the motive of personal-wealth accumulation does not appear as a central goal of governmental actors. True, bureaucrats in developmental states, as Frye and Shleifer note, “often have close economic and family ties to entrepreneurs,”[12] but this is not the basis of their support. An ideal typical developmental state supports firms—through resource allocation as well as various regulatory means—on the basis of impersonal criteria, such as competitiveness in foreign markets (export-oriented industrialization, EOI).[13] A developmental state also relies on the formal bureaucracy and not the patrimonial logic of informal patronal regimes, whereas the leader’s persona or charisma does not play a large role in the system either.[14] Naturally, state intervention creates rents [→ 5.4.2], and their allocation depends on the relative political strength and relations of business groups. This is true of ideal type liberal democracies [→ 5.3.1] just as much as of ideal type developmental states.[15] But this fact alone indicates that bottom-up rent-seeking, and not top-down allocation of rents based on loyalty to the chief patron, is definitive, whereas industrial (public) policy goals are never completely disregarded in face of making—perhaps totally uncompetitive—family members rich. The head of executive in a developmental state typically does not have economic front men either that would accumulate personal wealth from discretional state support [→ 3.4.3, 5.5.4.3].
Finally, we redefine the grabbing-hand model to encompass three state types. In general, the model entails the takeover of (1) non-monetary (as well as monetary) property to promote (2) ideology or elite interest. Distinctively, each state in this model engages in political reorganization of the ownership structure [→ 5.5.1], although they differ in their predominant extra-market means to achieve this. First, we can speak about the party state, which takes over non-monetary property during the establishment of communist dictatorship. Nationalization and collectivization are two processes belonging to this category, when productive property is taken over impersonally, from everyone who privately owns such property,[16] and the economic sphere is subjugated to the political sphere in a bureaucratic merger of power and ownership [→ 1.4.1]. Moreover, such normative state intervention is initiated on an ideological basis, as Marxism-Leninism entails state control of the means of production in general and of the “commanding heights” of the economy in particular.[17] The mafia state—or if we want to reflect only on ownership reorganization, the predatory state—is in sharp contrast to this, utilizing discretional state intervention to promote elite interest. Post-communist predation is not normative on class base but arbitrarily incidental, as prey are chosen by the adopted political family and predation is initiated by governmental actors in a top-down fashion. Basically, the mafia state redistributes non-monetary property from outsider/disloyal owners with autonomous ownership to loyal owners with dependent ownership [→ 5.5.3.4, 5.5.4]. The resultant collusion of spheres of social action remains informal and the rulers accumulate private wealth (through economic front men), as opposed to a party state’s takeovers, where the resultant merger of spheres is formal and no significant private fortunes are amassed from taken-over companies.
As we mentioned above, the mafia state and the developmental state share the trait of wide amplitude of arbitrariness. Indeed, both state types use discretional state intervention as dominant extra-market means, and tools of public authority are used in a coordinated way to achieve their goal. In a mafia state, this means that the legislature, tax authorities, prosecutor’s office etc. are used together, working toward a single goal in a single process of a single machine. This is possible only when a single actor—the chief patron—can direct the instruments of public authority, and so he has the (informal) power to combine them in a targeted campaign against the prey [→ 5.5.4.1]. At this point we reach the state type we began with, the failed state. For it is the feature of coordination that differentiates the grabbing hand of the mafia state and the failed state. In oligarchic anarchy, predation is initiated by individual predators who do not coordinate their attacks, and accordingly use only an isolated segment of state power. As Markus writes, predation in weak states is often conducted by individual actors, who abuse their power for their own private gain. These include policemen, local administrators, directors of state-owned enterprises, tax collectors, or “the agents at any of the myriad of departments with the power to halt productive activity (sanitation, fire safety, social security etc.).”[18] In Chapter 5, we are going to provide a typology of predation, where the actions of such bureaucrat predators will belong to the category of (local and isolated) grey raiding, whereas predation in a mafia state, centrally-led corporate raiding that combines techniques of grey and white raiding [→ 5.5.3.1]. In both cases, we can see the grabbing hand working, and state predators often use the helping-hand rhetoric as well to cover up their actions [→ 6.4.1.4].[19] Yet “grabbing hand” in oligarchic anarchy means a multitude of uncoordinated hands with narrow and opposing interests, while in a mafia state the grabbing hand belongs to the chief patron—or local sub-patrons authorized by him. We mentioned in the previous section that sub-patrons may manage local governments that can operate as sub-sovereign mafia states. Indeed, such local machineries can be used by sub-patrons for predation, and the stratification of single-pyramid patronal networks even allows for competition between members of the adopted family [→ 2.2.2.3]. However, this competition is not uncoordinated as in an oligarchic anarchy. If Markus calls state predators “piranhas,” we may say that the piranhas of oligarchic anarchy swim in a large, unified body of water, and it is only the extent of their power and voracity that limits their action. In contrast, sub-patrons of a mafia state are larger predatory fish with more means than individual bureaucrat predators, but they are also confined to clearly delimited fish tanks, with limited prey and range of authorized illegality [→ 5.3.4.2]. This means that top-level public authority, the chief patron has the power to act both as a predator himself and as a coordinator of predatory actors. This is the precise opposite of the head of executive in a failed state, where predation results from governmental actors not being able to control the state apparatus. In a failed state, opportunity makes the predator; in a mafia state, the predator makes the opportunity.
[1] Markus, Property, Predation, and Protection. We offer a typology of reiderstvo in Chapter 5 [→ 5.5.3.1].
[2] Kang, Crony Capitalism.
[3] Cf. Szentkirályi, “Orbán Viktor félreértett rendszere [Viktor Orbán’s Misunderstood System].” Also, see Chapter 6.
[4] Kornai, “Reforming the Welfare State in Postsocialist Societies.”
[5] Frye and Shleifer, “The Invisible Hand and the Grabbing Hand.”
[6] Frye and Shleifer, 354.
[7] Frye and Shleifer, 354–55.
[8] Frye and Shleifer, 354.
[9] Some proponents of the night-watchman state argue that it should be financed not from taxes but some sort of voluntarily paid fees (most prominently Herbert and Levy, Taxation and Anarchism.). However, we believe this, if feasible, would make such an institution more similar to a countrywide private police or insurance agency than an actual state, risking conceptual stretching of “state” altogether.
[10] Cf. Smith, The Wealth of Nations.
[11] That we still use the word “market” in dichotomy with “extra-market” follows Kornai, who calls lateral relation or horizontal linkage where individuals voluntary agree to transfer something to the buyer “market coordination” [→ 5.6.1].
[12] Frye and Shleifer, “The Invisible Hand and the Grabbing Hand,” 354.
[13] Cf. Choi, “Industrial Policy as the Engine of Economic Growth in South Korea: Myth and Reality.”
[14] Scheiring, Egy Demokrácia Halála [How a Democracy Dies], 278–79.
[15] Kang, Crony Capitalism, 12–18.
[16] Iordachi and Bauerkamper, The Collectivization of Agriculture in Communist Eastern Europe.
[17] Kornai, The Socialist System, 71, 360–62.
[18] Markus, Property, Predation, and Protection, 11.
[19] Frye and Shleifer, “The Invisible Hand and the Grabbing Hand,” 354.