State capacity and inclusive development: new challenges and directions

This paper takes stock of recent advancements in the literature on state capacity and connects them to the study of inclusive development. Specifically, four particular lines of argument are presented. First, state capacity is best approached as a multi-dimensional concept that can usefully be disaggregated into three distinct, but interrelated dimensions: (1) the external embeddedness with non-state actors, (2) the organizational competence of state agencies, and (3) their territorial reach. Second, the established focus on geography, external pressures and capitalist development needs to be complemented with close attention to elite politics, ruling coalitions and domestic conflict when identifying key determinants of state capacity. Third, the capacity of states to promote inclusive development is also shaped by historical patterns of state formation itself, in particular the institutional and political legacies left behind by European overseas colonialism. Fourth, contemporary state transformations linked to neoliberal globalisation, democratisation and power shifts in the international order have major implications for the capacities of states to promote inclusive development. The conclusion puts the spotlight on the key issues that should be taken up by future research on the topic.