How Can State Capacity Be Measured?

How Can State Capacity Be Measured?

Sub: Economy

Sec: National Income  

State capacity refers to the ability of a state to successfully deliver public goods and services to its citizens. It is considered by many public policy experts to be the major factor that explains why some countries are rich or developed while others remain underdeveloped.

 Common Measures of State Capacity

• Tax Revenues:
  • Tax to GDP Ratio: The most common way to measure state capacity is by its ability to collect sufficient tax revenues.
  • Countries with a higher tax to GDP ratio, typically rich countries, are considered to possess greater state capacity.
  • Example: Developing countries like India are often urged to boost their tax to GDP ratio to build state capacity.
• Employment in Public Sector:
  • Number of Public Officials: Another indicator is the number of people employed by the state.
  • Police Officials per Capita: Indicates the state’s capacity to maintain law and order.
  • Judges and Courts per Capita: Reflects the state’s ability to deliver justice.

Criticisms of Traditional Measures

• Efficiency vs. Size:
  • Efficiency Argument: More efficient states may deliver public goods with lower taxes and fewer staff.
  • Critics argue that the number of public employees and the amount of taxes collected only reflect the state’s size, not its effectiveness.
• Causal Link Between State Capacity and Success:
  • Tautological Attribution: Critics like U.S. economist Bryan Caplan argue that attributing the success of rich countries solely to strong state capacity is tautological.
  • Economic Growth Argument: It could be that strong economic growth allowed developed countries to fund larger states, rather than large states causing economic success.

Alternative Measures

• Upholding Rule of Law:
  • Delivering Efficient Justice: A better way to measure state capacity, according to critics, is to gauge a state’s ability to uphold the rule of law and deliver efficient justice to its citizens, regardless of its size as measured by tax collections or headcount.