Solid States

Francis Fukuyama, a leading contemporary thinker, has written a very useful, intelligent, and short book: State-Building: Governance and World Order in the 21st Century (2004, Cornell University Press). It examines a central international issue in the age of terrorism the perils (and sometimes necessities) of "state-building" in weak and failed states. Hopefully, it will become a "must-read" for State Department policy makers.

Fukuyama begins by describing how the "Washington consensus" of the early 1990s (an emphasis on privatization and market economics) has given way to a new "conventional wisdom" since 1997 that "institutions matter" (an emphasis on legal systems, accountability, transparency, commercial norms, and democratic values). Fukuyama quotes economist Milton Friedman as saying that he was "wrong" to overemphasize the privatization of public institutions in the heady days after the fall of the Berlin Wall. Recently, Friedman told Fukuyama: "It turns out that the rule of law is probably more basic than privatization."

If institutions are crucial what have we learned about them? Fukuyama skillfully walks the reader through major arguments over organizational theory. He is adept at dissecting the often jargon-leaden concepts of the field such as "satisficing," "stovepiping," "transaction intensity," "low-specificity activities," etc., in ways that should retain the interest of the non-specialist general reader.

There are two broad theories of organizations. First, an economic model that assumes members of organizations (both public and private) act as self-interested individuals. Therefore, this theory seeks to build rational, mathematical models to predict behavior. Incentives (usually monetary) are emphasized to improve performance. The rival sociological model, posits that individuals in organizations often act in non-rational ways. This model argues that informal norms, values, group goals, shared experience, the "culture" of the organization, leadership, and other non-rational factors often prevail over self-interested calculation.

While recognizing that incentives are important, Fukuyama leans toward the sociological model; because he notes, "the [economic] assumption that people in organizations are motivated primarily by individual self-interest" is "too limited." He points out that an employee who joins an organization "simply to have a job" can end up developing "intense loyalty to other members of her team working nights and weekends to help the team defeat a rival." Conversely, another employee might intensely dislike a co-worker and do "everything he can to undermine that person even at the expense of the broader organization and his own career."

Fukuyama concludes that "public administration is idiosyncratic and not subject to broad generalization." Thus, there is no general social scientific theory of organizations or public administration that could assist developing nations. However, while there are no lists of "best practices" that foreign aid officials should promote, this "organizational ambiguity" does not mean that "anything goes." There are "bad practices" (cronyism, corruption) to be avoided.

The author of a book on "social capital," Fukuyama believes that culture, values, and norms are crucial while, at the same time recognizing that culture can change over time, and that "over-punctilious deference to local customs" can be counterproductive. However, in the end, Westerners hoping to build "institutional capacity" in developing nations (or what we used to call the "third world), need to combine knowledge of foreign administrative practices with "a deep understanding of local constraints, opportunities, habits, norms, and conditions." Thus, "institutional solutions need to be developed not just with input or buy-in from the local officials who will be running the local institutions, but by them." Indeed, the "single, most important obstacle" to institutional development in poor countries, Fukuyama states, is "insufficient domestic demand" for reform.

Fukuyama has some favorable things to say about the Bush Administration's U.S. Millennium Challenge Account (USMCA) and the general policy of the National Endowment for Democracy (NED) because they allow locals to, first, develop their own projects, and, then, be held accountable for them. Thus, "demand" comes from the locals.

After examining the problems of weak states and reviewing the relevant academic literature, Fukuyama turns to questions of sovereignty and international legitimacy. He contends that weak or failing states have become the "single most important problem for international order." Moreover, these states have weakened the principle of sovereignty. The humanitarian interventions of the 90s created a de-facto international imperial power in places like Bosnia, Kosovo, Cambodia, Sierra Leone, and East Timor and set a precedent that national sovereignty was not an absolute principle. The record of the UN, the European Union (EU), and the US in this international imperium has met with very limited success in assisting the development of indigenous institutions.

The American historical record, he notes, in places like Haiti, Nicaragua, Panama, and the Philippines (and recent experience in Iraq) suggests the limited (and long-term) nature of successful state-building. Nevertheless, Fukuyama argues the interventions of the 90s were worthwhile because they responded to immediate humanitarian crises. Sometimes nations must address short-term problems and defer the long-term institutional issues. Moreover, Fukuyama contends, in today's post 9/11 world, the threat of terrorism dictates that future attempts at state-building (in some form and despite all the myriad limitations noted) cannot be avoided.

The chief (and perhaps only major) flaw in the book comes in Fukuyama's analysis of US-European differences over democratic legitimacy at the international level. Fukuyama states that Americans believe legitimacy "is rooted in the will of democratic majorities in constitutional nation-states," whereas Europeans believe it is "based on principles of justice higher than wills or laws of particular nation states," and that it "flows from the will of an international community." Fukuyama says, the "European view is correct in an abstract sense, but wrong in practice," because there is a moral realm beyond nation-states and national democratic majorities can violate human rights.

But Fukuyama unnecessarily cedes the moral high ground to continental European elites by mischaracterizing the American view as nakedly majoritarian. After all, the American regime is founded on "natural rights" as well as "consent," whereas the EU is based on neither the consent of the governed, nor inherent natural rights, but on "values" that are constantly "evolving" and hence, simply the conventional wisdom of elites at a particular moment in time. Thus, the European view is "correct," neither in principle nor in practice. Americans as much as (actually, more than) European elites believe in a higher moral realm of political legitimacy. However, (as Princeton's Robert George has noted) they also believe that un-elected elites (national or transnational) are not the sole interpreters of what constitutes this moral realm and universal human rights.

Like Robert Kagan in Paradise and Power, Fukuyama assumes a monolithic "European" view that ignores both popular opinion in Europe and the traditional British view of democratic sovereignty that differ from Franco-German thinking. Again, like Kagan, Fukuyama is overly solicitous of Continental elites and their creation: the EU. Far from being an "end of history" paradise this entity could more accurately be characterized as a "post-democracy" bureaucratic regime.

That said, in the final section, Fukuyama rightly rejects the "twilight of sovereignty" crowd "whether…proponents of the free market on the right or committed multilaterialists on the left." Power (including "traditional military power" and "soft power," like "the art of nation-building") exercised by sovereign nation-states is necessary for international security. The "motley collection of multinational corporations, nongovernmental organizations, international organizations, militias, terrorist groups and so forth" is no effective substitute for the sovereign nation state our task, Fukuyama says, is to "try to understand once again how to make it strong and effective," while, at the same time, keeping its functions limited.

This article appeared in National Review on September 13, 2004.