Monopoly of Taxation Without a Monopoly of Violence: The Weak State’s Trade-Offs From Taxation

Soeren J. Henn, Newcastle University Business School, Christian Mastaki Mugaruka, Marakuja Kivu Research, Miguel Ortiz, University of California, Berkeley, Raúl Sánchez de la Sierra, University of Chicago and National Bureau of Economic Research, and David Qihang Wu, University of California, Berkeley

This study presents a new economic perspective on state-building based on a case study in the Democratic Republic of the Congo’s hinterland. We explore the implications for the state of considering rebels as stationary bandits. When the state, through a military operation, made it impossible for rebels to levy taxes, it inadvertently encouraged them to plunder the assets of the very citizens they previously preferred to tax. When it negotiated with rebels instead, this effect was absent, but negotiating compromised the state’s legitimacy and prompted the emergence of new rebels. The findings suggest that attempting to increase taxation by a weak state in the hinterland could come at the expense of safety in the medium term and of the integrity of the state in the long term.