Why did the euro crisis start in Greece, which couldn’t control its public spending during the boom years prior to 2010, while Germany was able to maintain budget discipline? Careful comparative study of the dynamics of state building and public-sector modernization shows that while some developed countries (defined as those beyond a standard threshold of per capita income) managed to enter the 21^st century with reasonably effective and uncorrupt governments, others continue to be plagued by clientelism, corruption, poor performance, and low levels of trust both in government and in society more broadly. If we can explain this variance, it may provide some insight regarding strategies that contemporary developing countries might use to deal with problems of corruption and patronage today.

All societies began with what Weber called patrimonial states, governments that were staffed with the friends and family of the ruler, or those of the elites who dominated the society. These states limited access to both political power and economic opportunity to individuals favored by the ruler; there was little effort to treat citizens impersonally, on the basis of universally applied rules.¹ Modern government—that is, a state bureaucracy that is impersonal and universal—develops only over time, and in many cases fails to develop at all.

It is not difficult to select cases that vary in terms of the success or failure of this modernization process. Germany developed the core of a modern state by the early decades of the 19^th century. Japan created a modern bureaucracy almost from scratch shortly after the country was opened up during the Meiji Restoration. Italy and Greece, by contrast, never developed strong modern states and continue clientelist practices today. Britain and the United States are intermediate cases: Both had patronage-ridden bureaucracies in the first half of the 19^th century, or, in the case of the United States, full-blown clientelism. Britain reformed its system fairly decisively following the Northcote-Trevelyan Report in the 1850s, while the United States reformed its public sector incrementally from the early 1880s through the 1930s.

Patrimonial states can be highly stable. They are constructed using the basic building blocks of human sociability, that is, the biological inclination of people to favor family and friends with whom they have exchanged reciprocal favors. Elites build power through the management of patronage chains by which clients follow patrons in pursuit of individual rewards. All of this is reinforced by ritual, religion, and ideas legitimating a particular form of elite rule. These elite groups are much better organized than others in the society—particularly dispersed and poverty-stricken peasants in agrarian societies—and have better access to weapons and training in the use of violence. As the scale of the society increases, informal patronage networks are converted into more formally organized clientelistic hierarchies. But the basic organizing principle of politics—reciprocal altruism—remains the same. Once they achieve political power, the elites running this type of system can be displaced by other, better-organized elite groups but seldom by the non-elites below them. These types of premodern states have succeeded in enduring for centuries and continue to exist around the world at the present moment.

Routes to Modern Government

How, then, did any society succeed in making the transition from a patrimonial to a modern state? The admittedly limited number of cases selected here suggests that there are at least two important routes.

The first comes by way of military competition. Ancient China, Prussia, and Japan all engaged in prolonged struggles with their neighbors in which efficient government organization was critical to national survival. Military competition creates imperatives far more powerful than any economic incentive: Nothing is worth very much, after all, if one’s entire family is likely to be slaughtered at the end of a war. The need to create an army puts a premium on meritocratic recruitment; it necessitates new taxes and revenue-raising capacity; it requires bureaucratic organization both to tax and to manage the fiscal and logistics chain that supplies the troops in the field; and it upsets interelite relationships by forcing the recruitment of non-elites to serve in and often lead the army.

To the extent that nation building has been critical to successful state building, war has also played a critical role. Once nationalism as a principle took hold at the time of the French Revolution, national identities were forged by adjusting political boundaries to correspond to existing cultural, ethnic, or linguistic communities. This usually required the violent redrawing of borders, or the killing, moving, or forcible assimilation of populations living within them.

State modernization via war is nothing new. China was the first society to set up a coherent, universal, and impersonal state. It was the Chinese who invented meritocracy and the civil examination in the 3^rd century BCE, a practice not widely implemented in Europe until the 19^th century. Both the Mamluks and the Ottomans arrived at a reasonably modern form of public administration through what seems today like the bizarre institution of military slavery: Young men were captured in foreign lands and taken from their families to be raised as soldiers and administrators.

Prussia, too, felt the pressure of military competition and gradually put into place the elements of modern autonomous bureaucracy that have survived into the present. This began with the Great Elector’s decision in 1660 not to disband the army after the Peace of Oliva but rather to maintain a standing military whose revenue needs necessitated reorganization of the country’s entire administrative structure. Prussia’s defeat by Napoleon in 1806 forced the opening of the bureaucracy to the middle classes under the Stein-Hardenberg reforms. Establishment of an elite, merit-based bureaucracy created an absolutist political coalition in support of the continuing autonomy of the bureaucracy. Thereafter, any time a politician or political party tried to place political appointees in the bureaucracy, the latter’s supporters would express great opposition, and the politician would be forced to back down. In Prussia this autonomy was carried too far, such that democratically elected leaders found it impossible to bring the military part of the bureaucracy to heel. Bismarck forged a modern German nation through war, and unleashed an aggressive nationalism that culminated in the two world wars of the 20^th century. State modernity and national identity were therefore purchased at a terribly high price.

The second route to state modernization was via a process of peaceful political reform, based on the formation of a coalition of social groups interested in having an efficient, uncorrupt government. Underlying the formation of such a coalition is the process of socioeconomic modernization. Economic growth drives social mobilization through an expanding division of labor. Industrialization leads to urbanization, requirements for higher levels of education, occupational specialization, and a host of other changes that produce new social actors not present in an agrarian society. These actors have no strong stake in the existing patrimonial system; they can either be co-opted by the system, or they can organize an external coalition to change the rules by which the system operates.

The latter scenario unfolded in Britain and the United States. Both countries were early industrializers, and the new middle-class groups thereby formed led a drive for civil service reform whose legislative expressions were the Northcote-Trevelyan reform and the Pendleton Act. The British reform process unfolded much more quickly than the American one for several reasons: First, the British elite was more compact and had considerable control over the reform process; second, the Westminster system posed many fewer obstacles to decisive political action than America’s complex system of checks and balances. The courts, opposition on a state level, and the difficulty of achieving a clear legislative majority all slowed the American reform process but were unimportant in the British case. The most important difference, however, was the fact that clientelism had become deeply rooted in American politics prior to the onset of reform and hence was much harder to eradicate.

This brings us to the question of clientelism, and why it is so much more powerful and pervasive in some countries than others. The answer suggested by these cases is that it is basically a question of the sequence by which modern institutions are introduced and, in particular, the stage at which the democratic franchise is first opened.² Clientelism, the trading of votes and political support for individual benefits rather than programmatic policies, is distinguished from elite patronage systems in which the scope of clientelist recruitment is far more limited and less well organized. Clientelism appears when democracy arrives before a modern state has had time to consolidate into an autonomous institution with its own supporting political coalition.

Clientelism is an efficient form of political mobilization in societies with low levels of income and education, and is therefore best understood as an early form of democracy. In the United States, Greece, and Italy, the franchise was expanded prior to the creation of a modern state: in the 1830s in the United States, from 1844 to 1864 in Greece, and in the period after 1946 in Italy. Political parties in all three countries used their public bureaucracies as sources of benefits to political clients, with predictably disastrous consequences for state capacity. The principle of effective government is meritocracy; the principle of democracy is popular participation. These two principles can be made to work together, but there is always an underlying tension between them.

The interactions between the different dimensions of development are of course considerably more complicated than this and can be illustrated in the figures on the next page.

Figure 1 illustrates the Prussian/German development path. Prussia began building a strong state for reasons that had nothing to do with economic development; rather, it was needed for national survival. (The dotted line linking state building and accountability indicates that the impact of the former on the latter was negative.) While state building occurred under absolutist governments, it did have a positive impact on the development of the rule of law. The bureaucracy ruled through law; while the state did not accept the principle of democratic accountability, its sovereignty was increasingly based on the notion that the bureaucracy was the guardian of the public interest.

The combination of a modern state and rule of law then set the stage for the takeoff in economic growth that began around the middle of the 19^th century. Economic historian Alexander Gerschenkron noted that in late-developing Germany the state played a much larger role in promoting economic growth than it did in England. Just as important was the fact that it had a high-capacity state at the beginning of the industrialization process.³ Economic growth then led to the emergence of a working class and its mobilization under the banner of German Social Democracy. The German road to liberal democracy went through war, revolution, and repression in the early 20^th century. The early development of a strong and autonomous state had a very negative impact on democratic accountability, helping to drive the country into World War I and then undermining Weimar democracy. A fully institutionalized liberal democracy emerged only with the birth of the Federal Republic in 1949.

The United States took a very different path toward political modernization. The United States inherited from Britain a strong rule of law in the form of the Common Law, an institution that was in place throughout the colonies well before the advent of democracy. The rule of law, with its strong protection of private property rights, laid the basis for rapid economic development in the 19^th century. The early introduction of universal white male suffrage, however, had a decidedly negative impact on American state building by making clientelism pervasive throughout virtually all levels of government (the dotted line in Figure 2). Growth, however, created new social groups, mobilized through civil society and as new factions within existing political parties. A reform coalition then led the drive to modernize the American state.

Finally, Figure 3 illustrates the Greek/southern Italian path. The entry point for development was neither state building nor economic growth; rather, it was social mobilization (which can also be described as modernization without development) and early democratization. The weakness and lack of opportunity in the capitalist economy made the state an early object of capture, first by elite social groups and then by mass political parties as democracy deepened. Extensive clientelism weakened state capacity, which then further constrained prospects for economic growth (the dotted lines).

Corruption and the Middle Class 

In Britain and America, economic modernization drove social mobilization, which in turn created the conditions for the elimination of patronage and clientelism. In both countries, it was new middle-class groups that sought an end to the patronage system. This might lead some to believe that socioeconomic modernization and the creation of a middle class will by themselves create modern government. But this view is belied by the Greek and Italian cases, societies that are wealthy and modern and yet continue to practice clientelism. There is no automatic mechanism that produces clean, modern government, because a host of other factors is necessary to explain outcomes.

One of these factors is the quality of economic growth. Industrialization came late to both Greece and southern Italy, and the process of urbanization had a very different character from what went on in Britain and the United States. In the latter countries, new occupational groups and social relationships were created by industrialization; in Greece and southern Italy, the population of the countryside simply moved into the cities, bringing with them rural habits and ways of life. In a thriving capitalist economy, one’s self-interest is often best advanced through broad public policies, like lower tax rates, different forms of regulation, and consistent standards for internal and external trade. When Gemeinschaft is preserved intact by the ruralization of cities, by contrast, it is much easier to preserve clientelistic forms of social organization. The individual payoffs that are the essence of clientelism matter more than policies.⁴

Second, there is no guarantee that a member of the middle class will support an anti-clientelistic reform coalition. Even within the United States, not all of the new social actors produced by industrialization signed up with the Progressive movement. The railroads figured out how to make use of the existing patronage system to their own benefit; in many cases it was rather the customers of the railroads—the merchants, shippers, and farmers—who led the charge against what they perceived as a cozy relationship between the railroads and politicians. There was in a sense a race between the newly organizing middle-class interests opposed to patronage and the existing urban machines to sign up new social groups like recent immigrants.

In Greece and Italy, the race to recruit the middle classes to a reform coalition was lost almost before it began. In Italy, there was a strong reformist middle class in the North that could have led a coalition to try to change the nature of politics in the South. But these groups found the job far too ambitious, given the weakness of the existing state; it was easier to guarantee peace and stability by making use of local elites and their chains of clients. In both places, the least clientelistic groups were those on the extreme left, the Greek and Italian Communists. But both parties had an agenda of overturning the democratic political system as a whole and were therefore strongly opposed by external powers including Britain and the United States. (In Italy, the Communists succeeded in coming to power locally in Turin and Bologna, and were generally credited with running relatively clean and effective municipal governments.) While the Progressives in the United States tended to be on the Left as well, they had a strong stake in preserving the existing American system and therefore had a much better chance of taking power at a national level.

Third, cultural factors may explain the difference in outcomes between Germany, Britain, and America on the one hand and Greece and Italy on the other. Self-interest explains only part of the reason that different social groups push for change, and it does not capture the high degree of moralism that often accompanies such movements. In each of these countries, individual leaders of reform movements were motivated by personal religiosity. They included the Great Elector and Frederick William I of Prussia, whose Calvinism induced them to import coreligionists from abroad and gave them a disciplinary vision of an austere and moral society led by an upright state. Calvinism also infused the Dutch state, which had accumulated extraordinary wealth and power in the 17^th century after winning independence from Catholic Spain.⁵ From well before the English Civil War, Puritanism was an important driver of reform in England, and it continued to shape the behavior of the new middle classes in the 19^th century. This was true as well of the upper-crust Progressive Era reformers in late 19^th-century America, who did not think merely that political bosses and patronage politics got in the way of making money. They were morally outraged that public offices were being perverted for private ends. While Americans may distrust state authority, they also believe that their democratic government is deeply legitimate, and that manipulation of the democratic process by monied interests and corrupt politicians is a strike against the democratic principle itself. Individual leaders like Gifford Pinchot, a pioneer of the U.S. Forest Service, were driven by a kind of Protestant religiosity that has largely disappeared from contemporary American public life.

Putting loyalty to the state ahead of loyalty to family, region, or tribe requires a broad radius of trust and social capital. Britain and the United States are traditionally societies with good endowments of both, at least in comparison to Greece and southern Italy. It is impossible to create social movements if people cannot be motivated to join civil society organizations, and they will not be inspired unless there is some ideal of civic responsibility to a larger community present among their fellow citizens.

The sources of social capital in Britain and the United States were varied. One had to do with the sectarian form of Protestantism, noted above, that took root in both countries and encouraged the grassroots organization of religious life that did not depend on centralized, hierarchical institutions. But the second source had to do with strong national identity organized around institutions—in Britain’s case, the Common Law, Parliament, and the monarchy; in America’s case, a similar Common Law tradition and the democratic institutions emanating from the Constitution. By the 19^th century, government in both countries came to be seen as a legitimate expression of national sovereignty and an object of considerable loyalty.

Greeks and Italians always had a more troubled sense of national identity. Greek society was very homogeneous on ethnic, cultural, and religious levels, but the Greek state was frequently seen as a tool of foreign powers and therefore illegitimate. Loyalty was therefore limited to a narrow circle of trust around the immediate family; the state was an object of suspicion.

Italy, particularly in the South, had also been the playground of various foreigners who set Italians against one another. The unified country that emerged after 1861 yoked together regions of very different cultures and levels of development, and never generated the kind of centralized political power that could assimilate the South to the North. To this day, regional loyalties often trump national identity, as the very existence of the Northern League suggests. There have been heroic individuals inspired by a strong sense of civic duty, in the South, like Alberto dalla Chiesa and Giovanni Falcone. There is also the residue of a strong civic republican tradition in the cities of the North. But especially in the Mezzogiorno, the lack of legitimate state institutions narrowed the radius of trust to friends and family, a tendency that then became institutionalized through organizations like the Mafia.

Before Americans, Britons, or Germans get too self-satisfied about their own political systems, however, it is important to note that the problem of patrimonialism is never finally solved in any political system. Reliance on friends and family is a default mode of human sociability and will always return in different forms in the absence of powerful incentives to behave otherwise. The modern, impersonal state forces us to act in ways that conflict deeply with our own natures and is therefore constantly at risk of erosion and backsliding. Elites in any society will seek to use their superior access to the political system to further entrench themselves, their families, and their friends unless explicitly prevented from doing so by other organized forces in the political system.

This is no less true in a developed liberal democracy than in other political orders. The Progressive Era reforms in the United States eliminated one particular form of clientelism: the ability of the political parties to secure support through the distribution of jobs in the bureaucracy at Federal, state, and local levels. It did not, however, end the practice of distributing other kinds of favors, such as subsidies, tax breaks, and other benefits, to political supporters. One of the big issues afflicting American politics in recent years has been the impact of interest groups that are able to effectively buy politicians with campaign contributions and lobbying. Most of this activity is perfectly legal, so in a sense the United States has created a new form of clientelism, only practiced at a much larger scale and with huge sums of money at stake.

This is not only an American problem. Japan, as noted, has a tradition of strong, autonomous bureaucracy, and jobs in the bureaucracy were never the currency of corruption there. On the other hand, budgetary perks have for many decades been the currency of so-called money politics in Japan, with the Liberal Democratic Party maintaining its hegemony over several decades by skillfully handing out political pork. The ability of Japanese interest groups like the electric power industry to capture regulators was evident in the crisis that enveloped the country in 2011 after the Tohoku earthquake and the Fukushima nuclear disaster.

Give War a Chance? 

Military competition was an important driver of state modernization in many cases, but it is in itself neither a sufficient nor a necessary condition to achieve this end. Successful cases can readily be cited, but several observers have pointed out that prolonged military competition in other parts of the world has not produced modern states. This is true among the tribes of Papua New Guinea and other parts of Melanesia, which fought one another for some 40,000 years and were nonetheless unable to achieve even state-level forms of organization prior to the arrival of European colonizers. This has also been largely true in Latin America, where wars have ended with patrimonial elites still in power. There are clearly other conditions, such as physical geography, the class structure of societies, and ideology, that combined with war to produce modern states in Asia and Europe but not elsewhere.

Conversely, other countries have created modern, non-clientelistic governments without military competition. While Sweden and Denmark fought large numbers of wars in the early modern period, their neighbors Norway, Finland, and Iceland did not, and yet all have very similar clean governments today. Korea was the victim of outside aggression, occupation, and violence beginning in the late 19^th century up through the end of the Korean War, and yet it has a bureaucratic system equal in quality to that of Japan, as does the former British colony of Singapore. Canada, Australia, and New Zealand have modern, non-clientelistic states and yet were never militaristic in the manner of Prussia or Japan.

In many of these cases, high-quality government was the result of a direct colonial inheritance (Norway became independent of Denmark in 1813, Iceland in 1874, and Canada separated from Britain in 1867). In others, it was due to a deliberate copying of other models. Singapore and Malaysia created effective modern governments virtually from scratch out of materials that seemed initially very unpromising, in response to perceived challenges from leftist forces that were mobilizing across Southeast Asia.⁶

These observations have important implications for the present. In a half-serious vein, Edward Luttwak once suggested that the international community needed to “give war a chance” in weak-state zones like sub-Saharan Africa.⁷ Modern states, he argued, had been forged over the centuries in Europe through relentless military struggle; Africa, with its irrational colonial-era state boundaries, had not been allowed to sort itself out in a similar manner. The states there created neither strong bureaucracies nor overarching national identities.

Apart from the fact that no one should wish Europe’s violent experience on anyone else, it is not clear that even a couple of centuries of conflict would actually produce strong states in other parts of the world. Why this is so, and what alternative approaches might be taken to state building in Africa, turns on the several legacies of colonialism. On the other hand, the fact that other states achieved modern governments without war suggests that developing states today might choose similar peaceful paths.

The fact that the early introduction of democracy encouraged clientelism, and that today’s strong states were often forged prior to the onset of democracy, might further suggest that contemporary developing countries should try to follow the same sequence. Samuel Huntington drew that very conclusion in Political Order in Changing Societies—that societies needed order before they needed democracy, and that they were better off making an authoritarian transition to a fully modernized political and economic system rather than trying to jump directly to democracy. Huntington praised not just existing Communist regimes for their ability to expand political participation and force the pace of economic growth; he also wrote approvingly of systems like the one created by Mexico’s Institutional Revolutionary Party (Partido Revolucionario Institucional, or PRI), which ruled the country from the 1940s up until 2000 and returned to power in 2013. The PRI created a tremendously stable political order that replaced the coups, military caudillos, and violent social conflicts that characterized Mexico’s first century of national existence, but at the expense of democracy and economic vitality.⁸ Huntington’s student Fareed Zakaria has made a similar argument about the importance of sequencing, emphasizing less political order in itself than a liberal rule of law as a necessary first step prior to the onset of democracy.⁹

While this type of argument would seem to flow logically from a host of cases, it is not such a good guide to policy in the present.¹⁰ It is fine to say that societies should create a strong, autonomous Weberian bureaucracy first, or else put into place a liberal rule of law with its independent courts and well-trained judges. The problem is that, as a matter of institutional construction, it is not easy to do either. Institutions are often predetermined by historical legacies, or shaped by external powers. Many poor societies in the developing world have been able to create authoritarian states that stay in power through some combination of repression and co-optation. But hardly any has been able to create a Chinese mandarinate or German Rechtsstaat, in which authoritarian power is embodied in a highly institutionalized bureaucracy and operates through clearly articulated rules. Many contemporary authoritarian states are riddled with patronage and high levels of corruption. The only countries in the contemporary world that come close are some Persian Gulf monarchies, as well as Singapore, whose peculiar circumstances make them difficult models for anyone to emulate. Under these circumstances, what is the point of putting off democratization if the alternative is a ruthless and/or corrupt and incompetent dictatorship?

The final reason why a deliberate effort to sequence the introduction of political institutions is problematic is a moral or normative one. Accountability through periodic free and fair elections is a good thing in itself, apart from any effects it may have on the quality of government or economic growth. The right to participate politically grants recognition to the moral personhood of the citizen, and exercise of that right gives that person some degree of agency over the common life of the community. The citizen may make poorly informed or bad decisions, but the exercise of political choice in and of itself is an important part of human flourishing. This is not simply my private opinion; around the world, large masses of people are now mobilized to defend this right of political participation. The Arab Spring of 2011 is just the latest demonstration of the power of the idea of democracy, in a part of the world where many assumed there was a cultural acceptance of dictatorship.

In countries like Prussia and Britain that did experience a sequenced introduction of modern political institutions, the older nondemocratic regimes were traditional monarchies that had their own sources of legitimacy. This is not true for the vast majority of authoritarian countries that emerged in the wake of colonialism in the mid-20^th century, which were founded in military coups or elite power grabs. The most stable among them—Singapore and China—maintained their legitimacy through good economic performance but lack clear wellsprings of support like the Hohenzollern dynasty.

For better or worse, then, most contemporary developing countries do not have a realistic option of sequencing, and, like the United States, have to build strong states in the context of democratic political systems. That is why the American experience during the Progressive Era is singularly important. No country today can realistically try to imitate Prussia, building a strong state through a century and a half of military struggle. On the other hand, it is possible to imagine civil society groups and political leaders in democratic countries organizing reformist coalitions that press for public-sector reform and an end to gross corruption. The single most important lesson to be drawn from the American experience is that state building is above all a political act. The structure of a modern state may be specified by certain formal rules (for example, selection of officials based on merit rather than connections), but implementation of these rules inevitably hurts the interests of some entrenched political actors who benefit from the status quo. Reform therefore requires dislodging these actors, working around them, and organizing new social forces that will benefit from a cleaner and more capable form of government.

State building is hard work, and it takes a long time to accomplish. Elimination of patronage at a Federal level took more than forty years, from the Pendleton Act to the New Deal. In New York, Chicago, and other cities, political machines and patronage survived until the 1960s. The American political system puts up high barriers to reform, however, and not every country is like this. Oftentimes countries can make use of external crises like financial meltdowns, natural disasters, or military threats to accelerate the process. But there are very few historical precedents for this type of political modernization happening overnight.

State building in Greece was particularly difficult because of the role of outside powers. Greece was ruled for centuries by the Turks; foreigners helped the country win its independence; they imposed Otto of Bavaria as the first King of the newly independent country; they attempted a crash modernization of its political system and continued to intervene to either support or oppose domestic groups like the Greek Communists. All of this weakened the legitimacy of Greek governments, increased levels of distrust in the state, and ultimately failed to produce a fully modernized political system. In a way, the struggle among the European Union, the IMF, and the Greek government over the financial crisis early in the 21^st century is only the latest chapter in this ongoing story.

Greece exemplifies the effort to transplant modern political institutions from one part of the world to another. The process of globalization began in earnest with the European voyages of discovery in the 15^th century and the onset of colonialism, which suddenly brought entire regions of the world in contact with one another. The confrontation of indigenous societies all over the world with Western culture and institutions had profound and often deadly consequences. It also meant that political development would forever cease to be something that happened largely within the confines of a single region or society. Foreign models would be forcibly imposed or voluntarily adapted by locals, with very different conditions for institutional development. Why has this process worked better in some parts of the world than in others? Another very good and important question.