Subcontracting State-Building

Abstract

Contemporary development assistance often takes the form of subcontracted state-building. Foreign donors hire for-profit firms to provide services and to improve or create institutions in developing countries, particularly those experiencing internal conflict. This arrangement creates two counterproductive dynamics: first, it introduces agency problems between donors, recipient states, subcontractors, and citizens; and second, it undermines the long-run development of domestic bureaucratic capacity by creating disincentives for the host government to invest. These dynamics hinder, rather than foster, the legitimacy of state institutions. This paper summarizes trends in external support to state-building since the 1970s and illustrates subcontracted state-building with examples from Colombia.