War, Bureaucracy, and State Capacity: Evidence from Imperial China

War, Bureaucracy, and State Capacity: Evidence from Imperial China Peng Peng November 12, 2018 Abstract Warfare has been at the center of the analysis of state building. This paper explains why provisional financial strategy, driven by fiscal needs of warfare, impairs state capacity through undermining bureaucratic recruitment process. I exploit an original dataset between 1644 and 1911 in the Imperial China to provide empirical evidence that officials who entered the bureaucracy by purchase were less intrinsically motivated and less capable of mobilizing resources when managing crisis. This focus on bureaucracy as a pillar of state capacity provides an alternative pathway to effective state building, adding to the bellicist theory derived from the history of Western Europe. 1 Introduction Tilly(1992) famously argues that \states made wars, war made states." However, China did not experience state development as occurred in Western Europe, despite extensive exposure to conflicts. This is even more puzzling, considering China's head start on building an effective state. In 221 BCE, China's first unitary state, the Qin, abolished national feudal titles; appointed national officials to local jurisdictions; standardized the currency, measures and weights; established a uniform written language; and centralized the tax system. By contrast, l'Académiefran¸caisewas only created in 1635 and early censuses were conducted by the Church and not the state in Western Europe. In this paper, I introduce and provide evidence for a mechanism through which fiscal needs driven by warfare directly weaken state capacity: the recruitment process for 1 bureaucracy. State capacity is defined as a state's ability to implement its goals (Mann, 2012). Local administrators are the on-the-ground implementers of state policy, so their motivation and ability have impacts on the actual implementation of government policy. If rulers compromise merit-based bureaucratic recruitment for provisional financial relief, a deterioration of state capacity follows because these administrators are less intrinsically motivated and less capable. In the bellicist theory, an effective bureaucratic apparatus is often assumed. A few works that relate to bureaucracy use size as an indicator of its strength (Brewer, 2002; Garfias, 2018). This is problematic because a bulky government is likely to be inefficient, weak, and characterized by patronage. In sum, bureaucracy may not enhance state capacity, conditional on the officials who constitute it. The current literature on state capacity focus mainly on the political side of the state, for example, representative institutions and electoral systems (Mares and Queralt, 2015; North and Weingast, 1989). Fewer work consider bureaucratic characteristics as determinants of state capacity. My work intends to fill the gap. This argument is particularly relevant to developing countries in which broadening tax bases entails prohibitively high political and economic costs and government is inflicted with financial difficulty. Imperial China provides a suitable case to test this relationship because of two characteristics. First, Imperial China was an agri- cultural economy. By understanding the institutional consequences of its rulers' financial strategies, we can gain a deeper understanding of the political and economic constraints of state building under which underdeveloped economies operate. Second, its bureaucratic selection was highly routinized and merit-based, allowing me to test the effects of recruitment procedures on state capacity. I analyze data from a unique dataset I create for Imperial China between 1644 and 1911, and show that officials who entered the administration by purchasing their offices weakened state capacity. I also show two key mechanisms by which this occurred, namely, they were more likely to over-extract and less able to mobilize resources from local elites during crisis management. This paper makes three contributions. First, I contribute to the discussion of bureaucracy and state capacity. The existing literature mostly focuses on fiscal capacity (Beramendi et al., 2018; Queralt, 2018; Dincecco et al., 2011). Bureaucracy, especially local administration, as I show, is an important pillar of state capacity, but lacks systematic discussion. Second, my work sheds light on the linkage between irregular public revenues and state capacity. While it is politically expedient for rulers in developing countries to obtain revenues through sale of offices, this strategy undermines state building in the long run. Scholars studying export-oriented economies and rentier states have pointed out that over-reliance on abundant natural 2 resources, in particular, petroleum, makes rulers lose the inventive to invest in both extractive capacity and bureaucratic capacity because revenues are too easily obtained with the help of a small, specialized bureaucracy (Chaudhry, 1989). Foreign aid and external borrowing also elicit moral hazard: states spend the easy money without broadening the tax base and strengthening the bureaucracy (Bräutigam and Knack, 2004; Queralt, 2018). My argument is similar in logic to these scenar- ios: a windfall of money may help rulers avoid politically difficult bargaining, but it arrests state capacity. I differ from this literature by proposing and providing empirical support for how irregular public revenues impair the recruitment procedures for local administration directly. Third, this paper contributes to the discussion of Great Divergence (Pomeranz, 2009; Rosenthal and Wong, 2011) and state development in China. We know relatively more about state development or lack thereof in Africa and Latin America (Herbst, 2014; Boone, 2003; Centeno, 2002; Bates, 2014, 2015). By contrast, less work has been done on the development and atrophy of state organizations in China, which has a long history of meritocratic bureaucracy. 2 Argument In this section, I first review the bellicist theory of state building and its limited explanatory power in Africa and Latin America. I then emphasize a key feature of the theory, namely, the linkage between revenue strategy and domestic institutions. Finally, I argue that when rulers compromise a meritocratic bureaucratic recruitment for provisional fiscal relief, state capacity weakens. Non merit-recruited bureaucrats are inherently driven to maximize their own private interests at the ex- pense of public good; they are also less skilled at mobilizing resources to implement policies designed by the political center to improve state capacity. 2.1 The Bellicist Theory of State Building and Its Limited Explanatory Power The bellicist theory has many variants but its main content can be summarized as follows. In a context of continual threats of interstate warfare, the state needs to raise sufficient material resources to compete militarily. This revenue imperative compels rulers to invest heavily in building state institutions and, in particular, tax institutions. Tax institutions are instrumental to rulers because they can create reliable records of taxpayers, their economic activities, and their assets (Tilly, 1992; 3 Dincecco, 2011) and thereby provide rulers with a more reliable source of revenue. In exchange for tax revenues, rulers agree to establish representative institutions that cede powers to taxpayers (Stasavage, 2016, 2010; Dincecco, 2011). An effective state is thereby established, a state that is able to secure a broad taxation base and large-scale borrowing in private markets (Dincecco, 2011; North and Weingast, 1989). This story of state making obtained its inspiration from Western European history, especially the history of England and the Netherlands where pre-existing representative institutions provided the organizational infrastructure for tax bargaining. However, the bellicist theory has been found of limited use and explanatory power in other regions. Geography and the character of warfare have been singled out as the primary reasons for why other regions did not experience similar state development. Despite frequent conflicts, political disorder still pervades Africa and Latin America (Herbst, 2014; Centeno, 2002). States are unable to monopolize the legitimate use of violence, the basic function of the state as defined by Max Weber. Herbst(2014) explains the prevalence of weak states in Africa by pointing to its geography. Africa's barren and arid soil lowered the potential gains of fighting territorial wars; consequently, African rulers fought wars to plunder labor and animals, but not to establish effective territorial control with permanent state organizations. In the case of Latin America, Centeno(2002) emphasizes the character of warfare, arguing that only external wars amount to severe threats to rulers, and internal wars in Latin America merely divided elites and slowed down the development of political authority. Unlike Africa and Latin America, state institutions developed very early in China. As the first Chinese state, the Qin laid the groundwork for a centralized tax and bureaucratic system (Hui, 2005). Figure1 shows the territory of the Qin state and the comparison with present-day China.1 Its control stretched all the way to Mongolia in the north and Northern Vietnam in the south. These state institutions, however, did not give China a head start. As in Africa and Latin America, the Chinese state did not become effective, taxing on a broad base and regulating social and economic activities. Dincecco and Wang(2017) point to the differences in political

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