# Fragility, State Capacity and Poverty Reduction

Fragility will affect expectations and suppress investment incentives and, in this way, poverty. But the mechanism running between conflict and poverty is much more complex. This becomes clear when one looks at the six symptoms proposed by the International Growth Centre (IGC) in a recent study on fragility (The LSE-Oxford Commission on State Fragility, Growth and Development 2018):

1. Weak state capacity: a failure to invest in fiscal, legal, regulatory and spending capabilities of government;

2. A weak private sector: economies are characterized by a large informal sector with few large firms and poor legal structures in place, which hampers taxation; 3. Lack of security: the state is not able to provide security from disruptive actors (such as organized criminals or militias) throughout its territory; 4. Weak resilience: the economy often relies on few sectors and is subject to external shocks which threaten political stability; 5. Low levels of state legitimacy: society suffers from low levels of trust and reciprocal compliance; and 6. Polarized societies: prevalence of oppositional identities whether ideological, ethnic, linguistic, or religious. Different polities display these symptoms to differing degrees. Moreover, countries that have functioned effectively for long periods of time may occasionally display some of these symptoms.

From this it is clear that fragility and poverty are also linked through weak state capacity. The inability of the government to provide public services will, for example, directly affect its ability to combat poverty. This implies that the causal chain might run from conflict to human capital formation as proposed above but it might also run from low state capacity to conflict and low human capital formation. Empirically, it is therefore difficult to pin down a specific channel. We therefore rely on the micro literature discussed above to establish the causal link.

But this view on fragility should be taken into account when designing policy for poverty alleviation. Clearly, poverty reduction must partly come from reducing fragility and regaining state capacity. Besley and Mueller (2020) argue that crafting a program for building fiscal capacity to suit the context of state fragility means tailoring the narrative of reform to the social and cultural context. For example, poverty alleviation in fragile states must recognize the lack of legitimacy stemming from poor accountability in the use of public resources and corruption by elites. This needs to become a standard part of understanding the context for building state capacity for sustained poverty reductions. A country with low trust in government, weak national identity, and low confidence in the state may need a different approach from that taken where these factors are not present.

An important case study in this context comes from Sanchez de la Sierra (2020). He shows that stationary armed non-state actors in the Democratic Republic of Congo seem to improve economic welfare for local villages whereas the Congolese army only increases security. The reason is that other public services by the central state are not provided in remote areas. In such a context one would expect poverty measures to remain high with the presence of the army. This, in turn, will weaken support for the state and state revenues because the formation of norms of reciprocity rely on citizens seeing that the state is using revenues for common purposes. The presence of strong, local ethnic or regional identities can make this even more important.

An approach to poverty alleviation in fragile states that recognizes the need to strengthen the social contract therefore reinforces the need for organizations such as the UN, World Bank and IMF to coordinate when strengthening state capacity. Programs may work better if there is scope to 7