Elite Competition and State Capacity Development: Theory and Evidence from Post-Revolutionary Mexico

Abstract

International wars and interstate rivalry have been at the center of our understanding of the origin and expansion of state capacity. This article describes an alternative path to the development of state capacity rooted in domestic political conflict. Under conditions of intra-elite conflict, political rulers seize upon the temporary weakness of their rivals, expropriate their assets, and consolidate authority. Because this political consolidation increases rulers’ chances of surviving an economic elite’s challenge, it enhances their incentives to develop state capacity. These ideas are evaluated in post-revolutionary Mexico, where commodity price shocks induced by the Great Depression affected the local economic elite differentially. Negative shocks lead to increased asset expropriation and substantially higher investments in state capacity, which persist to the present.