States fail when they let their monopolies on violence or taxation slide

Do you know of a state which has let vigilantes commit violence on its behalf and has reneged on disbursal of taxes? I can't think of any, writes Devangshu Datta

In the narrowest terms, a government can be defined as an entity with the capacity to monopolise two broad functions. It must monopolise violence within the territory it controls, thus preventing non-state actors from victimising citizens, or external forces from annexing territory.

It must be able to monopolise fiscal and monetary functions, like taxation and the issue of currency, preventing non-state actors from inflicting extortion. When a government’s ability to protect and maintain these two monopolies breaks down, the compact between citizens and the State also breaks down.

If the government cannot protect its monopoly on violence, it means ordinary, law-abiding citizens are vulnerable to intimidation, and physical harm. Worse still, if a government gives permission to its favoured vigilantes to commit violence on those it does not favour, it is deliberately breaking the compact.

This happened in Nazi Germany when the State let thugs target minorities. It happened in Rwanda. It happened in the southern states of the US, when African-Americans were lynched. I am sure readers can think of contemporary examples closer home.

If a government cannot collect taxes and distribute them transparently, and more or less equitably, and it cannot prevent non-state actors from collecting taxes, another compact breaks down. Taxation is a form of extortion. It is willingly acceded to, when citizens see taxes used transparently for purposes they consider beneficial.

When this monopoly breaks down, it is “extortion raj”. When the State lacks the power to collect taxes, or it is incapable of protecting its monopoly, or uninterested in protecting it, non-state actors can collect “taxes”.

This happens in insurgencies when citizens are forced to “donate” to insurgents. In Sri Lanka during the heyday of the LTTE, Jaffna residents received receipts for “taxes” collected by Prabhakaran’s minions. Receipts are also handed out in several northeastern states by extremist groups. But with or without receipts, this form of extortion is common in every extremist-affected district.  There are quite a few.

 The monopoly is also broken when corrupt government officials force citizens to disgorge cash, which goes into the officials’ pockets rather than government coffers. It happens when criminals force legitimate businesses to pay “protection money” just to continue functioning, because the police will not protect them. This is also a common experience.

Most civil wars and revolutions feature a breakdown of one or both of these state monopolies, and of the underlying compacts. Taxation without representation was famously the cause of the US revolution. Taxation issues certainly contributed to the English Civil War, The French Revolution, The Russian Revolution, et al. It was a major factor in the US Civil War as well.  

Indeed, Abraham Lincoln claimed the war was all about collecting import duties and taxes from the Southern states, rather than being about slavery.

Arguably the Mughal Empire came apart when it could no longer collect taxes from its provinces. Indeed, Shivaji, Murshid Quli Khan, the Nizam-ul-Mulk and others can be considered to have established their own states because they could collect taxes, superseding the earlier right of the Mughals. They had successfully challenged the Mughal monopoly on violence and nibbled away and annexed what used to be Mughal-controlled territory.

The other side of tax collection is tax disbursal. People hate paying taxes. They also hate it when they don’t receive benefits from the tax they have been forced to pay. In federal governance structures, state governments hate it when the Central government collects taxes on their behalf and refuses to give them their promised dues.

I can think of a country where all these breakdowns have occurred in catastrophic fashion in the recent past. In the nation in question, the central government doesn’t have a monopoly on collecting taxes. It has reneged on the disbursal of taxes. It doesn’t have a monopoly on violence, and it has encouraged vigilantes to commit violence on its behalf. It has lost territory to other nations. These things can simmer for a long time but I cannot think of too many historical examples where such a complete breakdown in compacts has ended well. In fact, I can’t think of any.