Dysfunctional state institutions, trust, and governance ...

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Regulation & Governance (2015) ••, ••–••

doi:10.1111/rego.12100

Dysfunctional state institutions, trust, and governance in areas of limited statehood Tanja A. Börzel and Thomas Risse Otto Suhr Institute of Political Science, Freie Universität Berlin, Berlin, Germany

Abstract Areas of limited statehood where the state is absent or dysfunctional are rarely ungoverned or ungovernable spaces. The provision of rules and regulations, as well as of public goods and services – governance – does not necessarily depend on the existence of functioning state institutions. How can this be explained? To begin with, we identify functional equivalents to state institutions that fail to govern hierarchically. Moreover, we focus on informal institutions based on trust that are endogenous to areas of limited statehood. Personalized trust among community members enables actors to overcome collective action problems and enhances the legitimacy of governance actors. The main challenge in areas of limited statehood, which are often characterized by social heterogeneity and deep social and cultural cleavages (particularly in post-conflict societies) is to move to generalized trust beyond the local level and to “imagined communities among strangers,” despite dysfunctional state institutions. We propose two mechanisms: First, the more group-based identities are constructed in inclusive ways and the more group identities are crosscutting and overlapping, the more they lead to and maintain generalized trust. Second, experiences with fair and impartial institutions and governance practices – irrespective of whether state or non-state – also lead to generalized trust beyond the local level and allow for the upscaling of governance. Keywords: dysfunctional states, generalized trust, governance, limited statehood, social trust.

1. Governance despite dysfunctional state institutions: The puzzle Dysfunctional state institutions are a common feature in the contemporary international system. In fact, most states are dysfunctional in some very basic Weberian sense. Weber (1921/1980) conceptualized statehood as an institutionalized structure with the ability to rule authoritatively and to legitimately control the means of violence. In other words, the ideal typical state commands what Krasner calls “domestic sovereignty,” that is, “the formal organization of political authority within the state and the ability of public authorities to exercise effective control within the borders of their own polity” (Krasner 1999, p. 4). If ideal typical statehood is about the ability to rule authoritatively and to implement and enforce decisions, the majority of the states in the current international system suffer from problems of limited statehood. In other words, dysfunctional state institutions are the default in the international system and have been for a long time. There are few completely “failed states,” such as Somalia, the Democratic Republic of Congo (DRC), or, currently, Syria. Most countries, however, exhibit “areas of limited statehood,” that is, parts of the territory or policy areas where central state institutions are unable to effectively implement and enforce decisions (Risse 2011a). Washington DC, Berlin, Rio de Janeiro, and Nairobi have this in common. While state authorities can effectively enforce the law in some (or most) parts of these cities, there are other parts outside their reach. However, neither Washington nor Berlin, Rio, or Nairobi are ungoverned spaces, just because the respective state authorities cannot rule parts of their territories. The literature on “failed statehood” tends to conflate governance and statehood (see e.g. Milliken & Krause 2002; Rotberg 2003, 2004; Dorff 2005; Piazza 2008). For instance, the “fragile states index” which is widely used to determine states at risk, associates governance indicators (basic infrastructure, Correspondence: Thomas Risse, Otto Suhr Institute of Political Science, Freie Universität Berlin, Ihnestr. 22, 14195 Berlin, Germany. Email: [email protected] Prepared for Aseem Prakash and Matthew Potoski (eds), “Dysfunctional Institutions? Towards a New Agenda in Governance Studies,” Symposium in Regulation & Governance. Accepted for publication 1 August 2015. © 2015 Wiley Publishing Asia Pty Ltd

T. A. Börzel and T. Risse

Governance and trust

economic development, and the like), regime type, and state capacity indicators.1 As a result, it becomes impossible to examine the relationship between statehood and (good) governance. Statehood is about the capacity to implement and enforce central decisions, including maintaining a monopoly over the means of violence. Governance refers to institutionalized modes of social coordination to solve collective action problems, and provide binding rules and regulations, as well as public goods and services (Kooiman 1993; Rhodes 1997; Benz 2004; Mayntz 2009). Areas of limited statehood where the state is absent or dysfunctional are rarely ungoverned or ungovernable spaces. The provision of rules and regulations, as well as of public goods and services – governance – does not necessarily depend on the existence of functioning state institutions (for details and evidence see Krasner & Risse 2014). Quantitative studies have shown that there is no linear relationship between degrees of statehood and effective service provision (Lee et al. 2014). True, countries with high degrees of statehood effectively provide public goods and services while failed states often do not. However, in-between Denmark and Somalia, there is huge variation in the degree to which effective governance can be provided under conditions of dysfunctional state institutions. Moreover, qualitative studies confirm that even within failed states, we find islands of governance (for the DRC see Hönke 2013; for Somalia see Menkhaus 2006/2007; Schäferhoff 2014; see also Scott 2009; Risse 2011b; Beisheim et al. 2014; Krasner & Risse 2014). Weak or limited statehood does not necessarily lead to weak or bad governance. But how can we explain governance despite dysfunctional state institutions? This article makes two claims. To begin with, we identify functional equivalents to state institutions that fail to govern hierarchically. This part of our contribution summarizes our previous work (Börzel & Risse 2010). The main part of the article focuses on informal institutions based on trust in areas of limited statehood. We distinguish between personalized, group-based, and generalized trust. We discuss the conditions under which such institutions emerge and are likely to contribute to the provision of public goods rather than breeding public bads of clientelism, corruption, and violent conflict. First, personalized trust among community members enables actors to overcome collective action problems and enhances the legitimacy of governance actors. Such a “shadow of the community” also holds state authorities and other “governors” accountable (Avant et al. 2010). However, upscaling personalized trust beyond the community level is likely to contribute to clientelism rather than governance. Second, group-based trust leads to generalized trust: the more the underlying group identities are constructed in inclusive rather than exclusionary ways and the more group-based identities are cross-cutting and overlapping in socially and culturally heterogeneous communities. Third, generalized trust emerges and can be maintained through peoples’ personal experiences with fair and impartial governance institutions at the local level – irrespective of whether state or non-state, domestic or external. In other words, good local governance enables the upscaling of governance beyond the local level through the mechanism of generalized trust – even if state institutions are dysfunctional. 2. External statehood and functional equivalents compensating for dysfunctional state institutions Governance is about rulemaking and the provision of common goods for a collectivity. Government or “governance by the state” is usually provided through hierarchical steering by functioning state institutions. Yet, as argued above, state institutions in most parts of the world are dysfunctional in the sense that they lack the capacity to set and enforce collectively binding rules and to provide common goods. Unfortunately, large parts of the governance literature are still wedded to consolidated statehood. While scholars have recently emphasized non-hierarchical modes of governance which also include non-state actors, many studies claim that governance requires at least a “shadow of hierarchy” provided by the state in order to be effective (e.g. Scharpf 1997; Levi 1998; Héritier & Lehmkuhl 2008). That is, self-governance and private regulations by non-state actors, including companies, are assumed effective only if the state can credibly threaten to legislate and to enforce rules and regulations if non-state governance fails. If this was true, areas of limited statehood would be doomed twice. First, they exhibit dysfunctional state institutions which cannot provide public goods and services. Second, non-hierarchical modes of governance, including non-state actors, would not be effective either, because the shadow of hierarchy is lacking (Börzel 2010). However, there are many examples of effective and good governance under conditions of limited statehood. In a previous article, we theorized about the conditions of effective governance in areas of limited statehood with dysfunctional state institutions (Börzel & Risse 2010). We identified functional equivalents to the “shadow of 2

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hierarchy” cast by effective state institutions. First, the absence of state governance provides an incentive for other actors, for example, (trans)national companies and non-governmental organizations (NGOs), to engage in the provision of public goods (shadow of anarchy). Second, external actors, such as international organizations or foreign governments, can directly provide public goods and services; or they substitute for a lacking shadow of hierarchy and commit non-state actors to engage in governance (external shadow of hierarchy). Third, social norms may create reputational incentives for non-state actors to contribute to governance (shadow of the socially embedded market).2 The literature provides ample evidence for the existence of functional equivalents to effective state institutions. Yet these equivalents still rely, at least to some degree, on consolidated statehood. For instance, the external shadow of hierarchy is cast by external governments using their functioning state institutions to set and enforce (inter)national norms and rules for non-state actors operating in areas of limited statehood. Prakash and Potoski (2006, 2007), for example, have shown that environmental management standards are upheld by companies investing in areas of limited statehood, which are bound by these rules in their home markets in the global North. The shadow of the market can put the non-provision of public goods at a significant competitive disadvantage. Yet such economic incentives depend on the social and regulatory embeddedness of markets in which the demand of consumers is also influenced by moral obligations. Consumers in the domestic markets of the global North want companies to uphold the same environmental and human rights (child labor!) standards in areas of limited statehood by which they are bound in their Northern home markets (Stolle 2005; Stolle & Micheletti 2013). Thus, the regulations of functioning state institutions provide for domestic markets where the demand of consumers for corporate social responsibility translates into competitive (dis)advantages for transnational companies investing in the global South. Overall, the various shadows require at least some degree of consolidated statehood or functioning state institutions to deploy their effects in areas of limited statehood. The good news is that external statehood is sufficient. Thus, it is the multi-level nature of governance, linking areas of consolidated and limited statehood, which provides a functional equivalent to the shadow of hierarchy that areas of limited statehood are often unable to generate (Krasner & Risse 2014). The international community and/or Western consolidated states use their functional state institutions to cast an external shadow of hierarchy that makes non-state actors engage in governance and provide public goods in areas of limited statehood. In some cases, these actors, rather than external states or international organizations, even exercise legitimate authority when the state is dysfunctional (Koehler & Zürcher 2007). Yet the engagement of international organizations, individual states, NGOs, and multinational companies in fighting environmental pollution, pandemics, or water shortage in areas of limited statehood, has been selective at best (Börzel et al. 2012; Hönke & Börzel 2014). The scope of non-state governnance is often limited to a particular area (community, region) or social group (firm employees and their families, community members). Moreover, non-state actors are less likely to engage in the provision of highly complex governance functions, such as the building of roads, schools, or hospitals (Börzel 2012; Krasner & Risse 2014). What about factors endogeneous to areas of limited statehood that can compensate for dysfunctional state institutions without relying on external statehood? In the remainder of the article, we turn to trust as an enabiling condition for effective and legitimate governance in areas of limited statehood where state institutions are dysfunctional. 3. Trust and governance in areas of limited statehood What is trust? Luhmann (1989) has conceptualized trust as “upfront risk-taking” (riskante Vorleistung), that is, deliberately abstaining from checking whether my interaction partner tells the truth about not defecting or keeping her commitments. Giddens (1984) suggests that trust entails the decision not to insist on complete information (see also Hartmann 2011). Kydd uses game theoretic models to show how trust can overcome the security dilemma in international relations. He defines trust as “a belief that the other side prefers mutual cooperation to exploiting one’s own cooperation, while mistrust is a belief that the other side prefers exploiting one’s cooperation to returning it” (Kydd 2005, p. 6; Hardin 2002, p. 12). The international relations literature on trust is particularly helpful in our context, because the “cooperation under anarchy” perspective does not assume functioning state institutions to set and enforce rules (Oye 1986; © 2015 Wiley Publishing Asia Pty Ltd

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Hoffman 2007; Rathbun 2011). Similar arguments have been advanced for local communities and society-based networks (Ostrom 1990, 2002; Ellickson 1991; Putnam 1993; Ostrom et al. 1994; Hooghe & Stolle 2003). Following the literature on social trust, we distinguish between three types of trust: 1 Personalized or knowledge-based trust among people living in the same neighborhood or community who trust each other because they know each other. 2 Group-based or particularistic trust in people whom they do not know personally but trust because they belong to the same group. 3 Generalized trust beyond the borders of face-to-face interactions and group membership. The societal capacities to trust other people in general are also referred to as social capital (Putnam 1993; Fukuyama 1995). In the following, we discuss the governance potential of each of the three types of trust. 3.1. Personalized trust in areas of limited statehood Personalized trust has been found to be a functional equivalent for weak or dysfunctional state institutions in areas of limited statehood and, thus, helps to explain the governance puzzle discussed above. It does not necessarily involve external actors, but is endogenous to neighbourhoods and local communities where people know and trust each other. Personalized trust contributes to the effective provision of governance in the absence of functioning state institutions in at least four ways. First, personalized trust enables actors to solve local collective action problems (Gambetta 1988). Ostrom demonstrated through experimental designs that local communities in which members trust each other are likely to produce common pool resources without having to refer to strong institutions with their monitoring and sanctioning mechanisms (Ostrom 1990, 2002; Ostrom et al. 1994). Personalized trust, thus, enhances the action capacity of local communities. For instance, the study by Thomas (2014) on conflicts between multinational mining companies and neighboring communities in Tanzania and Guinea demonstrates that local communities with high levels of trust have a higher capacity to engage with companies to manage conflict. Second, local trust enhances the legitimacy of governance actors. Communities whose members trust each other are likely to put in charge leaders and convey authority rules to people they also trust (Schatzberg 2001; Paller 2014). Trust generates legitimacy, thereby inducing voluntary compliance with costly decisions – again in the absence of formal institutions with sanctioning and enforcement capacities. Our research indicates that legitimacy is a necessary condition for effective governance in areas of limited statehood (Krasner & Risse 2014). Without legitimacy, governance in areas of limited statehood (and beyond) tends to be ineffective in the provision of collective goods. Local trust is one mechanism by which legitimacy is generated (the others being input and output legitimacy, see Scharpf 1999). In this context, Schäferhoff (2013, 2014) has shown that trust within Somali indigenous communities provided them with the capacity to act in the fight against HIV/AIDS and to accept foreign assistance as legitimate in the provinces of Somaliland and Puntland, despite the complete absence of central state authorities (see also Debiel et al. 2009; Beisheim & Liese 2014). Hölck (2012) found that Spanish colonial rule in Sonora (Mexico) and Araukania (Southern Chile) was only effective to the extent that personal trust relationships developed between colonial authorities and indigenous communities (see also Rinke et al. 2011). Third, trust among community members with their own standards of appropriate behavior holds authorities accountable to the community. Areas of limited statehood are often populated by traditional communities with their own standards of what should be considered in the public interest, even when state actors overall might not reflect and uphold such standards, and even if these standards do not always conform to global standards of human rights, democracy, and good governance. Using comparative case studies of public goods provision in rural China, Tsai (2007) has shown that state representatives embedded in inclusive societal institutions at the local level are more likely to strive for public goods provision than those who are not embedded or in areas with no inclusive societal institutions. Likewise, Hönke and Börzel (2014) find that local communities in sub-Saharan Africa exhibiting high levels of trust restrain local state representatives and customary authorities in the use of their powers. This “shadow of the community” holds state representatives accountable in the absence of formal institutions through which citizens could voice their claims. Community institutions affect the willingness of state or non-state actors that are external to the community to engage in governance. 4




Fourth, and related to the third point, the “shadow of the community” based on mutual respect and shared norms tends to exhibit strong monitoring and sanctioning capacities which serve to insure compliance with costly rules. The quest for social approval and the threat of social exclusion from the community serve as powerful incentives to comply with the rules and to provide public goods. One should not underestimate the sanctioning potential of these informal institutions – ranging from social ostracism to physical punishment (Hönke & Börzel 2014; Paller 2014). Thus, the presence or absence of local trust offers a powerful explanation for the variation in effective governance in areas of limited statehood. At the same time, íts governance potential or “collective efficacy” (Sampson et al. 1997) remains limited to neighbourhoods and local communities (Sampson 2012; Sutherland et al. 2013). Public goods and service provison more often than not requires governance beyond the neighbourhood. Not only are local resources too limited to provide complex public goods and services, such as health, education, and infrastructure, many public goods problems, such as environmental pollution or pandemics, have to be addressed on a larger scale to be effectively solved. Moreover, upscaling personalized trust beyond local communities might not lead to better governance but to patronage systems. Closely knit local communities might turn into clientelistic networks once they reach beyond their own social and cultural environments. Clientelism also relies on high levels of trust, but provides exclusionary club goods for group members. Olson (1982) argued that closely knit social, economic, or political organizations are prone to act as special, rather than public interest groups, and engage in rent-seeking and corruption. Finally, in many areas of limited statehood with dysfunctional state institutions, those occupying state positions often use their power for racketeering and private rent-seeking while enjoying the full trust of their clientelistic networks as long as their followers continue “to eat” (Bayart 1993; Schatzberg 2001). How can this be avoided? 3.2. Group-based trust in areas of limited statehood Scaling-up governance in the absence of functional and effective state institutions requires the extension of trust to people not personally known. A first step is trusting strangers because they are members of the same social group, based on kinship, a shared ethnic background, faith, values, common history or language, geographical proximity, or behavioral similarities (Tanis & Postmes 2005). These “imagined communities” (Anderson 1991) no longer rely on personalized trust and can encompass transnational bonds among hundreds of millions of people (e.g. the Catholic Church as a global transnational community). Group-based trust may generate what Putnam (2000, p. 22) calls “bonding social capital.” It enables groups to cooperate more effectively and to provide collective goods and services, at least for group members and far beyond personalized networks if “imagined communities” are large enough. Thus, group-based trust has the potential for providing the social basis of scaling up governance in the absence of functioning state institutions. At the same time, group-based trust can also hinder the upscaling of governance. First, social groups do not have to use their trust to engage in governance. Criminal or terrorist networks, such as the mafia, Hamas, or Hezbollah, are also built on relationships of trust (Portes 1998, pp. 15–18; Stolle & Rochon 1998). Second, if a group only encompasses parts of a society, group-based trust produces, at best, club goods whose consumption is confined to the members of the group. At worst, it undermines rather than advances governance altogether (Putnam 1995, p. 665). “Groups segregated by class, occupation or ethnicity may build cooperation and trust only among group members, perhaps even encouraging distrust between members and non-members” (Stolle & Rochon 1998; Knack 2003, p. 343). Group-based trust might foster in-group favoritism and reinforce in-group/outgroup divisions (Hammond & Axelrod 2006). Among ethnic or faith-based communities, group-based trust might, hence, impair rather than foster the building of generalized trust (Uslaner 2002). These considerations result in a paradox for governance in areas of limited statehood, where formal institutions are weak and social heterogeneity is high. Areas of limited statehood are often post-conflict societies and have suffered through communal warfare and ethno-nationalist conflicts. Thus, they are unlikely to generate trust among their members and diverse groups. Moreover, diversity has been found to undermine the formation of generalized trust and civic engagement (Rice & Steele 2001; Alesina & La Ferrara 2002; Costa & Kahn 2003; Knack 2003; Delhey & Newton 2005; Putnam 2007; Stolle et al. 2008). At the same time, the greater the ethnic, cultural, political, and economic diversity, the greater the need for what Putnam calls “bridging social capital” or generalized trust to make governance work. The provision of public goods and services then requires generalized trust which “encompasses © 2015 Wiley Publishing Asia Pty Ltd

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people across diverse social cleavages” (Putnam 2000, p. 22; Uslaner & Conley 2003). It is precisely in the absence of functioning state institutions that generalized trust is necessary for the scaling-up of governance in complex and diversified societies (Putnam 1993, 2000; Fukuyama 1995; Delhey & Newton 2005). Is there a way out? 3.3. Generalized trust in areas of limited statehood How is generalized trust possible in areas of limited statehood characterized by social and cultural heterogeneity and strong cleavages? We suggest two causal mechanisms, one for the generalization of group-based trust through the inclusiveness of social identities, and the other for the building of generalized trust through the impartiality of institutions.3 3.3.1. From inclusive and overlapping social identities to generalized trust To begin with, whether or not group-based trust leads to generalized trust furthering better governance and the provision of public goods and services in areas of limited statehood and beyond depends crucially on the social construction of the group identity itself. Two dimensions of group identities can be distinguished in this context. First, how does the group construct the border between “in-group” and “out-group” (see above)? According to social identity theory, people that share a strong sense of group identity cooperate more within their group than with outsiders (Tajfel 1974). Group identities can be more or less inclusive and accommodating to strangers. The more inclusive a group identity is, the more easily it can be extended to encompass other groups. In this context, Eisenstadt and Giesen (1995) distinguished between three types of social identities, namely primordial, sacred, and civic. Civic identities are the most inclusive and tolerant toward the “out-group” and do not treat one’s own community as very special. Rather, relationships to other communities are characterized by mutual respect. As a consequence, trust among members is likely to be conducive to governance and the provision of public goods. At the other end of the spectrum are primordial identities. Not only do community members perceive themselves as very special, the various “out-groups” are regarded as inferior – and there is no way in which the “others” can become members of the “in-group.” Essentialized ethnic identities often have primordial characteristics.4 It follows that trust among community members with primordial group identities is unlikely to contribute to public goods provisions outside the group. Rather, group-based trust is likely to further the provision of exclusionary club goods, as is common in clientelistic networks. In between these two extremes are so-called “sacred” identity constructions. While the “in-group” is considered superior and the “out-group” is looked down upon, “out-group” members can convert and be integrated into the community. It is no coincidence that religious communities often exhibit such “sacred identities.” Because they regard members of other (religious) communities as potential converts, some degree of religious tolerance is at least a possibility, and as a result, trust can be built between communities and public goods and service provision becomes possible. The latter then depends entirely on the community’s own beliefs about the “in-group’s” degree of “sacredness.” It is not by chance that we often find religious communities providing public goods and services and, thus, governing areas of limited statehood. The second dimension, which is relevant in our context, refers to the number of groups with which individuals identify in heterogeneous societies. Self-categorization theory tells us that individuals naturally identify with several social groups holding multiple identities (Turner 1987; Abrams & Hogg 1990). These identity categories can be nested or blended into each other (I can identify with my village, my district, and my nation); they can also be cross-cutting or overlapping (e.g. gender identities and ethnic identifications; see Brewer 2001; Herrmann & Brewer 2004). Once in-group trust is built, it makes the generalization of trust more likely when combined with inclusive civic or at least sacred identities, which allow for the emergence of multiple, overlapping communities. “The more identity-categories overlap in the positive cooperation experience, the easier the transfer of trust to society at large” (Stolle 2002, p. 405). Cross-cutting cleavages can, thus, moderate the harmful effect of social fragmentation and diversity (Buzasi 2014; Dunning & Harrison 2010; cf. Coser 1956). Overlapping identities are not the same as a global identity or identities based on universal values, which might be too general to generate sufficient generalized trust. Rather, the “nesting” or “layering” of identities (Risse 2010) allows the broadening of belief in the trustworthiness of known persons to strangers (Stolle 2002). It is, therefore, crucial, in socially and culturally heterogeneous areas of limited statehood, including post-conflict societies, whether overlapping and inclusive identities can be constructed, allowing for “communities among 6




strangers” (Habermas 1996). Ethnic or religious identities do not have to be primordial. They can be civic or sacred social constructions, thus, allowing for generalized trust among socially diverse groups. The point is not to overcome ethnic or religious identities as the basis of group-based trust, but to transform them from primordial to sacred or, much better, to civic constructions. At the same time, social heterogeneity and cultural diversity as such are not the problem in areas of limited statehood – as long as they lead to overlapping group identifications. 3.3.2. From impartial local institutions to generalized trust and the scaling up of governance The Social capital literature has identified several mechanisms through which generalized trust can be built without exclusionary group boundaries. First, society-centred approaches have argued that generalized trust depends on cultural norms and values, such as optimism, egalitarianism or Protestantism, in which people get socialized (Banfield 1958; Yamagishi & Yamagishi 1994; Uslaner 2002; Delhey et al. 2011). The formation of such norms and values, however, is a long-term process “anchored in historical and cultural experiences that can be traced over centuries” (Stolle 2002, p. 404; Putnam 1993; Fukuyama 1995). Whether this mechanism is available in areas of limited statehood then depends on the long durée of community-building and the respective historical memories we often find among indigenous peoples (Scott 2009; Hölck 2012; Thomas 2014). However, this mechanism of generalized trust-building is likely to depend on socially and culturally homogenous communities which we often do not find in areas of limited statehood (see above). Second, people can learn trust, reciprocity, and cooperation through regular social interaction in voluntary associations and social networks of civic engagement (Putnam 1993, 2000). Several studies find a correlation between membership in voluntary organizations and generalized trust (Putnam 1993; Knack & Keefer 1997). However, others point to endogeneity problems or omitted variable biases that cast serious doubts about the existence of a causal relationship (Uslaner 1999; Stolle 2002; Hooghe 2003b; Knack 2003; Uslaner & Conley 2003; Delhey & Newton 2005). And some do not find any evidence in support for the societal model of trust-building rather than trust-maintenance (Stolle 1998; Claibourn & Martin 2000; Wollebaek & Selle 2002; Hooghe 2003a).5 Yet even if organized social interactions build trust, civil society organizations and networks have to form in the first place. For once, non-state actors willing to engage must have the necessary autonomy in order to act free from political control (cf. Mayntz 1993). In functioning states, this is ensured by the rule of law and democracy as two major constraints on the use of statehood. Semi-authoritarian and authoritarian regimes, by contrast, tend to suppress the political organization of societal or community interests. Moreover, local authorities in areas of limited statehood often have sufficient power to prevent collective self-organization, for example, if it threatens their rent-seeking opportunities (Börzel et al. 2012). In other words, self-organization in areas of limited statehood requires some degree of participatory rule. Interestingly enough, it might be precisely the absence of functioning state institutions that fosters societal self-organization. Weak states are often usurped by rent-seeking and clientelistic networks that capture what remains of the state and try to exploit the institutions for private gains. As Scott (2009) has argued, self-organization among local communities is particularly likely in stateless societies precisely because of the absence of predatory, rent-seeking, or repressive state institutions. Third, where lasting cultural patterns of social interaction, or voluntary associations and networks of civic engagement are absent, social capital formation has to rely on formal political, administrative, and legal institutions (Braithwaite & Levi 1998; Levi & Stoker 2000; Rothstein & Stolle 2008a; Hartmann 2011; Herreros 2012). Institutionalist approaches to social capital center on “government institutions and policies” (Rothstein & Stolle 2008b, p. 279) rather than the civil society as a source of social capital generation. State institutions foster trust in others by monitoring and sanctioning defection (Levi 1998) or being perceived as efficient, fair, and impartial (Knight 2001; Rothstein & Stolle 2008a; Freitag & Bühlmann 2009). If we need functioning state institutions to bring about and maintain generalized “trust from above” (Fukuyama 2000, p. 242), we are back at square one, as such institutions are absent by definition in areas of limited statehood.6 Dysfunctional state institutions, if they exist at all, are unlikely to generate trust precisely because the state is unable to effectively implement and enforce decisions. Quite on the contrary, ineffective and corrupt state institutions will undermine the building and preservation of generalized trust (Rothstein & Stolle 2008a; see above). Yet one problem of this literature on generalized trust is its state-centeredness. We argue, by contrast, that some of the causal mechanisms through which functional state institutions generate generalized trust are also applicable © 2015 Wiley Publishing Asia Pty Ltd

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to non-state institutions, or more precisely, do not require effective enforcement and hierarchical sanctioning capacities, that is, statehood (see above). Rothstein and Stolle (2008b, p. 283) argue that political, legal, and administrative institutions in charge of implementing government policies are most “important for the creation, nurturing and maintenance of generalized trust.” More precisely, it is the local practices of administrative or executive agents that matter. The practices of local police, judges, teachers, or doctors signal the moral standards of society to people. If they perform their governance functions effectively and impartially, people will infer from their experience to the behavior of others. These arguments resonate with studies on procedural fairness, which show that actors comply even with costly rules and regulations because they believe that those have been adopted “in accordance with right process” (Franck 1990, p. 706) and procedures that are fair and just (Tyler 2006). It is hard to see why impartiality and procedural fairness should be confined to state institutions only. To repeat, the causal mechanisms identified by these studies on generalized trust emphasize impartial and fair institutional rules, procedures, and practices. They do not require the ability to steer hierarchically, that is, statehood. If people experience equal access to functioning hospitals, schools, or courts, they are likely to generate and maintain generalized trust in institutions – no matter who provides them. In other words, impartial and fair non-state institutions and governance services provided by non-state, as well external actors, at the local level should also lead to generalized trust which enables the up-scaling of governance beyond the local levels. This is good news for the work of external governance providers in areas of limited statehood – be it (multinational) companies, (international) NGOs, international organizations, or foreign aid agencies. We have shown elsewhere that these external actors can effectively govern if locals perceived them as legitimate (Krasner & Risse 2014). Here we argue that they can even contribute to governance beyond the local level in areas of limited statehood: the more their governance services are provided in an impartial and procedurally fair way, the more they help generate and maintain generalized trust as an enabling condition for the upscaling of governance – even in the absence of functioning state institutions. 4. Conclusions Our starting point in this essay was the empirical observation that states with dysfunctional and ineffective institutions are neither ungoverned nor ungovernable. Rather, we observe huge variations with regard to the provision of public goods and compliance with costly rules in such areas of limited statehood. How can this be explained? We have argued previously that “governance without the state” often relies on functional equivalents for the shadow of hierarchy in order to be effective (Börzel & Risse 2010). However, many of these mechanisms ultimately depend on effective institutions in consolidated states (mostly in the global North). In this article, therefore, we sought to identify mechanisms to ensure effective and “good” governance in areas of limited statehood which do not rely on external statehood, namely trust defined as “upfront risk-taking.” Trust helps to overcome collective action problems and to stabilize cooperation in the absence of effective formal institutions and it serves to enhance the legitimacy of rulers. We then distinguished between personalized, group-based, and generalized trust. Personalized trust within close-knit communities enables effective and legitimate governance at the local level in the absence of functioning state institutions. Unfortunately, personalized trust beyond the local communities – upscaling – is likely to reinforce clientelistic and patronage networks. Governance beyond the local level requires some degree of generalized trust which presents a particular challenge under conditions of limited and dysfunctional statehood, where formal (state) institutions are, by definition, weak or absent. We propose two mechanisms by which generalized trust can emerge and be maintained under conditions of limited statehood. First, the more group-based identities are constructed in inclusionary rather than exclusionary ways (civic or at least sacred rather than primordial) and the more group-based identities overlap in socially and culturally heterogeneous societies (as is common in areas of limited statehood), the more group-based trust leads to and maintains generalized trust. But even if this mechanism is not available in areas of limited statehood or post-conflict societies, not everything is lost. Second, impartial and fair institutions and practices at the local level – whether state or non-state, whether provided by internal or external actors – are also likely to lead to and maintain generalized trust. In other words, 8




good governance at the local level allows for the upscaling of governance beyond the local through the mechanism of generalized trust – even in the absence of functioning statehood. In sum, dysfunctional institutions – limited statehood in our case – are not the end of governance. Most people in the world have to cope with inefficient and ineffective state institutions. However, some of these areas of limited statehood are reasonably well-governed. Our task as researchers is to explore when and how collective action emerges in the absence of effective formal (state) institutions, rather than engaging in fruitless attempts at state- and nation-building. Generalized trust enabling the provision of collective goods and governance can emerge even in dysfunctional states resulting from inclusive group identities in communities of overlapping memberships and from people’s experience with fair and impartial local institutions and governance.

Notes 1 http://ffp.statesindex.org/ (Last accessed 16 September 2014). 2 A fourth functional equivalent – the shadow of the community – is endogenous to areas of limited statehood and will be dealt with below. 3 Another scope condition identified by the literature more applicable to consolidated statehood is formal institutions (e.g. group rights, power sharing arrangements) by which societies manage diversity (Hooghe 2007; Freitag & Bühlmann 2009). 4 Note that primordial identities are still social constructions, but they are constructed in such a way that they are essentialized. 5 We thank Dietlinde Stolle for pointing this out to us. 6 The question remains whether institution-based approaches to social capital actually refer to trust in the Luhmannian sense of “upfront risk-taking” (see above) or rather confidence in effective institutions and their enforcement capacities (on the difference between trust and confidence see Luhmann 2000).

Acknowledgments This article is based on data and findings from the Collaborative Research Center 700 “Governance in Areas of Limited Statehood,” funded by the German Research Foundation (DFG). We thank the DFG for its continuous support. We are also very grateful to the editors of this symposium and of the journal, as well as to four anonymous reviewers and to Dietlind Stolle for their extremely helpful comments and criticism.

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