Political and Economic Foundations
This chapter analyzes the political and economic foundations of distinct state development in the region. The chapter aims to provide hindsight on the process led by the balkanized states to develop as discrete nations. The ways in which states develop hinge in crucial ways on their institutional capacity to intervene in society, regulating political associational space and the flow of material and human resources, raising taxes, distributing benefits, regulating markets, and controlling the use of natural resources. High-capacity governments are effective in this regard, while low-capacity governments may try to carry out these functions, but they have little effect. The political and economic foundations of state construction are thus crucial as we assess the capacity of the Central American states to establish viable strategies of institution building and governance in the region.
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