Subcontracting State-building

Contemporary development assistance often takes the form of subcontracted statebuilding. Foreign donors hire for-profit firms to provide services and to improve
or create institutions in developing countries, particularly those experiencing
internal conflict. This arrangement creates two counterproductive dynamics: first,
it introduces agency problems between donors, recipient states, subcontractors,
and citizens; and second, it undermines the long-run development of domestic
bureaucratic capacity by creating disincentives for the host government to invest.
These dynamics hinder, rather than foster, the legitimacy of state institutions. This
paper summarizes trends in external support to state-building since the 1970s and
illustrates subcontracted state-building with examples from Colombia.