The government of Colombia, led by President Álvaro Uribe, imposed a high tax on the country’s wealthy citizens during his first term in office (2002–10), justified by public safety concerns. At the time, the country was internationally seen as a “failed state,” and violence caused by criminal groups and irregular forces seemed impossible to stop. The tax served to fund the military’s professionalization and expansion. Despite the high cost, the tax was successful, and the wealthy continued to pay it for several years. Other Latin American countries attempted, with varying degrees of success, to address their own security issues through similar taxes.
In this book, Gustavo Flores-Macías describes a theory in which “demand and supply factors” (2) explain why economic elites in Latin America pay for public goods, even though they have a history of avoiding investing in the state, especially through taxes. Flores-Macías argues that in a world where Latin America is the most dangerous region, organized crime affects not only the daily lives of poor residents but also the activities of companies and wealthy families. When facing a security threat, the economic elite demands state protection. On the supply side, the government provides policy solutions, some of which involve business groups.
The linkages between business and government authorities, such as “consultation forums, collaboration mechanisms, and the inclusion of corporate leaders or their representatives into government positions” (49), determine whether the elite tax can be successfully enacted. These relationships are especially strong in right-wing governments, such as in Colombia, Honduras, and several Mexican subnational states, where elites have shown willingness to pay a higher tax.
The book connects well the historical literature on state formation to the current discussion on elite taxes. Its main contribution is that contemporary risks to public safety mimic prior systemic crises, which, according to the state formation literature, offer incentives for elites to invest in public safety. Homicide rates in Latin America are currently driving governments and elites to seek remedies that include higher budgetary revenues. This implied longitudinal comparison suggests that the government can hardly force elites to pay security taxes, as would be expected, for example, under a leftist administration. Business actors are still powerful. So, in this context of “strong society, weak state,” the elite’s willingness to invest in public safety is an essential condition.
While this argument is compelling and relies on the vibrant literature of state building, there are parts that could benefit from further clarification. State building is conventionally understood as developing the state’s ability to exercise territorial authority and oversee social relations; that is, the sequence preceding the rise of state capacity or infrastructure power. In that sense, elite taxation is a state-building phenomenon insofar as it boosts state elites’ ability to penetrate society. However, how to tell whether we observe a reinforcement in state building—that is, an increase in state capacity—or just a boost in elite taxation? If we focus solely on the successful cases of “targeted elite taxation”—Colombia, Honduras, and the Mexican states of Chihuahua, Nuevo León, and Tamaulipas—we can see that the actual consequences for state capacity and the (legitimate?) monopolization of violence are not systematically addressed.
The reader is shown heterogeneous evidence of state capacity in public safety, ranging from the expansion of armed forces in the territory (Colombia) to the purchase of equipment and vehicles (Honduras). Alas, Flores-Macías does not test the empirical effects of the budget increase that results from this elite taxation, although he acknowledges this limitation. Nevertheless, excluding the Colombian scenario, it may be unduly ambitious to classify elite taxation as a state-building mechanism if we rely exclusively on policy objectives without addressing the implications for effective control over the territory. The author also argues that elite taxation is state capacity, since it implies the fiscal extraction dimension. But this statement is problematic, too. For the state formation literature, increasing the burden on elites is a means used to reinforce the state administratively and militarily, not state capacity itself. To the contrary, relying on taxing a small portion of the population is an indicator of weak fiscal coercion, given the state’s inability to make its huge informal sector visible.
Turning to the “supply side,” this book offers additional crucial contributions. The most important is to reveal the specific context in which public security crises lead to a policy response. Critical events such as wars did not invariably produce a cooperative state-building reaction. Flores-Macías extends this argument by demonstrating that a desire for a public safety response is insufficient to justify the imposition of the security tax. As he notes in the case section, public safety issues are intimately linked to the subnational distribution of crime, particularly in urban regions, as the positive and negative examples of San José, Costa Rica, and Mexico City suggest. More important, the author recognizes that elites do not respond “functionally.” Elites have agency; they have their own ideas about how to deal with public problems, short-term interests, and internal conflicts that might cause collective action problems and prevent choosing the optimal solution. In that sense, the discord between economic and political elites is the key political variable in Contemporary State Building. In certain cases, this is overcome by taming mistrust in the presence of linkages with business circles and a right-wing government. Flores-Macías provides specific instances, such as the presence of forums and revolving doors, and explains how these enhance the likelihood of enacting security taxes.
It is possible that the reader will find the portrayal of how government-business relations operate to be a little messy, but so is the reality of policymaking in Latin America. This is a strength of the book—because we are seeking patterns of action, not deterministic mechanisms, good comparisons should not exclude contingency. Sometimes elite taxation is reversed, due to opposition from business and its allies. However, because mistrust cannot be eradicated overnight, linkages are critical for easing interactions and resolving collective action difficulties. Through linkages, actors learn, get persuaded during meetings, and discover new pieces of knowledge that eventually cause them to change their beliefs. It is an ongoing variable. Readers familiar with institutionalist frameworks may recognize this argument. Cooperation will benefit both types of actors, economic and political elites, but a lack of information and mistrust will lead to a stalemate and the worst-case scenario. In sum, institutions, which are instruments through which actors constantly communicate and share knowledge, explain optimal decisions.
This argument and these cases leave room for further research. First, one could focus more on theorizing the business-government linkages. As the author underscores, linkages work differently, and security taxes are targeted at the elite only in places where they are passed by right-wing governments. Yet it appears that these linkages differ in nature rather than varying only in degree. Uribe’s administration in Colombia used cabinet members with strong ties to the corporate world to arrange meetings. However, as Uribe’s political trajectory has shown, these ties were not crafted as a function of putting security taxes on the agenda. So there are indirect effects: right-wing connections between politicians and businessmen, which could have been put together for other governance goals, triggered unintended effects on public safety.
In Costa Rica, by comparison, links were built totally ad hoc for public security purposes. Yet they failed, at least when it came to taxing the wealthy. Additionally, in Costa Rica, linkages are sites for deliberation, forums where political and business elites are allowed to convince and persuade one another. In Colombia, linkages consist of networks that business groups use to ensure that politicians will not make decisions without their approval. They are channels for exercising power. Scholars might therefore be interested in theorizing these state-society linkages, since they offer empirical variation and differing observational implications.
Second, one could dig more into security taxes as policy ideas. What kind of security policies are created? Why not try other things, like giving each police agency its own budget or paying for equipment purchases directly? One way a state can respond is by raising taxes. So we could think of ways to explain why governments choose this response rather than other possible policies. One explanation is, for example, policy diffusion. Going back to Uribe’s presidency, it was no coincidence that the Colombia security policy came first and was the most successful option when it came to budgeting for building state capacity. As a starting point, policy ideas for building the state may be easier to spread, making it easier to force elites in other countries in Latin America to pay taxes.
Both historically and in contemporary settings, including the interests of economic elites in the polity is key to consolidating democratization; the same factor is crucial for statemaking. That is the main takeaway from Contemporary State Building: what scholars interested in state capacity, elite taxation, and security policies want to discuss. But there are other lessons, especially for junior scholars: how to set up a puzzle, how to link different strands of literature, and how to theorize without being hesitant to draw inductive conclusions. When all these things are considered, there is no doubt that Flores-Macías wrote a remarkable book.
