We develop a theory of the accumulation of state capacity as the outcome of a political competition between elites and (civil) society. State capacity is accumulated by elites, and it is productive as well as useful in controlling society. However, society can fight back and accumulate its own capacity, facilitating collective action. The theory leads to three distinct equilibria depending on initial conditions. One type, a weak state, emerges when society is strong relative to the elite. Another, a despotic state, originates where the elite is initially relatively powerful. A third type, an inclusive state, emerges when the elite and society are more evenly matched. The theory has several important implications; first, variation in state capacity does not require large structural differences; second, inclusive states have the highest levels of state capacity in the long run; third, the effects of shocks or external threats like wars are conditional on the balance of power between elites and society.