With news of a shaky, insecure Hamid Karzai and bad news coming out of Afghanistan every day, it may be too late to ask how a new system of goverment should be created.  But it’s an interesting question nevertheless!   Here are some possibilities.

A state must at the very least protect property rights.  Citizens must be protected from each other and contracts must be enforced to facilitate trade.  More subtly, citizens must be protected from the state itself.  Otherwise, the fruits of their labor can simply be confiscated by the state and they will have little incentive to engage in productive economic activity.

This kind of state exists in many Western democracies.  A judicial system enforces contracts.  A politician who interferes in lawful activity faces checks and balances to limit his ability to be rapacious.  The checks and balances can come from other branches of government or through political competition.  This is about the best system found so far.  If it could be established in Afghanistan and Iraq, it would be great!

Another kind of state has an elite (or a dictator) which enforces property rights.  They tax their citizens for the enforcement.  The elite is tempted to steal from the citizens: there are no checks and balances.  What potentially restrains the elite is that any expropriation will lead to a loss of reputation.   The citizens know they stand of being ripped off tomorrow if they work hard today.   A patient, far-sighted elite which is secure in power might then have the right incentives not to steal from its citizens.

The third scenario is a little like the first.  The state/government does not have monopoly power, it faces competition.  But the competition instead of leading to better behavior leads to worse behavior.  To stay in power, the government has to kill off other warlords.  The threat of being thrown out of power generates short-sighted rational strategies.  Exploitation and theft are widespread.  This most resembles present-day Afghanistan.

How do we go from one kind of state to another?  Which is the best system to set up from an outsider’s perspective?