The rise and reversal of bureaucratic capacity: lessons from Chinese history

In a previous post, I discussed ways in which recent historical political economy research has advanced the study of state capacity. In a field long dominated by the European state-building experience, studies on China have challenged our prior assumptions about the origins and evolution of state capacity.

The Chinese case offers three key departures from the European case. First, it is possible to build the very apparatus needed for extraction without actual extraction. This challenges a very core idea in the bellicist literature: not only are bureaucratic institutions just the “happy-byproducts” of war, their mere existence doesn’t guarantee rising extraction levels. Second, rulers in the quest to build a centralized bureaucracy faced challenges not just from elites trying to hold an Imperial court in check, but from local level actors in the form of provincial elite networks, peasants, and bureaucrats that shaped the character and quality of the bureaucracy. Third, the Chinese case offers a startling example of a reversal of bureaucratic capacity.

1. Bureaucratic Capacity Before War-Making

A defining feature of Chinese political history is a continuous state bureaucracy since the third century BCE. The examination system—introduced under the Sui dynasty (581–618 AD), expanded during the Tang (618–906 AD), and consolidated in the Song (960–1279 AD)—became the principal route for recruiting officials. Successful candidates served three- to five-year rotations at the capital, provincial, or county levels and were barred from serving in their home districts to minimize local bias. Successive dynasties refined this inherited system.

Stasavage (2021) argues that writing technology’s evolution in the Shang dynasty was crucial for China’s early administrative structures. Using data on bureaucratic presence from 186 societies and geographic distances from centers of early writing, he shows that societies adopting writing systems were more likely to develop state institutions. This finding suggests that technological innovations can precede and enable bureaucratic capacity.

Despite two millennia of a sophisticated bureaucracy and centralized tax system—centuries before Europe—China’s tax revenues began to lag behind European states by the early modern period (Dincecco and Wang 2018; Ma, 2011; Sng, 2014).

2. Early Modern Decline in Chinese Taxation

Until the early 1600s, Chinese tax collections matched or exceeded English revenues relative to GDP. In 1423, the Ming empire raised about 5.5 percent of GDP—over three times England’s rate (Stasavage, 2020). By the mid-nineteenth century, Qing tax revenues fell to 1–2 percent of GDP, compared with 15–20 percent in Tokugawa and early Meiji Japan and 10–15 percent in eighteenth-century England. Historians offer several explanations:

1. Size and Control: Sng (2014) focuses on late Imperial China (c. 1650–1850) and argues that China's large size impeded the ability of the ruler to control bureaucrats.

2. Incentive Structures: The Chinese empire created a set of conditions that weakened imperial incentives to engages in extraction. The Qing empire focused on territorial expansion by co-opting enemy territories, and reduced the need to prepare for sudden external attacks. Unlike Europe, the Chinese state development had both an absence of external threats and European style institutional constraints which led to weak investments into a tax system where the ruler paid bureaucrats good wages in return for tax revenues. (Ma, 2019).

3. Decentralization: Qing state simply relinquished everyday governance of tax collections, security and even legal matters to local communities and showed little will nor invested in resources that could intervene in sub-county matters (Zhang, 2023).

These studies allude to principal-agent problems where excessive exploitation came not from a autocratic despot, but local officials who enjoyed tremendous discretion. China's low tax capacity could be understood as an equilibrium where given a pre-existing bureaucracy, the ruler was unwilling incite a tax rebellion and also unable to keep the corruption of local officials in check.

3. Strategic Retreat: The 1712 Freeze

Chinese state-builders, however, have always faced the challenge of a large territory; size being a relatively static factor through Chinese history, despite fluctuations across dynasties. A key episode highlights how the drop in taxation was a strategic choice made by Qing rulers. In 1712, after the conclusion of a successful empire-wide cadastral survey, the Kangxi emperor called a halt to any future assessments surveys as he was satisfied with the revenue base that year. As no further surveys were conducted, land tax rates remained frozen at their 1711 level, leading to a rapid decline in fiscal revenue and a stagnation of the administrative bureaucracy. Similar to early 20th century India or 19th century United States, a relatively high capacity state simply gave up its historic bureaucratic advantage in collecting information about economic surplus.

Zhang (2023) argues that the Qing state's deliberate retreat from fiscal capacity was a manifestation of an ``empirical ideology" guiding its approach to taxation. Analyzing elite debates and documents from that era, he notes that elites of the Qing court adopted a pragmatic/utilitarian view that “increasing agricultural taxes will lead to severe economic hardship among the general population, and therefore lead to social unrest and rebellion” (Zhang (2023, pg.17) This belief was partly based on what they thought were the failures of the Ming era---that taxation had disastrous effects on subsistence agriculture. Even when empirical reality began to diverge in the 18th century and agricultural surplus grew, the ideology held sway over fiscal capacity investments and policy, resulting even worsening fiscal outcomes in the 19th century. He (2013) shows that despite experiments in public finance in the 19th cenutry, the Chinese state failed to transform into a modern fiscal state in part due to the continued reliance on decentralized governance arising from a decaying administrative state.

A weakened bureaucratic machinery was further prone to Internal conflicts and reshaped elite–state relations. Bai et al.(2023) study war mobilization efforts to suppress the Taiping Rebellion in 19th century China. The rebellion, that lasted 14 years (1850-1864) was one of the deadliest in human history killing at least 20 million. The paper studies recruitment and mobilization for the Hunan army that under the leadership of a scholar-general Zeng Guofan finally managed to suppress the rebellion. Using records on China’s civil service exam system and marriages, kinship and friendship networks the paper shows that counties with more dense connections to Zeng experienced more casualties in the war. These same counties also saw the rise of new provincial and national-level elites. In a notable twist to Charles Tilly’s famous aphorism – war made the state, and the state made war -- they show that elites made war, and war made elites.

Peng (2022) studies 17th century China and argues that rulers strategically used patronage appointments to secure not just loyalty but to gain trusted bureaucrats in times of conflict. She shows that the Imperial court was more likely to make patronage appointments during times of internal and external crises in order to mitigate risk. Conversely, the court relied on meritocratically chosen bureaucrats during time of peace. In this way, wars possibly weakened the meritocratic state..

Lessons Beyond Europe

1. Institutional Innovation ≠ Extraction: A sophisticated bureaucracy may under-extract when strategic, ideological, or agency considerations prevail.

2. Local and Moral Agency Matter: Provincial elites, low-level bureaucrats, and peasant communities actively shape state-building outcomes, complicating European-focused theories.

3. Capacity Is Reversible: Importantly for all of us observing Trump in action today: deliberate choices—such as the Qing freeze—can undo state strength. Once weakened, building back that capacity is hard and further makes the state prone to capture by warring elites and factions.

This is an excerpt from my Annual Reviews piece, available here