Structuring Capital Deepening in Fragile States: A Decision Workflow for When Institutions Lag
Capital deepening is supposed to be boring. You invest more per worker, productivity ticks up, and growth follows — a mechanical function of savings and depreciation. In fragile states, that story unravels fast. Institutions that enforce contracts, register collateral, or resolve disputes are either absent or captured. The result is not just stalled investment but capital that actively destroys: mining concessions that entrench warlords, aid infrastructure that rots without maintenance, and microfinance that traps borrowers in debt cycles. This article offers a decision process for when the institutional plumbing is broken. It is written for country economists, development finance officers, and project managers who must allocate capital in environments where the usual assumptions do not hold. No guarantees, but a structure for making fewer catastrophic choices.