The mainstream discourse on the political economy of drugs has emphasised the negative correlation between drug production and state capacity, with the presence of a thriving drugs trade seen as both a sign and a cause of weak states. Through an analysis of the drugs trade in Burma this study argues that such an approach is deeply flawed. Focusing on the period since the 1988 protests it argues that the illicit nature of the drugs trade has provided the state with an array of incentives (legal impunity, protection, money laundering) and threats (of prosecution) with which to co-opt and coerce insurgent groups over which it has otherwise commanded little authority. Although the state's involvement in the drugs trade was initially driven by an expedient desire to co-opt insurgent groups following the 1988 protests, this study also argues that over time it has provided an arena in which more immanent and largely unanticipated processes of state formation, namely the centralisation of the means of violence and extraction, have gradually been built. Rather than being a sign of corruption-induced state incapacity, the state's involvement in the drugs trade has thus become a central arena through which state power has been constructed and reproduced.
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