The article takes issue with the way in which economics deals with the state and assumes homogenous capacity. Instead it argues that differences in growth rates between countries can be traced back to the capacity of the state and political system. A state that is relatively capable is able to provide a political environment conducive to growth. It highlights the role of the elite in the development process, the necessity for a competent and insulated economic bureaucracy, and the significance of `embedded autonomy’ for the state. These elements shape the nature and capacity of the state.