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What role does identity play in determining a state's robustness? This article argues that the relationship between identities, institutions, social cohesion and state legitimacy is critical to understanding social and political progress in fragile states. States that lack a common identity will fail to progress. International actors should support fragile states to develop their own development and state-building strategies, and build on their own capacities for good governance.

The determinants of identity vary considerably across contexts. In some regions, religion is the most important determinant while in others it is ethnicity. Identities play a critical role in the formation of stable institutions (both informal and formal). Identity groups often have established rules governing political relationships and individual behaviour, reducing transaction costs and creating a sense of security. States that can take advantage of these benefits are in a better position than those that cannot. The most successful states in Africa and the Middle East – Botswana, Somaliland, the United Arab Emirates and Kuwait – are those that have been built on traditional identities and institutions that are accepted by the majority of citizens.

A combination of competing identities can weaken state institutions or undermine the state. These problems are likely to be most acutely felt in fragile states.

• The existence of competing identities weakens state legitimacy, which usually relies on social cohesion and consensus about national identity.
• Divided identities make it difficult to form an apolitical bureaucracy, which is a critical precursor to development.
• Political fragmentation undermines the effectiveness of informal institutions. These can build the social trust which facilitates productive economic and political co-operation.
• Fractured identities tend to encourage short-term opportunism, leading political elites to neglect the long-term investments necessary for development.

Western development agencies have neglected the role of identity in state-building. They have not sought to integrate indigenous identities into the state and have therefore precluded locally-driven processes of reform. Development efforts have typically been driven by financial targets and generic models of centralised state structures. The standard donor toolkit of competitive elections, economic reform and peacekeeping needs to be revised if it is to be effective.

• Foreign assistance should complement and reinforce local capacities and should take care not to undermine locally-driven arrangements.
• In some cases, government authority should be decentralised to serve cohesive identity groups such as the Kurds in Iraq or the Isaaq in Somaliland.
• In large countries such as Sudan and the DRC, locally-driven models of development are more likely to succeed than state-based models.
• In divided countries, governments can support national integration by investing in marginalised areas. Donors can support this process by funding sports, educational and cultural programmes that create stronger inter-group bonds.