Recent trends show a rapid expansion of state activity in some parts of the emerging world at the same time that social programs in education, health care, unemployment benefits and old-age pensions have stagnated or even retrenched in the advanced industrial economies. In addition, the recent global financial crisis has triggered an increasing presence of the state as an actor and regulator, and state-owned enterprises and sovereign wealth funds are playing an important role on a global scale. This report, published by the Joseph H. Lauder Institute of Management and International Studies and the Penn Lauder Center for International Business Education and Research, explores the new challenges that state fragility and failure pose to local populations and to the international system of states as a whole.