My paper, “Informal Markets and Political Violence in Relation to State Formation and State Collapse in Sudan and Somalia,” explains why structurally similar relationships to the international economy produce very different domestic political outcomes. Sudan and Somalia are major labor exporters that witnessed a boom in expatriate remittances in the 1970s and early 1980s. By the mid-1980s and into the 1990s, remittances declined dramatically, generating severe recessions and economic austerity policies. These capital inflows produced similar macro-institutional responses: in the boom, they circumvented official financial institutions and had the unintended consequences of undercutting the state’s fiscal and regulatory capacities while simultaneously fueling the expansion of informal markets in foreign currency trade. In the prosperous 1970s, these informal financial markets came to be “regulated” by indigenous Islamic and ethnic networks which provided cohesion, shared norms, and an economic infrastructure outside the formal economic and political system. In the economic crises of the 1980s and 1990s, however, the material links between formal and informal institutions eroded with the result that identity politics transmuted again, producing two different outcomes in Sudan and Somalia: consolidation and violence in the former and disintegration and violence in the latter. Through an historical analysis of comparable informal institutional arrangements across cases, my paper demonstrates when, and under what conditions, informal social networks have oriented social and economic relations around religious networks in Sudan, and ethnic affiliations in Somalia. I locate the rise of an Islamist-authoritarian regime in Sudan and state disintegration in Somalia in the way that informal financial markets were captured by segments of the state and social groups. My central hypothesis is that the form that collective action evolved in the two cases was largely dependent on whether Islamist or kinship groups were successful in establishing a monopoly over informal markets and relatively more proficient in utilizing their newly formed political coalition to control competition, albeit through highly coercive means.