Where peasant production predominates in the national economy, the state is faced with a difficult dilemma. It must derive its revenues from cash crops, but if it appropriates too much, it will drive peasants out of the cash market and into subsistence (Hyden, 1980; Bunker, 1983b). Many African states have attempted to resolve this dilemma through direct contrôl of crop markets (Bates, 1981). Market control in peasant economies, however, usually offers the major means of wealth and upward mobility at the local level, so different power groups there may challenge the state's hegemony (Saul, 1969; Hyden, 1970). I have already shown how such groups achieved significant control of markets in Bugisu, Uganda (Bunker, 1983a), and how the state responded with periodic interventions to limit their power and autonomy (Bunker, 1983b). In this article, I examine how the Ugandan state has justified its continued intervention in the local economy and how power groups among the Bagisu have legitimated their claims against the state.