The changing political economy of development

Patterns of development – and the ways in which we understand them – are shifting in dramatic and complex ways

Matthew Bishop
Matthew Bishop

In my previous SPERI Comment post, I suggested that the ‘rise of the BRICS’ forces us to think more clearly about the changing terms of the global political economy of development.

Tony Payne also picked up this theme recently, arguing that ‘we are all developing countries now!’ For him, the traditional terminology of development is increasingly inadequate and even misleading – in helping us to make sense of these dramatic changes.

One of the most interesting aspects of this is what it signifies for debates regarding the role of the state in development.

This has been highlighted by the recent publication of a book by Chinese economist and World Bank Senior Vice-President, Justin Yifu Lin, entitled The Quest for Prosperity: How Developing Economies Can Take Off. Dr Lin argues that, following the successful example of countries like China, states should do much more than simply provide infrastructure and the public goods which underpin markets. They should identify strategic sectors for growth and intervene purposefully to nurture and develop them.

Governments can and should ‘pick winners’, and the ones that do tend to be the most successful.

In one sense, this is not particularly radical stuff. Numerous heterodox political economists – notably people like the late Alice Amsden, Robert Wade, Adrian Leftwich and Ha-Joon Chang – have been saying much the same for many years.

But it is striking in two ways.

First, the fact that these ideas are emerging from a senior location within a major Bretton Woods institution is potentially suggestive of a broader shift in thinking.

Second, these ideas go beyond even the most outré frontiers of post-Washington Consensus thought.  In this regard Dr Lin’s intervention is considerably more radical than the tentative and often rather orthodox conclusions which have been drawn by many more famous, and supposedly critical, economists.

The interesting puzzle here relates to what Lin’s intervention implies for how we understand development.

To investigate this, it’s worth dipping into recent intellectual history.

The 1960s and 1970s witnessed a battle between notions of ‘modernisation’ and ‘dependency’. Regardless of one’s standing on the ideological spectrum, development was seen to be fundamentally about processes of national liberation and economic transformation, with outcomes characterised by sustained social amelioration.

By the 1980s, resurgent neoliberalism took aim at Keynesianism in the ‘North’ and, to paraphrase my colleague, Norman Girvan, ‘its presumptive intellectual offspring, developmentalism in the South’.

Throughout the 1990s, and beyond, neoliberalism’s stranglehold over the mainstream meant that, at the global level, attempts to theorise alternatives occurred within extremely narrow parameters.

Jean-Philippe Thérien identified two trends in this regard: a ‘Bretton Woods paradigm’ characterised by Joseph Stiglitz’s post-Washington Consensus agenda in the World Bank, which added notions of good governance and the importance of institutions to the neoliberal lexicon; and a ‘United Nations paradigm’ characterised by human-centred notions of development, most famously encompassed within the Human Development Index (HDI) and the Millennium Development Goals (MDGs).

It is often claimed (rightly) that neither of these agendas poses a genuine challenge to the neoliberal order.

But what is under-remarked is that both of them also intrinsically deny the kind of transformation of economy, state and society that was so central to the development debates of the post-war period.

The former is about off-the shelf liberalisation and global market integration, the disastrous results of which are ubiquitous and encompassed in rocketing levels of inequality and insecurity.

The latter is about incremental improvements in specific areas, such as education, access to clean water, sanitation and so on. These are, of course, good things in and of themselves. But in allowing the UN agenda to dominate much thinking and policy, more transformational notions of development are implicitly prevented from taking root.

Improvements in the components of the HDI or the MDGs can only ever be symptoms of development; policy which is geared exclusively towards achieving them will be incremental rather than transformative. Norway is not top of the HDI because its development policy is focused upon being so; its leading position is a by-product of its huge productive capacity and successful development more broadly defined.

Returning to the wider argument, changes in global patterns of development – particularly the dramatic transformations taking places in the so-called BRICS – are posing a huge intellectual challenge to the prevailing order.

Not only is the traditional language of development ripe for the dustbin, but for the first time in thirty years notions of national developmentalism are returning.

So what are the implications of these shifts?

One is that liberal approaches to development – particularly the market fundamentalist variant – appear increasingly implausible, even on their own terms. Successful growth, development and transformation are about much more than global market integration and require a developmentally-minded state to pursue them actively.

Another is that, regardless of how long it takes neoliberal ideologues to catch up with this reality, a number of hugely powerful countries are getting on with picking winners, transforming the productive capacity of their economies, effecting genuine national development, and, to borrow Tony Payne’s term, ‘renegotiating’ their position (upwards) within the global political economy of development.

Finally, there is an important lesson for countries, especially poorer ones, the world over. Improving living standards is important, but this will not happen in a truly fundamental way from blindly pursuing the MDGs as an end in themselves. Rather, as the example of Norway consistently illustrates, if you get the development right, the MDGs will – or should – largely take care of themselves.

For those of us who are of a broadly developmentalist mindset, these shifts together constitute an exciting, and long overdue, intellectual challenge.

If Dr Lin’s thinking comes to influence the World Bank and other development institutions, bringing formerly heterodox ideas in from the renegade frontiers to the intellectual mainstream, then it could also precipitate the most interesting period of critical reflection about development for a generation.