Revisiting the developmental state 1: Introduction

It’s time to open up a new debate about the potential gains offered by this longstanding and core concept in the study of the political economy of development

The bleak and grinding years of crisis and austerity in the West – symptoms of the decaying neoliberalism that may finally be reaching its endgame – have contrasted markedly with the spectacular rise of China and the advance of other so-called ‘emerging’ powers over the same time-frame.  These twin processes have reignited interest in a range of questions – covered frequently on this blog – relating to the state’s appropriate role in development and the nature of a modern industrial strategy.

These debates all crystallise around the notion of a ‘developmental state’. This concept emerged in the early 1980s in the writings of Chalmers Johnson and Alice Amsden and was quickly picked up and developed further by many other academic political economists, such as Robert Wade, Peter Evans and Meredith Woo-Cummings.  Several drew self-consciously on the classical statist political economy of US ‘founding father’ Alexander Hamilton and the German Friedrich List to emphasise how, contrary to prevailing free-market explanations, the ‘catch-up’ development of much of East Asia owed much more to a high level of state intervention.

To be clear, this approach to development was never about rejecting markets, but rather recognising that, left to their own devices, they can have pernicious effects, including never coming properly into being in the first place!  The goal of a developmental state was in fact conceived as building markets but then deliberately distorting them to serve specific national development objectives through the judicious use of incentives, tariffs, subsidies and especially control of finance.  Where liberals believe countries should accept and exploit their ‘comparative advantage’ almost as if it is naturally determined and therefore static, theorists of the developmental state see comparative advantage as dynamic and changeable, and something to be manipulated in a relentless process of industrial upgrading.

Such a way of thinking has retained many adherents in contemporary political economy.  There is a simple reason for this: developmental states appear to work.  Mariana Mazzucato (winner of the 2014 New Statesman/SPERI Prize) has shown how the Entrepreneurial State has actually been responsible for underwriting the major risks required for the kinds of technological innovations – such as the iPhone – that are often wrongly assumed to be the result of the genius and risk-taking of private firms like Apple.  Perhaps most strikingly, China’s recent industrial transformation has shown how dramatic levels of growth require massive amounts of state-direction.  This carries crucial lessons for other countries searching for a new development dynamic, as Chinese economist and former World Bank Senior Vice President Justin Yifu Lin pointed out so effectively in The Quest for Prosperity.

Moreover, this is just the tip of the iceberg: numerous other excellent academic books have been written on the developmental state in recent years (see here, here and here).  What explains this resurgence of interest?   Partly it relates to the way that the growing number of cases of apparently successful developmental statism has continued to provide fertile ground for analysis.

Again, even on this blog, many of us have sought to apply this idea to countries as diverse as Rwanda (which is growing rapidly) and even supposedly ‘developed’ countries like the UK, which look increasingly to be in need of a substantial dose of developmentalism.  Perhaps most important is the United States itself: the bastion of free-market rhetoric has actually always intervened substantially more than is widely realised precisely because, as Linda Weiss has put it, ‘it has a state whose risk appetite is enormous, extraordinary and enduring’ (emphasis added).

Yet, if the concept of the developmental state has been so well covered, why are we seeking to revisit it in this blog series?  There are at least four broad reasons why it is worth thinking about developmental states afresh.

First, it is not clear that the idea travels as easily as we might think across time and space.  The original developmental states of East Asia (Japan and the ‘Tigers’ of Korea, Hong Kong, Singapore and Taiwan) were in many ways unique, and they all developed rapidly together in a particular geopolitical climate, and often with huge amounts of US aid.  They were different to the early developers, and also different to those that have come since.  That the label is now applied – whether loosely or tightly – to a vast array of countries as diverse as Indonesia, Brazil, Mozambique, Mauritius and Botswana (amongst many others) suggests that it may have lost a degree of comparative analytical purchase.  Moreover, it is not clear whether any country, let alone all countries, can replicate the kinds of transformations that occurred in East Asia in the 1970s in the contemporary era of global-value-chain-driven globalisation.

Second, and consequently, we wonder whether there may be an excessive degree of conceptual stretching occurring today.  In a wonderful review article in 1991 Ziya Öniş outlined clearly the key elements of a developmental state.  These included, but were not limited to: a singular focus on productivity growth and industrial upgrading; a highly penetrating central state apparatus (and even potentially intrinsic authoritarianism); market-distorting interventions to protect strategic industries; export-led growth; and an insulated and developmentally-minded bureaucracy.  This latter point, especially, is crucial: as Öniş noted at the time, the whims of politicians were necessarily to be subordinated to highly capable technocrats: ‘politicians “reign” while the bureaucrats “rule” [and] the objective of the political elite is to legitimize the actions of the elite bureaucratic agencies’.  It is not, therefore, sufficient just to identify the combination of high levels of growth and state intervention: these two things do not, of themselves, render a state truly ‘developmental’.

Third, these states are actually not that novel, and they have always been with us.  As Ha-Joon Chang reminded us a few years ago in Kicking Away the Ladder (probably the most-read contemporary book on university political economy of development courses), even the Western countries that claimed to have developed via open markets did precisely the opposite.  Britain, the United States, Germany, France and others were highly developmental – and arguably remain so in certain respects and to differing extents – suggesting that the process of development always embodies in practice, even if not in theory or ideology, a complex mix of state-market interactions.  It may be implausible in reality to draw a simple binary distinction between ‘neoliberalism’ and ‘developmentalism’ as so many have done, for example, in contrasting the West with China.  Neoliberal deepening was itself a state-led process, just as developmentalism relies on market mechanisms. Countries can and do exhibit characteristics of both simultaneously.

Fourth, a whole host of other thorny questions still haunt the developmental state landscape.  Does globalisation inherently make economically nationalist policy more difficult?  Are strong states always desirable or developmental, and where does one find a developmentally-minded bureaucracy that is able to operate at arms-length from political actors?  Can very poor countries really build the necessary institutions to transcend a historically-constituted dependence on, say, extractive industries?  Is it plausible to allow countries great leeway to engage simultaneously in mercantilist policy while trying at the same time to maintain a relatively open global economy?  Can we tolerate the fact that developmentalism seems to require, at best, repression and, at worst, outright authoritarianism?  Is everything still rosy in the first-generation developmental states or do we now gloss over the developmental challenges facing them?  What actually distinguishes a genuinely developmental state and do the many countries to which such a label is assigned really fit the bill?  Who, if anyone, is responsible for driving developmental plans forward today, and do they all have to operate at the national state level?

Successive contributors to this blog series will pick up some at least of these many themes in the posts that will follow at weekly intervals over the next few weeks.

This article is the first in a new SPERI Comment series on revisiting the developmental state. Read all of the articles in the series so far here