Developmental states are organisational complexes with institutions that foster strong capacity for economic development. But what are the political origins of developmental states? This paper from the journal ‘International Organisation’ tackles this question by tracing the economic and political histories of the nations of Northeast and Southeast Asia. It argues that these capacities arose from the need to provide side-payments to restive popular sectors while under severe resource constraints and facing external threats to national security.
Developmental state bureaucracies are Weberian in nature, but go beyond this by promoting linkages with private actors. These can be distinguished from clientelist government-business relations in that: (i) They operate on functional and/or industry-wide criteria; (ii) the private sector participants tend to be ‘encompassing’ official associations; and (iii) their operations tend to proceed transparently and according to explicit rules.
There are three factors in the state-building literature that are useful in explaining the emergence of these institutions:
- Broad coalitions: Politicians can be induced to broaden coalitions where there is perceived intense elite or social conflict. Sustaining broad coalitions requires side payments – goods and services of perceived value. These have important positive institutional impacts.
- External threat: Strong states tend to arise in response to security threats. How this occurs depends on how war makes states generate revenue.
- Resource constraints: This increases fiscal pressure to promote complementary institutional and linkage development, as occurred in the Newly Industrialised Countries (NICs).
- These three conditions together constitute ‘systemic vulnerability’: The first two constitute critical claims on scarce resources that compel ruling elites to become ‘resource maximisers’, and preclude ‘easy’ development strategies.
- Policy making under these circumstances requires institutions able to: Formulate broad developmental objectives; facilitate information flows within state agencies and between officials and private actors; monitor firms’ performance; and be credible in commitment to economic policies and willingness to embed reciprocity.
In South Korea, Taiwan and Singapore institutions were created to meet the challenges of systemic vulnerability in three stages: Rural development and import substitution; labour-intensive export promotion; and industrial deepening and upgrading.
- After the Second World War, all three countries had real fears of attack and of popular discontent, and none had major export commodities on hand with which to buy quiescence. The necessary side payments took the form of ‘wealth-sharing’ mechanisms, such as rural development and education.
- Such reforms required the development of institutions capable of effective development planning, and effective implementation through public and semi-public organisations. The shifts to export promotion and especially to industrial deepening required similar institutional reforms.
- This last step meant resisting the temptation to reduce wages, which would have provoked a political backlash. It meant, instead, boosting productivity and exporting more sophisticated products. This stage marked the maturation of developmental state institutions.
- Thailand, Indonesia, Malaysia and the Philippines have never faced levels of systemic vulnerability that would have forced ruling elites to build developmental states. The absence of external threat and rarity of revenue shortfalls have permitted elites to neglect institution-building beyond property rights and price stabilisation.
- This argument runs against much recent scholarship, which challenges the benefits of state autonomy and stresses the contribution of democracy to the provision of public goods. Whilst democracy is a valuable end in itself, it does not necessarily produce more capable or generous states.
- Democracy may produce improved institutional performance where it induces elite vulnerability, but it should not be assumed that constraints on elite actions are confined to democracies.
