The Challenges of Building a Democratic Developmental State

By Tesfaye Habisso
Sept 01 2010

"A common factor among developmental states appears to be a committed leadership that is embedded in the 'right' context of demands. Developmental states are usually characterized by a leadership which is strongly committed to developmental goals, and which places national development ahead of personal enrichment and/or short-term political gains" [Ghani et al., 2005; Leftwich, 2000; Rotberg, 2004].

In Ethiopia, since the last seven years or so, the incumbent party and government have explicitly committed themselves to building a democratic developmental state that efficiently guides the national socio-economic and political development of the country by mobilizing the human and material resources of the state and directing them towards the realization of common goals. The current rulers place the needs of the poor and social issues such as health care, housing, infrastructure, education, poverty alleviation and reduction as well as a social safety net at the top of the national agenda. The country is led by a dedicated, radical and committed leadership bestowed with vision and strategy to fundamentally transform the socio-economic face and makeup of the nation in a relatively short period of time. Starting from a very dismal and pitiably low base of economic and human development as of 1991, considerable achievements in a large number of socio-economic and political spheres have already been registered throughout the country. The tireless struggles to improve the living standard and overall well-being of the rural and urban populations across the country, to insure the rule of law and to safeguard human and democratic rights are continuing unabatedly. Although a lot remains to be done when compared to the constitutional democracy that the country and state boast of, today, peace and stability reign throughout the country, attracting many foreign and local investors to start new businesses in Ethiopia. We also observe the current regime relentlessly striving to root out, rent-seeking, predatory behaviour, corruption and other malpractices in the public bureaucracy, to build an ethical, customer-friendly, efficient and meritorious public service, a well-functioning public-private sector alliance and collaboration, creating an investor friendly environment, supporting small business development and peasant agriculture productivity as well as commercialisation of small-scale agriculture, generating massive employment opportunities for the urban youth and women, encouraging export-led growth of the agricultural sector, and using state owned enterprises effectively and driving strategic investment initiatives. As a result, double-digit annual economic growth has been a characteristic pattern of the national economy since the last six or seven years, and now the government has formulated and launched a five-year Growth and Transformation Plan (GTP) with an over-ambitious aim of doubling the present national economy or gross domestic product with an expected yearly economic growth of 11- 14% GDP, including doubling the agricultural production of the country at the end of the five-year period (2011-2015).

The State is also strongly committed to playing a big role in keeping our economy competitive and close to the leading edge in the global development of knowledge and technology by pursuing a democratic developmental state, akin to the current experiences of similar developmental states such as South Africa, Botswana, Mauritius, Ghana, Brazil, among others. But what do we mean by a 'democratic developmental state'? How is it possible to simultaneously tackle the twin challenges of socio-economic transformation: democracy and development? What is the relationship between democracy and development? Does democracy promote development or is it the vice versa? These vexing questions require succinct answers.

Before going any further in the discussion of the topic, I believe, we must start with a definition of the concept because the term 'developmental state', amongst many circles of academics and business elites in Ethiopia today, is almost equated with the mere imposition of 'hard power' and authoritarian rule on the society with the sinister aim of perpetuating one-party rule under the guise of implementing socio-economic and political policies and programs in order to achieve fast and accelerated economic development and to extricate the poor masses from the scourges of poverty and depravation in a short period of time. This is because of the authoritarian political system that was prevalent during the developmental process of the so-called East Asian Tigers or Newly Industrialized Countries (NICs) such as Korea, Taiwan, Singapore, etc. in the 1960s and 1980s applying authoritarian politics to implement their developmental policies and agendas, and achieving spectacular economic growth rates and sustainable development in just three decades or so.

Yes, most developmental states in East Asia were initially authoritarian and applied heavy-handed approaches to implement their developmental policies and achieve fast growth in a short period of time. For these poor societies democracy in the short-term was considered a luxury they could ill afford, and thus they focused more on developing discipline than democracy, believing that the exuberance of democracy would lead to indiscipline and disorderly conduct which would be inimical to development. However, their integrity and commitment to achieve their developmental objectives and goals were unprecedented. This does not, however, imply that all authoritarian regimes are developmental and it also does not mean that states need to be authoritarian in order to be developmental. There have been many examples of anti-developmental or non-developmental authoritarian states in Africa and Latin America; Ethiopia of the pre-1991 era could be cited as an illustrative example in Africa. On the other hand, Brazil and South Africa today indicate that democratisation and a greater developmental orientation of the state can occur in parallel. In the case of Brazil, democratisation entailed a transition from military authoritarianism to democratic rule, while in the case of South Africa it was a transition from Apartheid to inclusive democracy.

However, building developmental states in a democratic context brings about particular challenges, which for the most part Asian success stories did not face. This issue has been neglected in much of the literature on developmental states. Brazil, India and South Africa, for example, have faced significant obstacles in managing their political economy with what Herring (1999) described as 'one arm tied behind [their] back by [their] commitment to liberal democracy'.

Definitions of a Developmental State

The term 'developmental state' does not enjoy any clear consensus about its meaning. Some even question the appropriateness of the term 'developmental state' contending that a 'state' as an abstract entity can neither be developmental nor non-developmental, and it is perhaps a 'regime', they contend, that may deserve such a label. Leaving aside this contention for further debate and scrutiny in the future, let us examine the views of other scholars on the issue. According to Castells: "A state is developmental when it establishes as its principle of legitimacy, its ability to promote and sustain development, understanding by development the combination of steady high rates of growth and structural change in the productive system, both domestic and in the relationship to the international economy... Thus, ultimately for the developmental state, economic development is not a goal but a means." [NUMSA, October 3, 2006]

Chalmers Johnson contends that: "the developmental state was one that was determined to influence the direction of and pace of economic development by directly intervening in the development process, rather than relying on the uncoordinated influence of market forces to allocate economic resources."

WIKIPEDIA, the Free Encyclopedia describes a 'Developmental state', or hard state, as "a term used by international political economy scholars to refer to the phenomenon of state-led macroeconomic planning in East Asia in the late twentieth century, In this model of capitalism (sometimes referred to as state development capitalism), the state has more independent, or autonomous, political power, as well as more control over the economy. A developmental state is characterized by having strong state intervention, as well as extensive regulation and planning. The other characteristics include (i) emphasis on market share over profit; (ii) economic nationalism; (iii) protection of fledging domestic industries; (iv) focus on foreign technology transfer; (v) large government bureaucracy; (vi) alliance between the state, labour and industry called corporatism; (vii) scepticism of neo-liberalism and the Washington Consensus; (viii) prioritisation of economic growth over political reform; (ix) legitimacy and performance; (x) emphasis on technical education. The term has subsequently been used to describe countries outside East Asia which satisfy the criteria of a developmental state. Botswana, for example, has warranted the label since the early 1970s. The developmental state is sometimes contrasted with a predatory state or weak state.

The first person to seriously conceptualise the developmental state was Chalmers Johnson. He wrote in his book "MITI and the Japanese Miracle":
In states that were late to industrialize, the state itself led the industrialization drive, that is, it took on development functions. These two differing orientations toward private economic activities, the regulatory orientation and the developmental orientation, produced two different kinds of business-government relationships. The United States is a good example of a state in which the regulatory orientation predominates, whereas Japan is a good example of a state in which the developmental orientation predominates.

Recent writing on developmental states has emphasized the importance of both infrastructural powers and political commitment. According to Ghani et al. (2005), a 'developmental' state project must possess at least two essential attributes. First, the state must have the capacity to control a vast majority of its territory and possess a set of core capacities that will enable it to design and deliver policies; secondly, the project must involve some degree of reach and inclusion, and have an institutional, long-term perspective that transcends any specific political figure or leader, and emphasizes commitment. In his view, an ideal-type developmental state is one that demonstrates a 'determination and ability to stimulate, direct, shape and cooperate with the domestic private sector and arrange or supervise mutually acceptable deals with foreign interests' [Leftwich, 2000: 167-8]. Thus, a developmental state is broadly understood as one that evinces a clear commitment to a national development agenda, that has solid capacity and reach, and that seeks to provide growth as well as poverty reduction and the provision of public services [V. Fritz and A.R. Menocal, 2006: 5-6].

A regulatory state governs the economy mainly through regulatory agencies that are empowered to enforce a variety of standards of behaviour to protect the public against market failures of various sorts, including monopolistic pricing, predation, and other abuses of market power, and by providing collective goods (such as national defence or public education) that otherwise would be undersupplied by the market. In contrast, a developmental state intervenes more directly in the economy through a variety of means to promote the growth of new industries and to reduce the dislocations caused by shifts in investment and profits from old to new industries. In other words, developmental states can pursue industrial policies, while regulatory states generally cannot.

As in the case of Japan, there is little government ownership of industry, but the private sector is rightly guided and restricted by bureaucratic government elites. These bureaucratic government elites are not elected officials and are thus less subject to influence by either the corporate-class or working-class through the political process. The argument from this perspective is that a government ministry can have the freedom to plan the economy and look to long-term national interests without having their economic policies disrupted by either corporate-class or working-class short-term or narrow interests.

Models or Types of State and Their Role in Economy

Peter Evans of the University of California at Berkeley and a sociologist by profession categorizes states into three types (or models) based on their roles in economic development--the Minimal State, the Developmental State, and the Predatory State [7]. Artikel Ilmiah adds another type: the Regulatory State [8]. However these types of state are only ideal types. Given the complexity of reality, countries have historically applied a combination of them. Other scholars categorize states into four models; these are: the democratic interventionist-welfare state, commonplace in many Western societies; the developmental state that evolved in the Soviet system, and spread with some modifications to many developing countries; the liberal, market-friendly state espoused by the World Bank, which has found a footing in most developing countries that have taken structural adjustment loans from the World Bank and IMF; and the business-like, managerial state promoted by Margaret Thatcher, Ronal Reagan and others. These types of states are not essentially at odds with or much different from the above state models. It is also contended that innovations in any kind of state can, with suitable modifications, be adapted in any other kind of state, and that innovations in governance systems and adaptive borrowings are powerful keys to state excellence [Khandwalla P.N, "Revitalising the State: Models of the Modern State", 1997].

When we analyse the state models, we come to understand that the Minimal State is a concept from Adam Smith. The supporters of this concept argue that market mechanisms know best and work more efficiently than governments. To have the most favourable conditions for business, the role of government should be kept as minimal as possible. Based on this framework, the role of government is restricted only to preventing monopoly and externalities, providing public goods, and enforcing the law. Government's help to business should be indirect and non-selective.

The Regulatory State goes one step further than the Minimal State. The supporters of the regulatory state argue that the government is also responsible for the welfare of society as a whole and may help business people by ensuring a better government. From this point of view, indirect help is not and never sufficient. Government should be more active in giving direct help and should sometimes be selective. Two variants of the regulatory state are the Associative State and the Welfare State. The Associative State frames government to work together with business people and labour to mobilize productivity and allocate distribution for welfare. The Welfare State frames government to distribute welfare programmes (e.g. housing, unemployment aid, healthcare, etc.) and sometimes, to protect small businesses from the threat of big business.

The Developmental State goes one step further than the Regulatory State. The supporters of the Developmental State argue that the government should direct the trend of national industries and pick the "winners" to become the leading industries (or business locomotives). To play this role powerfully, the government should manipulate industrial policy (protection, subsidies, lower tax), offer cheap loans, and give administrative guidance that can direct business people to choose certain business strategies. The assumption of this approach, contrary to the Minimal State, is that the government knows more than the market how to achieve the highest national economic growth.

The last one is the Predatory State. The easiest way to describe the predatory state is as follows: "The predatory state is the developmental state without bureaucratic competence." As a developmental state, the predatory state also directs the trend of business and picks the "winners". However, the criteria for the intervention is not technical competence based on assessments of expertise, but nepotism and corruption. The government's high officials act as rent seekers, giving government facilities and protection to business people, and getting personal benefits in return.

The indirect role of government refers only to the Minimal State. In this category, the role of the government is only to protect market mechanisms and to build infrastructures for the economy. The government may spend much money to build railroads or highways. This role is considered indirect, since what is created is a part of public goods. The direct role of the government refers to the Regulatory State, the Developmental State and the Predatory State, since in these states the government's role is to be selective and more than just to protect market mechanisms.

In the history of business, the governments of the United States and Great Britain play roles as Minimal States, Regulatory States and Developmental States interchangeably, from one point of time to another. Compared to the United States and Great Britain, Japan acts as a developmental state much more frequently.

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