The Challenges of Building a Democratic Developmental State
By Tesfaye Habisso
Sept 01 2010
The Relationship Between Model of State, Development and Democratisation
Although there has been considerable discussion in the development economics literature on the role of the state, it is only in recent years that explicit attention has been paid to the model of state and its relationship to development. As development economics moved from a narrow definition of development confined largely to the growth of per capita incomes to a more holistic and needs- and- rights- based approach, the form of the state became relevant to the discussion.
While neo-classical economics was based on the implicit assumption of a minimalist state, all late-industrializing countries chose to deviate from the prescription, giving rise to the concept of a developmental state which played an active role in promoting the country's development. However, a developmental state was not preordained to be either democratic or dictatorial, nor destined to be either socialist or capitalist. The prototype of non-democratic developmental states with capitalist orientation were pre-War Japan and East Asian countries and that with socialist orientation were the former Soviet Union and East European countries.
Only the First World countries of Europe and North America had the distinction of combining developmental capacity with a democratic political regime. The basic characteristic of a developmental state was to promote the mobilization of economic surplus and its investment into new industries to ensure self-sustaining growth and rise in per capita incomes.
The developmental state used a large variety of instruments, both direct and indirect, to promote industrialization: general and targeted subsidies; tariffs; credit and direct finance; regulation of foreign investment and foreign capital inflows. Developmental states enlarged the size of the domestic market by unifying their countries politically and by investments in infrastructure.
The jury is still out on whether all countries can or should become a developmental state and whether a developmental state necessarily should be democratic. Historically, there was no strong positive correlation between the two.
The paradigm of a developmental state, which is largely based on the East Asian "miracle" economies is now facing a less hospitable environment as a result of the financial crisis faced by these economies during the late 1990s and the increasing pressures to open up the economies to foreign competition in all spheres.
However, the basic idea of a developmental state with managerial capacity and leadership could still hold a country in good stead in facing the challenges of globalization.
With the change in the scope and objectives of development, the need for defining the form of government to achieve developmental goals has also become imperative. So long as development was defined narrowly as growth, it mattered little how it was achieved and often dictatorial and military regimes (such as in East Asia) performed better than democratic regimes.
However, with the inclusion of such objectives as social, political and institutional modernization; and widespread improvement in the human condition, including reduction of inequality of incomes, poverty incidence and gender gap, among others, the need for a democratic dispensation became unavoidable. However, the idea of democracy as a universal commitment is quite new, as it is quintessentially a product of the twentieth century. Throughout the nineteenth century, theorists of democracy found it quite natural to discuss whether one country or another was "fit for democracy." This thinking changed only in the latter half of the last century, when it came to be realized that a country does not have to be deemed fit for democracy, rather it has to become fit through democracy. In fact, both democracy and development have rather steep and non-linear learning curves, climbing which is possible only through considerable investment of perseverance, patience and time [S.M. Naseem, 2004:2].
In his recent work, Development as Freedom, Professor Amartya Sen has emphasized the link between democracy and development and has debunked the oft-repeated claim that undemocratic systems are better at fostering economic development. Sen finds no convincing evidence that authoritarian governance and the suppression of political and civil rights are really beneficial to economic development. Systematic empirical studies give no real support to the claim that there is a general conflict between political rights and economic performance. In fact, a harsher political system is often counterproductive in bringing out the full potential of the labour force.
What Are Developmental States and Why Do They Matter?
Again, what do we mean by the developmental state? And why do we believe that this concept contributes something useful to contemporary thinking on development policy?
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, and 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.
Drawing on the work of Johnson (1982), Deyo (1987) and Evans (1995) among others, we understand a developmental state to exist when the state possesses the vision, leadership and capacity to bring about a positive transformation of society within a condensed period of time. To be judged developmental, a state does not need to be in control of everything and successful in all spheres. A transformation that is positive overall may be accompanied by a range of negative consequences, such as major environmental damage or greater social tension, which become problems that society and the state have to address in a subsequent phase.
The transformation can also take various forms. In the classic East Asian examples, it was aimed at speeding up growth, while at the same time enhancing opportunities to participate in the modern economy--most commonly through the expansion of public services such as education, health care and agricultural extension. The developmental state was associated with rapid processes of industrialization and/or the adoption of new technologies--that is, moving into higher value-added activities relative to the starting point. Typically, there was a shift from subsistence agriculture to more commercial, export-oriented farming, or to textile processing, or to tourism, or a mixture of these.
Clearly, not all social transformations are actively promoted by developmental states. There are many instances of private-sector-led growth in which the state's role has been quite limited. In addition, not all attempts at state-led transformations succeed.
In fact, in developing countries, ambitious attempts at state-led transformation have commonly met with failure, often with far-reaching negative consequences [Scott, 1998; Lockwood, 2005]. Moreover, the developmental orientation of a state is not a permanent condition but rather a dynamic feature with a limited time horizon. Germany and Japan, for example, had developmental states at critical junctures in their history, which triggered considerable economic and social transformations, while also storing up unresolved issues for the future [Moore, 1966]. Today the challenges are different and those countries' states [regimes] would no longer be considered developmental. Nor need the developmental condition be even across the entire state: a state may be characterized by the co-existence of sectors or institutional areas that have a clear developmental orientation with areas where significant anti-developmental factors are in play.
Developmental states have been the subject of research and analysis at various points in history. The roots of the idea of a developmental state reach back at least to List (1909) and Gerschenkron (1962), whose concern was the role of the state in rapid 'late' industrialization in continental Europe. The most recent experiences with successful transformations generated by developmental states have been those in East Asia between the 1960s and 1980s. Over a period of 30 years, a set of city-states and countries including Hong Kong, Singapore, South Korea and Taiwan underwent rapid economic growth and radical socio-economic change, moving from being poor agrarian societies in the 1960s to producers of high technology and high value-added goods by the 1990s [Fritz and Rocha Menocal, 2006]. These so-called 'Asian Tigers' have generated a considerable literature [Evans, 1995; World Bank, 1993; Haggard, 1990; Kohli, 2004]. Since the 1980s, developmental states in China and Vietnam have also overseen a remarkable process of social transformation. More limited examples of state-led development can be found in countries such as Brazil, India and Mauritius [Evans, 1996; Grindle, 1996; Rocha Menocal, 2004].
As this illustrates, we can with hindsight quite easily identify developmental states; that is, once the transformative outcomes have become visible. However, it is less easy to specify ex ante the key characteristics. Developmental states are marked by a combination of capacities, visions, norms and/or ideologies. They are not associated with specific policies; at different times and in different places, very different policies have ushered in social and economic transformations. At most, as Woo-Cummings (1999: 1-2) explains, the developmental state is 'neither socialist...nor free-market...but something different: the plan-rational capitalist developmental state...[which links] interventionism with rapid economic growth'.
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]. Historically, many of the examples of the emergence of such a leadership have been associated with a severe crisis (the perceived threat that Japan posed to South Korea, for example), and the response that political elites have designed to overcome it [Lange and Rueschemeyer, 2005; Herbst, 2000]. On the other hand, a degree of political stability is usually a precondition for such capacities to be sustained and to flourish. Aspects of the domestic context are important as well: demands arising from society, and in particular from wider elite groups, as well as international factors, may help or hinder the efforts of a national leadership in pursuing developmental goals [Gordon White, 2006: 535].
Many of the original leaders in post-colonial developing countries had a developmental vision: Julius Nyerere of Tanzania and Kwame Nkrumah of Ghana are perhaps the best known African examples. Patrice Lumumba had the potential to become a visionary leader in the Congo. However, wider conditions were disadvantageous. Domestically, there were strong clientelist demands for spoils, and ethnic/tribal rivalries that needed to be managed. The international context of the Cold War was particularly unfavourable, providing the backdrop to the elimination of potentially good leaders (for example, the murder of Lumumba), as well as the imposition or tolerance of outrageously bad ones.
The importance of the structure of domestic demands is reflected in a fundamental characteristic of the developmental state: what Evans (1995) calls its 'embedded autonomy'. According to Evans, the developmental state is autonomous insofar as it has a rationalised bureaucracy characterized by meritocracy and long-term career prospects, traits that make civil servants more professional and detached from powerful rent-seeking groups. On the other hand, the state cannot be too insulated from society without running the risk of becoming excessively detached, unable to appreciate and act upon societal needs. Thus, it must also be embedded in society, that is, [connected to] a concrete set of social ties that binds the state to society and provides institutionalised channels for the continual negotiation and renegotiation of goals and policies' [Evans, 1995:12].
State capacities generally cannot increase if a developmental commitment among the state elite is missing or insufficiently resolute. This may be the main reason why so much donor-sponsored capacity building has proven ineffective. However, commitment at the elite level is insufficient on its own. It is usually necessary for the elite to expound a vision that connects the state and society in a mutually binding way, through some form of shared 'national project'. Another of the underlying requirements of the developmental state is thus the creation of a nation-wide public [Ghani et al. 2005]. A nation-wide public need not be rooted in a unified sense of 'nation' based on cultural and linguistic unity, but may well take the form of a more civic identity (as in the case of the US). The important issue is that all citizens see themselves as Ethiopians or Nigerians, Kenyans or Tanzanians as much as or more than as an Oromo or as Igbo or Kikuyu or Nyamwezi. Post-independence leaders in sub-Saharan Africa often understand this challenge, and their drive to expand primary education was in good part aimed at creating a national public consciousness [Turner, 1971; Deutsch, 1953; Connor, 1972].
Many African countries experienced some sort of big push for development during the early independence years. However, subsequently governance deteriorated too sharply for this to be followed through. The deterioration was due to a combination of domestic and external factors. On the one hand, clientelistic and/or neo-patrimonial social structures strangled the potential of promising economic sectors and undermined attempts at state-led industrialisation. Efforts to spread education stalled, inter alia when increasingly authoritarian leaders found that those with some education, but lacking good employment opportunities (due to the clientelistic throttling of the economy), become politically dangerous. National armies discredited themselves through bloody coups and internal divisions along ethnic lines. The project of national integration failed.
Embedding State Autonomy
The big question for political economists in the 1990s was why the East Asian Tigers were growing so dramatically when other strong states were faring badly. Dictatorships and post-socialist states during the same period, for example, were creating the kind of economic and social ruin that caused their populations to detest them.
One answer came from Peter Evans, who identified two linked factors that distinguished successful 'developmental states' from economically failing ones, which he called 'embedded autonomy'. 'Embeddedness' he defined as good communication and ties with the private sector--the factor stressed by those promoting a 'developmental state' in Ethiopia regarding pro-poor inclusion. But this factor was bound up with 'autonomy', defined as political autonomy or insulation, which would simultaneously allow state officials to make policy professionally and independently of special private-sector interests [Peter Evans, 1995: 45].
In Evans' analysis, the interdependency of these factors was crucial. Social embeddedness without political autonomy would leave state officials vulnerable to private pressures, leading to corruption and cronyism. Autonomy without embeddedness would leave state officials isolated from real events, prone to bad decision-making and, in the worst scenarios, ruinous miscalculations [ibid].
For embedded autonomy to work, Evans observed, the state must create a meritocratic bureaucracy of highly skilled people who can freely combine their close contacts with the private sector with their independent understanding of the global market to help steer economic planning in directions good for the national economy as a whole.
Notably, a meritocratic bureaucracy has nothing to do with democracy. South Korea, Taiwan and Singapore were, until recently, repressive dictatorships (as was Brazil). These states used the peasantry (as long as it lasted) for agriculture to drive growth; they did not look out for peasant interests or any interests that didn't serve central state growth. Not until the 1980s were the rising middle classes in these states able to launch effective struggles for greater political voice, precisely because the states were so strong.
Hence a tangential debate about developmental states is that if early authoritarianism enabled the East Asian Tigers to overcome entrenched private interests, then Ethiopia, for example, is hampered in this respect because Ethiopia today is a constitutional democracy where authoritarianism has no place whatsoever.
Money and Autonomy
While authoritarianism may be a necessary condition, it is not a sufficient one. Even pro-authoritarian development analysts admit that other necessary conditions are needed: notably, the financial power that supported strong states in Asia.
Where did that power come from? The answer clarifies that the key factor for the Tigers was not authoritarianism but yet another conspicuously neglected truth about the developmental-state model that should give its admirers pause: for several decades, the US Administration pumped billions of dollars straight to the East Asian Tigers' governments in order to consolidate their compliance and capacity in the Cold War. This massive external funding greatly strengthened these states in relation to their private sectors, allowing them to operate with unusual independence and autocracy. Yet, oddly, this enormous financial and political factor is entirely overlooked by many who enthuse about the capacity of least developed countries such as Ethiopia and other states to blossom economically simply by emulating some South Korean policy regarding the bureaucracy.
This massive external funding greatly strengthened these states in relation to their private sectors, allowing them to operate with unusual independence and autocracy.
The same factor explains why authoritarian Latin American states have been unable to follow the East Asian Tigers' model: because their states lacked that external funding and even by the late 1970s were running aground on debt. Instead, extensive direct foreign investment in Latin America (again mostly from the US) strengthened the private sector in relation to governments, and effectively made the 'developmental state' model unworkable on most of the continent. Generally, entrenched oligarchies and repressive landed elites stifled development in the rest of Latin America precisely because they were in control of the state.
In other words, these states were socially 'embedded' but profoundly lacked insulation from private elite interests--indeed, they were composed of those interests and existed entirely to serve them. In these conditions, which endure today, leftist revolutions and democratic reforms have had disappointing impact in improving the lot of the poor.
That this vital finding of the 'developmental state' literature is not even heard is perilous to the Ethiopian debate. For it boils down to this: it's no good including more people in the nation's development project (even poor people who clearly deserve more voice in state planning) if the state bureaucracy lacks sufficient political insulation, because otherwise this lauded 'inclusion' will just foster more savoury deals, clientelism and tender abuse.
The challenge for Ethiopia as a democratic developmental state in the making is the same challenge that faces countries everywhere: to develop institutions and policy instruments, to win the hearts and minds of the majority of the population around democratic developmentalism, to secure resources, particularly foreign savings, to build an efficient, meritocratic and meritorious public service, and to insulate the state from private political pressure enough to allow 'inclusion' to be a positive form of 'embeddedness' rather than just another distortion. Only then can the state play a genuinely positive role in relieving Ethiopia's endemic poverty and inequality and truly serve the nation as a whole. The future of Ethiopia surely lies in building a robust democratic developmental state where democracy and development co-exist as 'kissing cousins', because "bread without democracy is bitter and democracy without bread is fragile."
"If a country's problems require radical remedies, you need a radical government. But how can you have a radical government without radically-minded officials? Difficult problems are solved by people who desperately want to solve them: not by people who had been fully prepared until polling day to make those self-same problems worse, rather than better."[Sir John Hoskyns, 1982].