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The Importance of a Common Vision: Forgotten Traditions of Thinking about the
Importance of State Capitalism for Socio-Economic Development
Moisés Balestro (University of Brasilia) and Andreas Nölke (Goethe Universität in Frankfurt)
Abstract
The rise of large emerging markets such as China and India has made the debate about the role of
the state in development very lively again. Several scholars argue that the role of the state in
emerging market capitalist dynamics can be better grasped under the umbrella of state
capitalism. This mirrors – and threatens to repeat – debates about the role of the state during the
East Asian miracle in the 1980s and 1990s. Debates on an active role of the state in economic
development need to avoid the danger of reinventing the wheel. More importantly, the
dominance of the modern Anglo-American debate leads to a neglect of important older
contributions from other national traditions. Our excavation of classical Japanese, German and
Latin American contributions demonstrate the rich contribution of these alternative traditions. In
contrast to the somewhat economistic, micro-economic and often supply-side focused
contributions of the dominant Anglo-American debate, the forgotten traditions much more
strongly highlight the importance of a common national vision for catch-up industrialization, a
macro-economic and a demand-side perspective.
Introduction
The rise of large emerging markets, and particularly the case of China, has made the debate
about the role of the state in development very lively again. A broad debate on emerging
markets‘ state capitalism has been ongoing for a couple of years in Western media such as Time
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Magazine (Schuman 2011), Businessweek (Kurlantzick 2012), the Economist (2012), Reuters
(Bremmer 2012), or the Wall Street Journal (Sharma 2013). Usually, the term ―state capitalism‖
takes on a pejorative meaning in public debate, but this is often inappropriate (Rodrik 2013). The
subsequent academic debate on state capitalism (Grugel and Riggirozzi 2012, Lin and Mulhaupt
2013, McNally 2013, Xing and Shaw 2013, Carney 2014, Schweinberger 2014, Nölke 2014,
Hsueh 2011, 2015, Kalinowski 2015, Nölke et al. 2015, Kurlantzick 2016) came to a much more
nuanced assessment. Our concern, however, is that the current wave of engagement with state
capitalism tends to neglect the contributions made in previous scholarship and policy, thereby
not only threatening to reinvent the wheel but also missing relevant insights. After all, this is
already the third wave of engagement with state capitalism (ten Brink and Nölke 2013, Nölke
2014).
The first wave of state capitalism happened during the mid- to late 19th century and had the trade
protectionism as a critical issue. It included countries such as the US, Germany, parts of
Scandinavia, and later Japan. Inspired by authors such as Hamilton (1791/2001) and List
(1841/2014), the target was the development of the domestic industry, in order to avoid
colonization by a superior economy (mainly the United Kingdom). Tariffs were a particularly
important device for state capitalism during this period, supplemented by the creation of central
banks and other new economic institutions. Later, state capitalism became less fashionable,
especially during the 1920s, with its rather liberal outlook.
The second wave of state capitalism refers to the highly important role of the state in the
economies of the US, Europe, and the Soviet Union after the Great Depression. It also comprises
the emergence of the East Asian developmental states after the end of the Second World War.
This wave of state capitalism differed considerably from the first one, as it was much less based
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on tariffs, but rather on the idea of a centrally planned modernization of the economy. The latter
came in different guises, from the US New Deal, the Swedish model, Fascism, and Stalinism to
the 1950s/1960s economic success stories of Japan and South Korea. The second wave of state
capitalism stemmed from a comprehensive state intervention into the economy.
In contrast to the first one, it was more developmental than protectionist. Central agencies such
as the Japanese MITI set priorities for business and other economic actors. Domestic
interventionism becomes coupled with multilateral trade with incremental trade liberalization as
described by the concept of ―embedded liberalism‖ (Ruggie, 1982).
After decades of dominance on industrial policy, the developmental state model (Johnson 1982,
Wade 1990, Evans 1995; see also Chang 2002, 2010, Fine 2005, Edigheji 2010, Evans 2010,
Sasada 2013) lost its predominance during the 1980s and 1990s and gave way to neoliberalism,
as symbolized by the rise of the Reagan and Thatcher governments.
The third wave of state capitalism in large emerging markets such as China, India, or Brazil
again has a different focus, since it neither departs from prohibitive tariffs nor is it based on a
centralized economic command. While it also includes protectionist measures as well as a certain
degree of economic coordination, the strategic and selective use of both inward and outward
foreign direct investment (FDI) for national economic development is the core pillar of this third
wave. In current literature, state capitalism is nearly wholly associated with the rise of stateowned or at least state-supported companies from emerging markets (Baccini et al. 2017, Nem
Singh and Chen 2017, Chaisse 2018, Cooke et al. 2018,
Feng et al. 2018, Li et al. 2018, Yang and Lee 2018; Lim 2018, Arnold et al. 2019, Dolfsma and
Grosman 2019, Hu et al. 2019). State capitalism thus is equivocated with the importance of state
ownership, the support of national champions by public development banks and selective
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industrial policies, often based on the influential work by Musacchio and Lazzarini (2014,
Musacchio et al. 2015).
Upon closer inspection, however, Hamilton (1791/2001), Japanese Meiji reformers, and the
German Historical School (e.g., List 1841/2014) already have articulated many of the ideas
forwarded during the most recent debates more than a century before. More importantly, the
dominance of the modern Anglo-American (and, interestingly, often also Chinese) debate leads
to a neglect of significant older contributions from other national traditions. Our excavation of
classical Japanese, German, and Latin American publications demonstrate the rich contribution
of the latter. In contrast to the somewhat economistic, micro-economic, and supply-side
contributions of the current Anglo-American debate, the forgotten traditions much more strongly
highlight the importance of a shared national vision for catch-up industrialization, a macroeconomic, structural and demand-side perspective.
One could even claim that the topic of state capitalism recently has been appropriated by an
implicitly liberal perspective. Correspondingly, we need to appreciate its less liberal origins, in
order to make full value of the concept.
In order to support this argument, the first section of our review essay highlights the common
historical roots on catch-up industrialization from proposals put forward by Hamilton and the
Meiji Restoration but mainly based on the more elaborate conceptualization of the German
Historical School (List, Schmoller). The second section presents the theoretical contributions of
the much-neglected ―organized capitalism‖ approach (Hilferding, Naphtali, Polanyi, Sombart)
developed during the first half of the 20th century. Latin American authors have developed their
approaches, first on ―structuralism‖ (Furtado), later on, ―new developmentalism,‖ with much
attention given to macroeconomic issues (Bresser-Pereira, Fonseca) covered in section three. The
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concluding section highlights the commonalities between the Japanese, German, and Latin
American schools and their contribution to contemporary debates that still are strongly
influenced by Anglo-American authors.
1 Hamilton, the Meiji reforms and the German Historical School: The importance of a
sense of community
Alexander Hamilton appears as one of the earliest thinkers and politicians that have propagated
state-led catch-up industrialization. The importance of the state for economic development
already had been highlighted by the earlier mercantilists. However, Hamilton was the first to
highlight the specific role of public policies in order to temporarily shelter an emerging economy
against the superior competition by the leading power on global markets, in this case, Britain.
Concerning Britain, the US was considered a latecomer at that time. Hamilton presented four
central policies to the American Congress, which later were incorporated by List and other
reformers. These were 1) tariffs on imports; 2) direct subsidies, or "bounties," for domestic
manufacturers; 3) a partially public-owned national bank and 4) significant public investments in
infrastructure, or "internal improvements," like roads, canals, and ports (Parenti, 2014).
In his famous "Report on Manufactures" from December 5, 1791, Hamilton (1791/2001)
mentions the importance of the government for the late industrializing countries. In particular, he
highlights the role of government to overcome the obstacles posed by the superiority of nations
that developed earlier their manufacturing. According to Hamilton, the first US Secretary to the
Treasury, to maintain upon equal terms the modern manufacturing from one country with the
older from another in terms of quality and price, the interference and aid of government are
indispensable. Thus, Hamilton opposed the universal laissez-faire ideas of Adam Smith, David
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Ricardo, and others, at least for countries in a situation of the emerging United States vis-à-vis
established Britain.
As Cohen and DeLong (2016) remind us, it was the British approach that guided Germany's
rapid industrialization, but the approach from Hamilton as presented from List. After that, this
approach became spread in East Asia through Japan, then Korea, and now China.
Hamilton's ideas were later carefully studied and followed by representatives of the Japanese
Meiji Restauration (Austin, 2011). As in the case for Hamilton and the newly established United
States of America, the main aim of the Meiji Restoration (1868-1885) was to establish an
independent nation based on industrialization (and a strong army). As in the case of the late 18th
century USA, industrialization was a response against the competition by superior economic
powers with the forced opening up of Japan, e.g., by the interventions of the US Commodore
Perry in 1853/4. As we shall see, however, the Japanese reformers added their particular twist to
the ideas developed by Hamilton and others in the US. According to Crawford (2008), rather
than the belief in the laissez-faire philosophy of the free enterprise, business activity became
rationalized as service to the community and the state. The communitarian worldview is an
enduring feature of the Japanese economic ideology. It also provided legitimacy to Japanese
governments to put more faith in manipulation than in free competition.
The most comprehensive elaboration of 19th-century ideas about state-led development,
however, stems from Friedrich List and Gustav von Schmoller. List is considered the founder of
the German Historical School (Historische Schule). While in the United States, he got in touch
with the contributions from Alexander Hamilton as one of the founding fathers who first claimed
the need to foster manufacturing. List (1841/2014) emphasized what he called productive power.
For him, the powers to create wealth are much more important than wealth itself. The concept of
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productive powers as the powers to create wealth includes industriousness, thrift, morality, and
the intelligence of individuals, social, political, and civil institutions and laws, as well as the
guarantee of continuance (Harada, 2000). About the role of the state, List (1841/2014) claims
that the state should intervene when private business causes harm or when community interests
become ruled out. At the same time, due to the role of actors and institutions, it does not result
from the deliberate, intelligent design but is more experimentalist and, therefore, cannot be
ascribed to the concept of a general model. As of List (1841/2014), the primary condition for the
unity of the nation and long-standing national welfare occurs when private interests are subject to
national interests.
When establishing the common roots from the concepts of the developmental state, one must
trace back to both macro and micro levels of analysis. At a macro-level, akin to List, Schmoller
has put forward a general notion of institutional development. For Schmoller, values in the form
of law, morality, and custom are embedded in institutions and play a leading role as the
determinants of evolving institutions and consequent economic performance (Shionoya, 2005).
Mostly, latecomers depend more on institutional endowments than laissez-faire to catch up with
advanced countries (Shionoya, 2006). At a micro-level, institutional development is explained
not so much by the free choice of autonomous individuals in markets, as by the sense of
community and by coordinated actions based on shared values; both ideas and cultural values
play a role in the economic rationality. Similar to Gao (1997), who highlights the role of
ideology and shared beliefs in the economic catch-up process from Japan, Schmoller stresses this
sense of community and coordinated action beyond market mechanisms. It is essential to remind
that community here has a more general sense as shared interests, beliefs, and values than the
standard concept of community from sociology.
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The original idea of social policy in Germany as a latecomer is related to German idealism. In
the Kantian, as well as the Hegelian philosophical tradition, society, politics, and the state are
examined from an organic, historical, and cultural understanding perspective, in opposition to
utilitarianism (Schmoller, 1998; Blümle, 2006). Delving into Schmoller's arguments on social
policy, Prisching (1997) points out two considerations that deserve attention when linking the
historical school to contemporary discussions about the developmental state. First, Schmoller
saw the economic value of the social policy. In this sense, improvements in morals and the
expansion of education may promote the economic organization. Critical of methodological
individualism, Schmoller (1895) claims that economic life is not a process mainly dependent on
individual action, but instead on the collective organization with the rules for production and
trade intercourse.
For Schmoller, education and justice are collective factors of production. Second,
industrialization yields social costs, and the social costs of industrial society need compensation.
The compensation of these costs entails political regulation and constraint over the process of
accumulation that goes beyond the sole profit-making rationale from capital.
To conclude, the first generations of thinking on state capitalism were unified by the vision of
national independence based on industrialization, implicitly directed against superior economic
powers such as the United Kingdom (and later the United States). A core principle was that
private (individual) profit interests have to overlap with common national interests. In order to
organize this subjugation, reformers highlighted the importance of shared values and a sense of
(national) community.
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2 German thinking on organized capitalism in the early 20th century: The importance of
overriding collective goals
A frequently overlooked stream of thinking about the role of the state in catch-up
industrialization stems from German and Austrian scholars such as Hilferding, Naphtali, Polanyi,
Sombart and Pollock in the early 20th century, around the notion of "organized capitalism"
(Kocka 1974, Puhle 1984, Könke 1987, Höpner 2007, Callaghan and Höpner 2012, Nölke 2012,
Nölke 2017, Nölke and May 2019). In contrast to the ideas developed by Hamilton, List,
Schmoller, and the Meijis, the emphasis is less on the early stages of catch-up industrialization,
but rather on its stabilization in times of economic crisis. Moreover, theories on organized
capitalism do not focus exclusively on the state and public policies, but rather on the broader
organization of business, particularly on cartels and the role of financial capital.
With hindsight, it is possible to set out two different streams concerning the idea of 'organized
capitalism' with further implications to the current heuristic use of this approach to understanding
the capitalist dynamics of latecomers. One stream has to do with the state's role in the economy
after the capitalist crises from the eighties in the nineteenth century. Fundamentally, organizing
implies more collective action to develop productive forces, both at the organizational and
technological levels, and more incentives and guided by the state. Growing influence from
technicians and specialists in the public services introduced new behavioral standards and
mentalities in the public services (Torstendahl 1985). One may claim that this type of
organization is already in place in the state-led industrialization and further upgrading from
latecomers, as discussed in section one above.
Another stream relates to the social-democratic experience from the Weimar Republic in the
twenties, but not entirely restricted to Germany, given that organized capitalism can also
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contribute to explaining the New Deal experience in the USA. In contrast to the emphasis laid
upon the state's role in economic growth, this second stream associates' organizing' to stabilizing
and the establishment of social objectives for the large business, especially conglomerates and
trusts, and the interlocking between the bank and industrial capital. Between 1873 and 1913,
Germany went through rapid economic growth with four-fold GDP growth. It was not only
growth but also a structural economic shift with a higher share from more technologically
advanced branches (Kocka, 1975). Since the 1890s, there was steady cooperation between banks
and industrial firms. The banks were concerned with the financing with long-term credit for the
industrial firms. The representatives from banks were involved with the necessary management
changes in the firms to improve the accounting methods and management as a whole, aiming at
higher efficiency and profitability. The long-term support from banks protected firms from shortterm market fluctuations (Puhle 1984).
In his famous essay "Probleme der Zeit," Hilferding (1924/1982) considers the organization of
capitalism as an attempt to regulating and organizing productive social forces. In this sense,
economic concentration, from the perspective of social-democracy, as opposed to the earlier
principle of economic liberalism characterized by the anarchic competition principle. For such a
reason, economic concentration as an ordering trend was positively rated (Könke, 1987). The
instability of the capitalist production diminishes so that the crisis and its effects on workers
become dwindled. Sound credit regulation by large banks taking part in the board of large
industrial corporations, adequate monetary policy, and investment coordination by large firms in
times of economic boom are some of the means to reduce the effects of market fluctuations. As
Winkler (1974) reminds us, the concept of organized capitalism developed by Hilferding does
not stem from state help in the course of the industrialization process, but from interventions to
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stabilize an established capitalist system characterized by social and economic crises. The
approach from organized capitalism assumes that the possibility of stabilizing capitalism is more
realistic than its collapse (Winkler, 1974).
Industrial relations also change due to this hierarchically organized capitalism. Unemployment is
not so threatening on behalf of unemployment insurance, as once and there is more demand for
higher labour skills with the further mechanization process and science applied to management
(Hilferding, 1924/1982). The organization of great masses of workers under the control of few
large companies opens the opportunity, according to Hilferding (1982), of democratizing the
economy or, in other words, the option of broadening social control over the firms' objectives.
Such objectives are under the scrutiny of collectively organized workers and the state.
Furthermore, individual capitalist profit-seeking becomes subjected to the collective goals and a
scientific organization of the overall economy (Könke, 1987). The primary underlying argument
is that economic and political power concentration facilitates economic democratization, in
contrast
to
liberal
capitalism.
One
crucial
aspect
for
the
economic
democracy
(Wirtschaftsdemokratie) put forward by Hilferding (1924/1982), and Naphtali (1928) as a
possibility brought about by organized capitalism is the ability to sway on the very content of the
firms' policies. Such a thread of reasoning is very much in line with the German tradition of codetermination (Mitbestimmung). It means that the workers have a say in the way labour gets
organized within the company. The concept of economic democracy is also akin to the Fabian
model of industrial democracy (Könke, 1987).
To wrap up, even as the situation now is not catch-up industrialization, but stabilization in times
of economic crisis, Austrian and German thinking on organized capitalism during the early 20th
century shares with the earlier generation of thinking on state capitalism the emphasis on the
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importance of overriding collective goals. Hilferding, Naphtali, Polanyi, Sombart, and Pollock
also favour social control over the objectives of individual firms. However, in contrast to the first
wave of state capitalism, not only the state exercise this control, but it also financial capital or
cartels. Economic concentration from this perspective can yield outcomes for social
development, for example concerning economic democracy.
3 Structuralism, New Developmentalism and the Latin American debate: The importance
of the demand side and of a macroeconomic perspective
Theories about the advantages of state capitalism, however, are not a prerogative of the Northern
hemisphere. On the contrary, the idea of an infant industry protection from List, as well as his other
contributions, had support in Latin American intellectuals in the second half of the 19th century in
Argentina, Chile, and Brazil (Helleiner, 2017). In this sense, the development of Latin American
structuralism was not the inception of development economics in this region.
Latin American Structuralism is an original theoretical contribution coming from Latin American
economists that have shed light on the structural limits in economic development, with a particular focus
on the role of the state. There are three building blocks for this approach (Cimoli and Porcile, 2016). One
is the slow and irregular diffusion of technology from the centre to the periphery. Technology diffusion
is particularly relevant when considering the role of the state in promoting initiatives to overcome
technological backwardness. Science and technology interweave with the accumulation process. Only by
incorporating science and technology in the accumulation of capital, it is possible to speed up the
catching up process (Furtado, 2013).
More recently, the structuralist approach (CEPAL, 2008)
encompassed contributions from institutional literature coming from innovation systems and authors of
the Schumpeterian stream. As put by Cimoli and Porcile (2016), the accumulation of technological and
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organizational capabilities does not take place in a vacuum but within the limits and stimuli provided by
institutions.
A second block refers to specialization patterns, specialization in the export of agricultural products
constrained Latin American countries to a static comparative advantage. Furtado (2013) was particularly
critical of the Ricardian law of comparative advantages, which served as the primary rationale to justify
specialization. For him, Ricardian law was unable to cope with the extreme inequality in the diffusion of
technical progress in the production processes. Another weakness of comparative advantage was the fact
that surpluses stemming from the export of agricultural products financed the diffusion of new
consumption patterns rather than the formation of gross capital to invest in catching up process.
The third block has to do with the persistent informal labour market in Latin America as well as the
enormous unequal income distribution. Differently, from the East Asian developmental experiences,
Latin American countries never managed to create an inclusive labour market for their abundant labour
force. A large share of total employment is in low-productivity activities or self-employed subsistence
sectors. A smaller share of skilled workers in firms hampers income distribution as low-skilled workers
usually earn subsistence wages.
The highly unequal income distribution also has severe negative repercussions over domestic demand,
given the much lower propensity to consume of the affluent strata of society. The importance of the
demand side with macroeconomic issues laid the foundation to cope with the developmental challenges
concerning structural heterogeneity, abundant labour force, and lower levels of productivity (Furtado
1970; Prebisch, 1986, and Cimoli et al., 2005)
Following Latin American structuralism, there is a new school of developmentalism with a greater
emphasis on macroeconomics. The context of the development of the new school is the different global
economic situation that has developed since the 1980s. The process of financialization has increased the
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volatility of global financial flows, and a catch-up industrialization strategy has to put up with these
speculative financial flows.
The concept of "new developmentalism" was firstly coined by Luiz Bresser-Pereira, an important
Brazilian scholar who was minister of planning and treasury in the eighties and the nineties. For new
developmentalism, the key institution is a national development strategy. As of Bresser-Pereira (2010),
"such a national development or competition strategy materializes into laws, policies, common
understandings, and shared beliefs that orient innovation and stimulate investment; it is not formal or
written, but it can easily be intuited by the observer" (p. 59). Similarly to the developmental state, new
developmentalism is also normative in the sense of presenting the various elements for a catch-up
strategy. Also, it draws on classical political economy authors such as Smith, Marx, and List, and
partially on Polanyi (1944/2001). Following a classical political economy approach, new
developmentalism stresses that "institutions are fundamental, and reforming them is a constant task
insofar as, in the complex and dynamic societies in which we live, economic activities must be
constantly reregulated" (Bresser-Pereira, 2010; p. 102).
Far from being economicist, it takes into account not only the development of technological capabilities
and production factors endowment in general but also ideational and political aspects. The nation is
considered a collective actor and the state its primary nucleus of collective action. Moreover, new
developmentalism requires an informal cross-class political coalition where cooperation supersedes
domestic conflicts for the benefit of a national developmental strategy. The dynamics of social struggles
is the outcome from cross-class coalitions, from political pacts and agreements carried out by these
coalitions. The cross-class coalition from new developmentalism includes industrialists, bureaucrats,
progressive intellectuals, and workers that stand for a coordinating role of the state in the economic
system together with market governance (Bresser-Pereira, 2014b). There are two crucial elements for
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this cross-class coalition. One is the role of the state to lead, through incentives and sanctions, the longterm industrialization strategy, and another is not to rely upon the agrarian elite's capacity to play an
active role in the development strategy. The persistent substantial political power of the agrarian elites
was undoubtedly a significant shortcoming in Latin American industrialization.
The national development strategy, as a key and encompassing institution, "guides the main political and
economic actors in their decision-making processes – politicians on how to define new public policies or
reform existing ones, businesspeople on when and where to invest" (pp. 59-60). One aspect that
highlighted by Bresser-Pereira (2010) is that new developmentalism must emerge from an internal
consensus in order to become a real national development strategy.
In contrast to the discussions covered in the previous sections, new developmentalism has a sharper
focus on macroeconomic issues such as exchange rates and capital controls. This focus mirrors the
global economic conditions since the 1980s, with strongly increased financial flows, but also the strong
potential of an over-valued currency based on strong agricultural exports. As exchange rate appreciation
through foreign savings is a significant cause of the Dutch disease, capital inflow controls are necessary
for the sense that they avoid deindustrialization related to an overvalued currency. Also, capital inflows
related to financial speculation and rentism become more constrained by this specific state action.
An industrializing ideology is also a fundamental issue in the new developmentalism agenda in Latin
America. The new, as well as the old developmentalism, are an ideology in the sense that a national
development strategy requires an ideology and the very idea that economic development is a government
enterprise and economic development itself is the ultimate goal from state action (Bresser-Pereira, 2007;
Fonseca, 2012). By explicitly incorporating a social dimension in the new developmentalism, BresserPereira (2014) argues that:
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"In the framework of a new developmentalism, each country now has the possibility of adopting
effectively national development strategies – strategies that widen the role of the state in regulating
markets, that create profit opportunities stimulating private investment and innovation, and that increase
the country's international competitiveness while protecting labor, the poor and the environment"
(Bresser-Pereira, 2014, p. 128)
Beyond a normative approach for developmentalism and stemming from a historical analysis from 29
different governments in various Latin American countries, Fonseca (2014) was able to find three
commonalities within those governments that could be labelled developmentalist. The first commonality
is that developmentalist governments have a national project to overcome backwardness and present
themselves as key actors in the building of a desirable future for the country. A shared common project is
essential to build a developmental cross-class coalition (Bresser-Pereira, 2019). Bresser-Pereira stresses
the role of ideas organized around an encompassing narrative. The second commonality is that these
governments make clear that economic growth is set as a priority so that all policy measures are subject
to this priority. Finally, the third commonality is that industrial upgrading is set as a priority to achieve
economic growth so that measures in economic policies and institutional development lead to this
direction.
In sum, the third forgotten tradition of state capitalism departed from the previous two ones by
highlighting the importance of the demand side of macroeconomic perspectives more general
and cross-class coalitions. It not only demonstrated that the integration into global capitalism
based on Ricardian economic advantages leads to economic stagnation (as today still can be seen
in Russia and the Gulf economies) but also incorporated a new global economic situation and the
related need to protect against speculative financial flows. Somewhat similar to the previous two
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traditions, it underlines the importance of a unified national effort, now, however, based on
cross-class coalitions (and against the agrarian elites).
4 Conclusion and implications for contemporary developmental state discussions
Tracing the intellectual roots of the state-driven development thinking allowed us to rediscover
classical thoughts about the institutional organizing of capitalism as the core pillar for economic
and social catching-up. Common elements shared by these traditions include the need for catchup development against superior external economic forces in order to prevent economic or
political colonization, the focus on the nation-state as a collective actor, a strong preference for
industrialization (not only on agriculture and the exploitation of resources) and a central role for
the state (tariffs, planning, macroeconomic stabilization) as support for the private sector.
This survey highlights that none of the various schools of non-liberal development thinking can
monopolize the various valuable insights for economic and social catch-up. However, the most
valuable intellectual achievements of earlier lines of thinking are scantily present in more recent
debates on state capitalism. Adding ideas, and providing more salience to political and social
dimensions beams overseen nuances from catching-up strategies. From our perspective,
mobilizing the intellectual tradition of non-liberal development thinking more diligently allows
us further knowledge of the interplay between the economy and society.
Current references to state capitalism as a development strategy for large emerging markets such
as China contain a brief reference to Hamilton, Friedrich List, or the East Asian developmental
state, if at all. A more detailed study of, e.g., the German Historical School or theories of
organized capitalism, usually is absent, even if Breslin (2011) and Nölke (2012, 2017, Nölke and
May 2019) recently re-engaged with some of these old writings. Still, even these recent writings
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tend to neglect some of the lessons learned by earlier lines of scholarship, such as the role of
mobilizing ideas and of an ideology of industrialization more specifically. A shared vision was a
systematic component from the earliest latecomers onwards. The promise of industrialization
links personal economic fates to pride regarding the fast development of the country, often
mediated by national brands, foreign policy, mega-events (such as Olympic Games), or
grandiose construction projects.
Another essential advice for current discussions about a return of state would be to avoid a too
technocratic
view
of
these
developmental
strategies.
By
grasping
the Wahlverwandschaft between the German Historical School, organized capitalism, and later
Latin American schools of statist thinking, we can bring the political economy back into the
economic development in latecomers-debate. Especially the constraining role of the state over
firms' objectives, as propagated by thinkers of organized capitalism, gives us a crucial instruction
for the general set-up of these strategies. An overarching national development strategy is a sine
qua non condition for developmental state capitalism.
We can draw more lessons from these frequently forgotten classical theoretical approaches for
policymaking regarding catch-up processes in emerging market economies. The complex
political nature of the state cannot be reduced to the support of the expansion of multinational
corporations, as implicitly argued in the approaches that currently dominate the debate on state
capitalism. A successful state-capitalist role implies the mobilization of cross-class coalitions,
the mediation of conflicts, as well as a wide array of ideas encompassing an agenda beyond pure
economic efficiency.
Finally, the development of successful state-capitalist strategies today also has to take potentially
adverse global economic conditions into account. In particular, the process of financialization
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and the related volatility of financial flows, as well as currency relations, can constitute a
significant hindrance to the successful organization of contemporary state-capitalist strategies.
State capitalist projects, therefore, have to keep the domestic financial sector under strict control
and, in particular, have to avoid a long-term currency overvaluation due to the deindustrializing
effects of the latter.
Most of these insights are absent in the contemporary debate that equates state capitalism with
state-owned or state-backed companies, mostly from China. The earlier debate on the
developmental state, however, still remembered most of these debates. A famous lineage
between the German Historical School and more recent thinking about developmental state were
the references to Friedrich List's concept of "kicking away the ladder" by early industrializers, as
popularized by writers such as Ha-Joon Chang (2002) and Robert Wade (2003). In his seminal
work on the developmental state, Johnson (1982) already places the Japanese experience in the
ideational tradition from the German Historical School. He states that "the most striking
structural characteristic of the capitalist developmental state is an implicit political division of
labor between the tasks of ruling and the tasks of reigning—the politicians reign and the
bureaucrats rule" (Johnson, 1982; p. 154). Unfortunately, the role of politicians and their
leadership and inspiration has been underrated in the later literature on state capitalism. For
Robert Wade (1990), the design and legitimation of a developmental strategy as well as of a
national project is the first and most crucial element of a developmental state. In a more
comprehensive review concerning the evolution of the developmental state in Japan, Sasada
(2013) highlights the importance of ideational guidance. The ideational theory claims that once
actors adopt a given set of ideas as their ideational guidance, they become committed to certain
types of policies that comply with that guidance and reject policies that contradict it. In a similar
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vein, Gao (1997) works out the idea of policy paradigms and hinges it on ideology when
analyzing the role of economic ideology in Japanese industrial policy.
However, the original developmental state literature did not reflect all insights developed by the
traditions excavated by this contribution. Later contributions to the developmental state debate,
however, very often did. The major disadvantage of the East Asian developmental state (debate)
was its rather technocratic and often state-centric approach. This approach neglects the
importance of the mobilization of broad social coalitions for developmental strategies in
democratic states. In East Asia, the institutions of the developmental state, as well as the national
development strategy itself, were the outcome of a compromise and resulted from the formation
of a stable socio-political bloc (Amable, 2003). Discussions about the need to mobilize crossclass coalitions for a "democratic developmental state" have become particularly prominent in
post-Apartheid South Africa (Edigheji 2010). Two traits have been highlighted in particular
(Chang, 2010): First, developmental states must derive legitimacy from successful economic
development. Second, developmental state action implies favouring specific sectors over others.
At a policy level, this translates into selective industrial policies. In other words, state
intervention entails a political preference for a particular cross-class coalition (usually industrial
sectors, urban middle classes, and, sometimes, parts of working classes), leading to distributive
conflicts. Given looming bottom-up pressures from society, also in the context of democratic
transitions, this calls for a broadening of the sustaining cross-class coalition beyond industrial
elites and the state, in particular by incorporating deliberative institutions as critical contributors
to development (Evans, 2010). Fine (2005), finally, brings forth a political economy approach
towards the late developmental state debate. In particular, it contains analytical variables to grasp
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the interaction of national systems of accumulation with global, pervasive factors such as
financialization and global value chains.
The current company-centered debate on state capitalism has forgotten nearly all of these
insights. Still, there is hope. Recently, some scattered empirical contributions have featured a
number of the themes highlighted in our intellectual archaeology. Beeson (2017) puts the high
degree of state control, the ability to reconcile competing interests, an extremely prudential
engagement with global financial markets and an undervalued exchange rate as core implications
of China's rise for the developmental state paradigm, reflecting the importance of the latter in
Steinberg's broad survey of recent developmental state strategies (2016).
Similarly, Yeung's (2017a,b) surveys of the more recent fate of the East Asian developmental
state not only highlight the challenge of global financial integration (and, increasingly, crossborder production networks) but also of the need to develop much broader societal coalitions
than the traditional focus on state support for business only. Finally, Wylde's (2018) study on
Argentine development under the Kirchner's strongly underlines the need for "the creation and
maintenance of a hegemonic ideology consistent with rapid, catch-up development" (p. 13). We
hope that our review essay assists in putting the findings of these and other ongoing studies into
a more comprehensive framework and – better still – seeking renewed inspirations with the
classical authors, particularly those outside of the dominant Anglo-American debate.
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