Development Strategies
Evidences from East Asia
Developmental state
• Paradigm of developmental state in
development economics and comparative
political economy
• mostly bred by experiences of Japan and
NIE’s from 1960s to 1980s
– choice of efficient, coherent, and flexible
economic policies
– effective implementation
Developmental state
• place top priority on economic
development
– growth, productivity, and competitiveness
• actively intervene in market
– guide, discipline, and coordinate private
sector
– strategic allocation of resources
– use of diverse policy instruments
• rational and competent bureaucrats
– insulated from political pressures
Paradigm
• Departure from traditional neoclassical
development strategies
– government intervene only to correct market
failure
– “Washington consensus” of US Treasury, IMF,
and World Bank
– free market, free trade, free capital mobility,
and limited government
Paradigm
• Deviation from “dependence” school of
thought
– integration into the international capitalist
division of labor
– developing economies at the periphery
depend on developed economies at the core
– developing economies are denied the
opportunity for self-sustained growth
Incomplete conceptualization
• State is not an internally cohesive and
unitary actor
– divisions within executive leadership
– executive-bureaucracy relationship
– inter-bureaucracy conflicts
• State-society relationship
– bureaucrat-constituent links
Problematic premises
• Insulated bureaucrats make rational
policies
– often not insulated: under political pressures
– often not rational: politicized
• Efficient, coherent, and consistent policies
• State policies determine economic
performance and outcomes
– supply-side factors, demand-side conditions,
corporate structure and strategy, luck, etc.
Network theory
• Developmental state is embedded in
society
– functional links
– exchange of information
• Policies result from interactions
– interdependence of private sector and state
– intermediate organizations
• State and private sector merged into an
internal organization
Problems solved and created
• Networks are dynamic
• Networks create opportunities for
corruption
• Networks are not naturally efficacious and
benign
– What factors lead to dysfunctional and
malignant networks?
Case study 1
• Hong Kong and Singapore
– both are entry ports to mainland
– both are former British colonies
– both are mostly ethnic Chinese societies
• Profoundly different development
strategies
• But, both invested heavily in human capital
and public spending to enhance
international competitiveness
Case study 2
• Hong Kong and the Philippines
– both are “weak” states
– difference in economic performance
• A weak state
– doesn’t necessarily lead to free market
– can be dominated by powerful economic
interests
– creates opportunities for powerful economic
groups to manipulate and distort economy
Dependency theory
• International capitalist economy
– exploit weak third-world countries at the
periphery
– perpetuate poor nations’ dependence on rich
nations at the core
• Multinational corporations and foreign
capital play significant role in the
economies of Hong Kong and the
Philippines, with different consequences
Case study 3
• South Korea and India
• both states are strongly committed to
promoting economic growth
• both states had significant intervention in
the industrialization
– India was one of the first states in the
developing world to produce a detailed
development plan (1952)
Restriction on foreign capital
• South Korea and India
• both states restrict multinational
corporations and foreign capital
• different economic outcomes
– protection of domestic industries
– build up efficiency of domestic firms
– increase competitiveness of domestic firms
Different strategies
• Import-substituting industrialization
– tariff and non-tariff barriers to protect domestic
industries
• Export-oriented industrialization
– selective protection and free trade regime
• State intervention in financial and labor
market
• State-owned enterprises
Case study 4
• Firm size & competitive strategy
• Hong Kong and Taiwan
– small and medium enterprises
• China’s mainland
– township and village enterprises
• South Korea and Japan
– large integrated conglomerates
Strong states, weak states