Prof.

Ashwani Kumar State & Democracy

DS : State & Democracy

Class Outline 26 October 2021

Developmental State

What is developmental State?

 The first person to seriously conceptualize the developmental state was
Chalmers Johnson. He wrote in his book "MITI and the Japanese Miracle"
that “In states that were late to industrialize, the state itself led the
industrialization drive, that is, it took on developmental 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.”
 Developmental state, or hard state refers 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 become 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
developmental state is sometimes contrasted with a predatory state or
weak state or fragile or failed state!
Why Regime theory important in defining State Power; Authoritarian V
Democracy?
 Most developmental states in East Asia were initially authoritarian. This
does not imply that all authoritarian regimes are developmental and it
also does not mean that states need to be authoritarian in order to be
Prof. Ashwani Kumar State & Democracy

developmental.( Amartya refuted arguments that there is positive

correlation between development and authoritarianism; Consider reading
Atul Kohli’s book “ Poverty Amidst Plenty in the New India, 2012, last
chapter)
Developmental State in Democracy
 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”

Context of Developmental State;

 By the end of the 1970s, the economic success of the major East Asian
NICs- Taiwan and Korea-was increasingly interpreted as depending in
important ways on the active involvement of the state.
 Credit for dubbing Taiwan and Korea "developmental states," however,
should probably go to the researchers associated with the Institute of
Development at Sussex University (see Wade and White, 1984, revised as
White, 1988)
 Chalmer Johnson—1982- MITI and the Japanese Miracle: The Growth of
Industrial Policy, 1925-1975. Stanford, CA: Stanford University Press.
 Johnson's description of MITI (1982) provides one of the few detailed
pictures of a "developmental state" in action. Regardless of whether his
accountt overstates the relative weight of state action in producing Japan's
impressive rates of industrialization, his description is fascinating.
 MITI, given its role in the approval of investment loans from the Japan
Development Bank, its authority over foreign currency allocations for
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industrial purposes and licenses to import foreign technology, its ability

to provide tax breaks, and its capacity to articulate "administrative
guidance cartels" that would regulate competition in an industry, was in a
perfect position to "maximize induced decision-making" (see Johnson,
1982:236
 The administrative apparatus that oversaw Japan's industrial
transformation was as impressive as the transformation itself.
 few would deny the fact that Japan's startling postwar economic growth
occurred in the presence of "a powerful, talented and prestige-laden
economic bureaucracy."
 MITI's "relative autonomy" is what allows it to address the collective
action problems of private capital, helping capital as a whole to reach
solutions that would be hard to attain otherwise, even within the highly
organized Japanese industrial system. This "embedded autonomy," which
is precisely the mirror image of the "incoherent absolutist domination" of
the predatory state, is the key to the developmental state's effectiveness.
{ Peter Evan’s thesis)
 Periods of their industrial growth during. “Embedded autonomy” depends
on the existence of a project shared by a highly developed bureaucratic
apparatus with “interventive capacity” built on historical experience and a
relatively organized set of private actors who can provide useful
intelligence and a possibility of decentralized implementation

Distinction between Regulatory State and Developmental State( Peter Evans

in his book “Embedded Autonomy)
 Regulatory State; A regulatory state governs the economy mainly through
regulatory agencies that are empowered to enforce a variety of standards
of behavior to protect the public against market failures of various sorts,
including monopolistic pricing, predation, and other abuses of market
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power, and by providing collective goods (such as national defense or

public education/health ) that otherwise would be undersupplied by the
market.( Consider role of various regulatory institutions( TRAI etc) in
India)
 Developmental State; 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 can not.
 Chalmer Johnson challenged paradigm of orthodox/neoclassical
economics which emphasized the primary role of free trade and export-
oriented industrialization in the Asian economic ‘miracle’ as well as the
superiority of free-market principles while being critical of ‘price-
distorting’ state intervention and bureaucratic ‘rent -seeking’.
 Some Scholars have offered “ Revisionist paradigm” and called for a
‘developmental-state theory’ (Woo-Cumings, 1999)
 Chalmers Johnson’s study of the Japanese economic bureaucracy, the
Ministry of International Trade and Industry (MITI), and industrial policy
formulated and implemented by the ministry, and this study focused on
the bureaucracy’s role in Japan’s rise as an economic giant during the
post-1945 era.
 He constructs the Japanese case as a different economic model from both
the American system and the Soviet one. According to his typology, the
Japanese model is ‘plan-rational’ (developmental state) while the
American model ‘market-rational’(regulatory state) and the Soviet one
‘plan-ideological’; His study led to popularization of a ‘typology of
capitalisms’.
Prof. Ashwani Kumar State & Democracy

 Following Johnson, Robert Wade from Sussex (1990) suggested a

‘governed-market theory’ (GMT) in his analysis of Taiwan’s (and
Korea’s) industrialization, which refuted a neoclassical ‘free-market
theory’ (FMT)
Diverse Path ways of capitalism{ capitalism is not similar everywhere)
 Economic historian Gerschenkron’s study on diverse paths to
industrialization in European history set an earlier precedent for the
typology of capitalisms because he denied the historical generality of the
English case in industrialization and considered it even as an exception
(Gerschenkron, 1962).
 Theorists in the developmental-state school including Johnson (1982) and
Amsden (1989) depend largely on Gerschenkron’s discussions. See also
Shin & Chang (2003).
Predatory State v Developmental State( Peter Evans)
 According to Peter Evans;” We can imagine a range of states defined in
terms of the way in which they affect development. Some states may
extract such large amounts of otherwise investable surplus and provide so
little in the way of "collective goods" in return that they do indeed
impede economic trans-formation; It seems reasonable to call these states
"predatory”; Zaire might be considered an archetypal case of such a state.
Those who control the state apparatus seem to plunder without any more
regard for the welfare of the citizenry
 Other states, however, are able to foster long-term entrepreneurial
perspectives among private elites by increasing incentives to engage in
transformative investments and lowering the risks involved in such
investments. They may not be immune to "rent seeking" or to using some
of the social surplus for the ends of incumbents and their friends rather
that those of the citizenry as a whole, but on balance, the consequences of
their actions promote rather than impeding transformation. They are
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legitimately considered "developmental states" (cf. Jonhson, 1982; White

and Wade, 1988).
Historical role of the state in industrialization
 That "the phenomenon of successful 'late development' ...should be
understood...as a process in which states have played a strategic role in
taming domestic and international market forces and harnessing them to a
national economic interests(White and Wade; 1988:1)
Polyani, Market and State
 Karl Polanyi (1944/1957) reminded us that Smith's "natural propensity
to truck and barter" had not sufficed to produce the rise of the market in
England. Instead, Polanyi argued (1957:140) that "The road to the free
market was opened and kept open by an enormous increase in continuous,
centrally organized and controlled interventionism." From the beginning,
according to Polanyi, “the life of the market has been intertwined not just
with other kinds of social ties, but with the forms and policies of the
state”. ( “The Satanic Mill” )

Max Weber, Market and the State [ Read Peter Evans’ book “ Embedded
Autonomy: States and industrial Transformation (1995)

 Looking at established market societies, Max Weber carried this line of

reasoning further, arguing that the operation of large-scale capitalist
enterprise depended on the availability of the kind of order that only a
modern bureaucratic state could provide. As he put it (1911-1968:1395,
footnote 14), "capitalism and bureaucracy have found each other and
belong intimately together”
 For Weber, the state was useful to those operating in markets precisely
because the actions of its incumbents obeyed logic quite different from
that of utilitarian exchange. The state's ability to support markets and
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capitalist accumulation depended on the bureaucracy being a corporately

coherent entity in which individuals see furtherance of corporate goals as
the best means of maximizing their individual self-interest. Corporate
coherence requires that individual incumbents be to some degree
insulated from the demands of the surrounding society. Insulation, in
turn, is enhanced by conferring a distinctive and rewarding status on
bureaucrats. The concentration of expertise in the bureaucracy through
meritocratic recruitment and the provision of opportunities for long-term
career rewards was also central to the bureaucracy's effectiveness. In
short, Weber saw construction of a solid authoritative framework as a
necessary prerequisite to the operation of markets.
 Weber's bureaucrats were concerned only with carrying out their
assignments and contributing to the fulfillment of the goals of the
apparatus as a whole. Use of the prerogatives of office for maximizing
private interests was, for Weber, a feature of earlier pre-bureaucratic
forms.( Kohli”s controversial Thesis on characterization of UP as “
patrimonial state” and Gujarat as “developmental state”)

The State and Third World Development; State elites, State Autonomy and
State capacities:

 Drawing on Skocpol’s theorization of “autonomy of the state”, Peter

Evans’s well-known book “Embedded Autonomy” on states in
developing capitalist economies revolves around the problem of
specifying the forms of “state autonomy” that affect the capacity of the
state to effectively support economic growth and development.
 He offers an account of what he terms the “embedded autonomy” of the
state: an autonomous capacity for initiative and action that comes from
the specific forms of connection between state and elite interests in
Prof. Ashwani Kumar State & Democracy

society rather than from the isolation or separation of state from society.
This concept is then used in a comparative study of the variability of
autonomy across countries which he uses to explain te variability in the
success of their developmental projects; The "incoherent absolutist
domination" of the "klepto-patrimonial" Zairian state are contrasted to the
"embedded autonomy" of the East Asian developmental state by Peter
Evans in his discussion.
 Case Study of Zaire in Peter Evans analysis as example of “ predatory
state”;( Joseph Mobutu Sese Seko gained control over Zaire in 1965, he
and his coterie within the Zairian state apparatus extracted vast personal
fortunes from the revenues generated by exporting the country's
impressive mineral wealth)
 Peter Evans writes that “Zaire confirms our initial suspicion that it is not
bureaucracy that impedes development so much as the lack of capacity to
behave like a bureaucracy; In short, his example of “predatory state” of
the the Zairian state confirms the idea that autonomy is a necessary
prerequisite for effective state action.

Developmental State; Embedded Autonomy Thesis of Peter Evans

Four Roles of the State (Typology in the Developmental State)

Evans introduces four state roles; Custodian, Demiurge, Midwife &

Husbandy
 Custodians play a regulatory role, protecting and policing industry. All
states play the role of producer, but states that take on the demiurge role
take this a step further by directly competing with private investors, rather
than simply playing a complementary role. The demiurge role implies that
local capital is incapable of becoming a “transformative bourgeoisie.” If
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local capital is unable, and foreign capital is unwilling, to take on the

transformative role, then it maybe the case that demiurge is the only way to
ensure economic development. A midwife state seeks to assist in the
emergence of new industries. K. Y. Yin’s role in Taiwan in the textile
industry is a classic example. Midwifery can encourage firms to “take the
plunge” and move into a new sector. Once in a sector, there is a danger that a
firm will fall by the wayside and the state’s midwifery efforts will be lost.
Therefore the state may be required to play a husbandry role (“supporting
and prodding” private firms). (pp. 77-81)

Embedded Autonomy
 The developmental state establishes its autonomy through the creation of
a rationalized (core) bureaucracy characterized by meritocracy and long-
term career outlooks. These traits make civil servants more professional
and more detached from powerful rent-seeking groups attempting to
influence them. At the same time, the state cannot be too insulated from
society because it would then run the risk of becoming self-serving rather
than responsive to demands and needs for further development. 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 institutionalized
channels for the continual negotiation and renegotiation of goals and
policies’

 Embedded autonomy as a framework for structuring the accumulation of

industrial capital changes the nature of relations between capital and the
state. Most developing states offer combinations of Zairian "klepto-
patrimonialism" and East Asian "embedded autonomy." The balance
varies not only over time but also from organization to organization
within the state apparatus itself, The most effective states in developing
Prof. Ashwani Kumar State & Democracy

countries or emerging countries are characterized by embedded

autonomy, which joins well-developed, bureaucratic internal organization
with dense public-private ties.(Brazil and India are considered as
intermediate cases between ideal type developmental state and predatory
states by Peter Evans)
 Embedded autonomy challenges both Marxian nations of the state as
well as Weberian ones; effective capitalist state cannot be simply a
passive register for private interests nor the effective capitalist state run
by an undisciplined collection of individually maximizing
incumbents( politicians& bureaucrats) always becomes a predatory
monster(as neo-utilitarians like us to believe!)

Two Conditions for Embedded Autonomy;

 Two factors are assumed to have enabled such a bureaucracy

embodying embedded autonomy and the developmental orientation
of the state to arise in the East Asian cases: a political leadership
that was committed to development and, in most cases, the
uprooting of traditional elite!
 India could not become a developmental state because, the
effectiveness of the state has been undermined by its lack of
embeddedness in society and capacity to undertake developmental
tasks.( Evans)
 Is India a Developmental State?
“In popular and academic commentaries, the descriptions of Indian state are full
of negative adjectives. The Indian state has been labeled as ‘weak and captured’
(Kohli, 1987), ‘clientele state’ (Wilkinsion, 2004), ‘failing state’ (Pritchett,
2008), ‘locked in place’ (Chibber, 2003), ‘overextended’ (Bardhan, 1984), ‘red-
taped’ (Gupta, 2012), ‘soft state’ (Myrdal, 1968), ‘strong-weak state’ (Rudolph
Prof. Ashwani Kumar State & Democracy

and Rudolph, 1987), ‘weak state’ (Paul, 2010), and ‘a divided Leviathan’
(Sinha, 2006) among many others. More recently, while making a case for a
strong state that can propel India’s ambitious strategy to emerge as a global
player, Gurcharan Das (2011) vividly describes the role of Indian state in
economic growth by arguing that ‘India grows at night even when the
government sleeps’( Rahul Varma, Unpublished Paper; University of
California, Berkeley ,2013)

India as case of Developmental State?

Relative Autonomy Thesis; Pranab Bardhan, “The Political Economy of

Development in India”

Pranab Bardhan analyzes India's slow economic growth by focusing on that

country's dominant social classes. Assuming that the actions of dominant
classes determine patterns of state intervention, Bardhan traces the roots of
India's sluggish growth to the role of India's dominant classes in frittering away
investible public resources. The key independent variable in Bardhan's
analysis of Indian political economy is the role of heterogeneous dominant
classes.with the relative autonomous role of the state.

He presents the explanation of the model of the Indian polity which

distinguishes itself from the usual/standard Marxist maxim in two respects,
namely, the composition of the dominant classes and a certain autonomous
nature of the state. His class model includes in addition to the two dominant
classes usually recognized in standard Marxian literature on India namely big
industrial capitalist and rich farmers, and third which he calls “the professionals
in the public sector ". As to the State, he is talking of a "relative autonomy “of
the state which much beyond the concept of "the State acting not at the behest
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of certain classes, but all practical purposes on behalf of the dominant

proprietary class as an autonomous organizational actor”.

He attempts to explain the low economic growth and failure of so-called

“developmental state” in India as a consequence of state-class relationships. The
industrial capitalists, the better-off commercial farmers, and the educated
middle class--bureaucrats, professionals and white collar workers--are
characterized as constituting a coalition of India's dominant classes( dominant
proprietary interests model)

What strikes Bardhan as significant about these dominant classes is their

"plurality and heterogeneity" (p. 40). None of these classes alone is in a position
to impose its will upon India's polity or economy. Moreover, there are
significant conflicts of interest among these classes; they do not act collectively.
The dominant coalition is held together because all the members are able to
seek advantages from the state in the form of subsidies and patronage: cheap
public sector inputs and export subsidies help the industrialists; subsidized food
helps all urban consumers, but especially the wage-paying employers; and
cheap agricultural inputs and price supports for farm products are aimed at
satisfying the clamoring farmers; rather than imperatives of surplus
appropriation or class conflict, but the demands of economically motivated,
dominant class actors for a share of the state's resource determined the nature of
the state! According to Bardhan, “Indian democratic system is a subtle and
resilient mechanism for conflict management and transactional negotiations
among the proprietary classes with all their internal divisions and regional and
social diversities”.

One of the major defects of his analysis is that the state is not so autonomous
but seems highly vulnerable to pressure by all classes and groups; ruling or non-
ruling! Overemphasis on the role of those who benefit--social groups or
Prof. Ashwani Kumar State & Democracy

classes--at the expense of those who make policies-state authorities—leads

Bradhan to undermine the pressures of democracy on challenges of
development( securing electoral support from key social groups)!

State Capacity as the Embodiment of Class Forces: Vivek Chibber, (‘Locked in

Place’)

 While sharing a belief in the potential capacity for third world states to
play a dynamic role in economic development, Vivek Chibber is
generally quite skeptical that this has a lot to do with “autonomy” and
sees it much more closely linked to the ways in which outcomes of class
struggles and class formations shape the strategies of states and state
elites.

Debunking "Developmental Bourgeoisie” thesis in India

 In “Locked in Place” Chibber examines the apparent “failure” of

industrial planning in India since the early 1950s as the outcome of
successful strategies of the leading segments of the Indian capitalist
class to constrain the state to act in specific ways.

 Chibber gives particular attention to the “Bombay Plan,” put out by

representatives of the leading industrial houses and often provided as
proof of their openness to state planning and intervention. Such an
interpretation is sorely misguided, Chibber argues.

 From the start the Plan was hostile to disciplinary planning and State
involvement in profitable sectors of the economy. The official positive
approach to “planning” was a crafty political maneuver made during the
heady days of mass mobilization, from the Quit India campaign (1942)
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through the post-War labor upsurge, to head off any further

radicalization propelled by labor, the Congress Left (Congress
Socialists) and the Communist Party (CPI).

 Proof of this is the bourgeoisie’s rapid backtracking from even the tepid
talk of “planning” immediately following Independence, the
demobilization of labor and marginalization of the Congress Left.
Revisiting Class-Analysis of State rather than “ autonomous state” thesis
 Chibber in his book “ Locked in Place” offers a class analysis of
developmental state and argues,” India did not fail to develop because
the country was too “socialist” and therefore held back the country’s
dynamic entrepreneurial elite. Similarly, though, while South Korea did
not have a free-wheeling capitalist class operating in perfect conditions of
competition and free trade, he says it is equally wrong to attribute its
success to the existence of an obedient capitalist class at the mercy of an
all-powerful developmentalist state”!
 In both cases, he argues, it is essential to examine actual capitalist
behavior, and the precise circumstances of this behavior, to understand
how the “developmental state” could succeed in one instance and fail in
another
 His key argument is that, while the South Korean state did indeed play a
critical role in Korea’s industrialization, it did not do so by imposing a
command economy on local capital, but rather, by entering into an
alliance with it
 By the mid-1960s a lucrative path of “export-led industrialization” (ELI)
opened up to the South Korean capitalist class, thanks to the regional
strategy adopted by Japanese capital, and thanks also to the preferential
treatment accorded both countries by the United States in the context of
the Cold War.
Prof. Ashwani Kumar State & Democracy

 The South Korean capitalist class was prepared to accept what Chibber
calls “disciplinary planning” from the state, because it needed such
discipline and coordination in order to take full advantage of the
opportunities created under ELI(export-led industrialization”).

Why Was India Different?

 On the other hand, no such option of ELI existed for India following
Independence in 1947. Indeed, India did not figure prominently in the
economic or political strategy of any big imperialist power.
 India therefore had little option but to adopt some form of
“industrialization through import-substitution” (ISI), which local
capitalists exploited to the full to secure subsidies and special treatment
from the state — while resisting interventionist efforts aimed at
improving their productivity and steering their activities in the direction
of overall development plans.
 In the case of India, the neoliberals have a field day pointing to the abject
failure of a rigid and corrupt bureaucracy to produce results in an
economy where, moreover, the principal capitalist firms were reputed to
be all in favor of state planning in the interests of the nation.

 In reality, it was capitalist intransigence (and the complicity of their

supporters on the right wing of the Congress and in the bureaucracy) that
prevented left-wing elements of the Nehru-led Congress Party from
setting up more interventionist and disciplinary mechanisms.
 After all, Indian capitalists were shielded from the rigors of competition
in foreign markets, and did not require a disciplinary state of the South
Korean variety. They wanted full freedom to capture sectors and markets
abandoned by British firms, and to enter new areas of their choosing.
Prof. Ashwani Kumar State & Democracy

 It was therefore not a matter, in one instance, of a more effective and

streamlined Korean state imposing a successful path of development on a
“paper tiger” local capitalist class and, in the other, of a bureaucratic and
corrupt Indian state holding back a dynamic entrepreneurial elite!