The REAL message of the 'Developmental State'

The term ‘developmental state' does not enjoy any clear consensus about its meaning. It may help avoid some false dichotomies (and false hopes) to remember where this term came from, when it was invented by political economists back in the mid-1990s and became a hot topic in social science and policy circles. Because in those days, it had nothing to do with socialism, democracy, nationalism or pro-poor anything, says Virginia Tilley.  

Neither interpretation fits the term's history. Of course, that may not worry us: any term can be changed to suit new needs, and if ‘developmental state' serves debates about reducing economic inequality in South Africa, fine.

As a term, ‘developmental state' first arose in academic studies of the East Asian Tigers (the booming economies of Taiwan, South Korea, Hong Kong and Singapore) when political economists, like Robert Wade, Meredith Woo-Cummings and Alice Amsden, set out to debunk the Washington Consensus and its hyperbolic claims about the virtues of free markets and minimalist states.

However, these ‘developmental states' were far from market-averse. On the contrary, they were drawing attention precisely because they were playing the global market so well.

Critical of these claims on empirical grounds, they pointed out that all the Tigers had benefited from strong state roles in the economy. Some of this celebratory analysis wandered into cultural essentialism - ‘Confucianism' was briefly praised.

However, these ‘developmental states' were far from market-averse. On the contrary, they were drawing attention precisely because they were playing the global market so well. They were in fact ruthless capitalists, as their US alliance might suggest.

The same US connection might expose another misconception - that these ‘developmental states' were nationalistic. Lying across the West's geopolitical fault-line with communist Asia, all were transparently tools of US policy in the Pacific as well as forcibly open markets for US exports. Yet all were growing like mad.

Embedding state autonomy

The big question for political economists in the 1990s was why the 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.

However, these ‘developmental states' were far from market-averse. On the contrary, they were drawing attention precisely because they were playing the global market so well.

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 South Africa 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.

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.

Social embeddedness without political autonomy would leave state officials vulnerable to private pressures, leading to corruption and cronyism.

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.

...  if early authoritarianism enabled the East Asian Tigers to overcome entrenched private interests, then South Africa is therefore hampered in this respect.

Notably, a meritocratic bureaucracy has nothing necessarily 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 South Africa is therefore hampered in this respect.

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 shovelled 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 South Africa 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 South African 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 sweetheart deals, clientelism and tender abuse.

The challenge for South Africa is the same challenge that faces countries everywhere: 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 South Africa's endemic poverty and inequality and truly serve the nation as a whole.

Professor Virginia Tilley is a senior research specialist in Democracy, Governance and Service Delivery.