Divergent Cases and their Relevance for the Developmental State Concept

Written by Siyaduma Biniza*

With the introduction of effective state interventionism the debate on the role of the

state in development has evolved from a contention between state interventionists

and laissez-faire policy advocates to the emergence of the developmental state

concept more recently. Although the developmental state theory conceptualises

characteristics of the ideal case from the developmental successes in East Asia, the

reality of many developmental states has diverged from the ideal case. Nevertheless,

despite the complex epistemological challenge of defining the necessary conditions for

development, the developmental state concept offers an adequate analysis of the

sufficient conditions for development. Consequently, despite the normative approach

of the developmental state theory, a developmental state may not be necessary for

development although it is sufficient. Therefore, this essay is a descriptive analysis of

the Indian and Indonesian developmental states. Thus this analysis concludes that the

failed case of India and the anomalous case of Indonesia serve as a critique and

enhancement of the importance of a developmental state; which is one set amongst a

complexity of political-economic conditions that catalyse development.

What is meant by ‘development’?

The discourse on the state and development has been dominated by a conflation of

the separate matters of development, which relates to attainment of human potential,

and economic growth which relates to production growth and accumulation (Herring,

1999). Consequently many case studies of attempts at the developmental state have

been classified exclusively according to their economic performance due to this

conflation. But this conflation has been challenged with the introduction of the human

development index, which is a measure that tries to consider both developmental and

economic aspects of state development. So analyses, such as the developmental state

concept, try to incorporate the delivery of public good to assess more than economic

performance. Nevertheless, this conflation is a persistent feature of the discourse and it

has influenced the way we analyse the success or failure of states‟ attempts at

development. However, dealing with this conflation falls outside the scope of this

paper but it is important to note before proceeding with the discussion and analysis at

hand; because this conflation is influential in the developmental state concept analysis.

Furthermore, the development of the discourse on the state‟s role in development can

be summarised into four eras, namely: the pro-state interventionism era in the 1950s

and 1960s, the Washington Consensus era which was dominated by a preference of

laissez-faire policies in the early 1980s and 1990s, the re-emergence of the state era

which sought to introduce effective state intervention in the mid-1990s, and the

developmental state era post-1997 (Fritz & Menocal, 2006); which shows the changing

perception of the role of the state and the gradual move from anti-interventionism

towards effective interventionism. Therefore, the discourse on the state‟s role on

development has been dominated by two approaches which either emphasise the

primacy of economics or political economy as a determinant of development. However

the debate has evolved from a contention between state interventionists and laissez-

faire policy advocates to the introduction of effective state interventionism; and the

emergence of the developmental state concept.

The Washington Consensus era was characterised by structural adjustment

programmes by the International Monetary Fund (IMF) and World Bank (WB) which

focused on economic indicators such as inflation and liberalisation of trade; as move

away from the pro-state interventionism which was seen as responsible for retarding

development toward a market-orientated approach (Meyns & Musamba, 2010).

Thereafter the WB and IMF focused on „good governance‟ but still emphasised the

importance of economic indicators such as inflation-targeting and public budget

deficits. And more recently the approach has emphasised the primacy of politics and

the state‟s role in development. For example, Adrian Leftwich (2000) argues that the

modern approach to development has led to incorrect analyses that emphasise the

importance of effective governance or democracy as the determinants of

development; he therefore asserts the developmental state, which he sees as the best

deliverer of development, to substantiate his argument about the primacy of political

economy and the role of the state in development. Thus the role of the state in

development has become critically analysed leading to the emergence of the

developmental state concept.

The changing discourse on development sheds light on the complex epistemological

challenge of determining what conditions are necessary for development (Herring,

1999). Although the non-interventionists and interventionist approaches advocate

different means to development, neither of the schools would disagree that

development partly depends on the outcomes of both of their methods. Such that

political action is sometimes vital to achieving efficient economic outcomes in markets,

which makes politics important; whilst, on the other hand, politics needs to consider

economic consequences for the effectiveness of political actions. Therefore these two

approaches are evidence that the question of what conditions lead to development is a

consideration of the complex political-economic conditions that catalyse development.

Thus, as the discussion proceeds it will become clearer that the developmental state

concept seeks to analyse political-economic characteristics of the ideal case from the

developmental successes of East Asian states; whilst the reality of many developmental

states diverges from this ideal (Herring, 1999).

Is there a developmental state or developmental states?

Many post-colonial states have been driven by various interests, such as nationalism or

survival, to pursue high economic growth as a strategy for development. But the

approach to development has been driven by the intervention of governments and

anomalous fluidity between the military and public service, which is uncommon and

sometimes frowned upon in the developed world (Leftwich, 2000). Nevertheless, the

results have been mixed with resounding success in some East Asian economies that

was unexplainable and unexpected under the orthodox view of economic

determinants of development; and many failures in Africa and Latin America. This then

led to the developmental state concept, which sought to explain this „Asian Miracle‟,

and the emergence of the developmental state theory as an attempt to formalise ideal

conditions for development.

Therefore the developmental state theory (hereinafter referred to as the DST) asserts a

particular list of characteristics that are integral for a developmental state. These

characteristics include: a strong politically-willed and technocratic elite that can

intervene in the market and co-ordinate private economic interests in favour of

national development goals, a civil society that can be subjugated and a technocratic

bureaucracy that can design and implement policies successfully (Gainsborough,

2009). This requires a certain level of state autonomy from private economic interests.

But the developmental state should not just seek autonomy from the private sector

and civil society. Instead, the state needs to exercise “embedded autonomy” to harness

a mutually beneficial relation between private and public sectors to ensure

development (Meyns & Musamba, 2010: 13). The idea of embedded autonomy asserts

the necessity of interconnectedness between the state and private sector to ensure a

two-way flow of ideas and learning that benefits both the state and private sector; and

ultimately civil society through the provision of public goods. Moreover, the

relationship between the state and private sector should be such that the state can

insulate its nationalist interests from being veered by the dominant economic interests

of the private sector; whilst allowing the state to consolidate both public and private

interests in pursuit of development (Meyns & Musamba, 2010).

But it is vital to note that these notions are theoretical and ideal with states resembling

them to a certain degree (Herring, 1999). Therefore, in accordance with the foregone

discussion, developmental states can be analysed according to their: strong and

insulated economic bureaucracies, a weak and subordinated civil society, consolidation

of private economic interests for the purpose of development and development

performance. Thus, although there is no definitive criterion for what constitutes a

developmental state, we shall use this general criterion in our analysis of India and

Indonesia before concluding with what each cases means for the developmental state

concept.

How developmental are the cases considered?

India is described as a developmental state that which was: committed to planning, too

democratic, economically interventionist and estranged from the private sector

(Herring, 1999). This brief description highlights the fact that India lacked certain

characteristics according to our criteria of analysis.

Firstly, the Indian bureaucracy was not strong or insulated. India‟s bureaucracy was

characterised by “embedded particularism” which resulted in internal and external

relationships that did not allow for coherence and uniformity in rule application

(Herring, 1999: 322). This can be attributed to federalism which undermined the

autonomy and cohesion of the bureaucracy because the state was structurally inimical

to coherent bureaucratic decision-making and policy implementation. The central

bureaucracy did not have control over certain parts of the state which federal rule had

the prerogative over (Herring, 1999). Therefore, even though the state was led by the

economic planning of a central bureaucracy the local bureaucracy was weak in

implementation because of the federal fragmentation and incoherence of rule-

application. Moreover, the Indian bureaucracy‟s insulation from private economic

interests was limited by populist politics at the national-level while powerful interest

groups infiltrated the local-level politics (Herring, 1999). So the consequence of federal

fragmentation and populist politics was the embedded particularism which served

specific public and private interests instead of national developmental interests. Thus

the fragmented bureaucracy had little coherence and it was not insulated from

particular private interests which made for a weak and incoherent bureaucracy.

Secondly, the embedded particularism was inimical to the type of relationship where

the state could resist private economic interest to promote development (Pedersen,

2008). So the state was not able to consolidate private economic interests for the

purpose of development. Moreover, the private sector opposed the state‟s

developmental path so much that the state had to abandon its developmental policies

for neoliberalism (Chibber, 2006). This change in policy came after the recurring foreign

reserve crises which were a consequence of the state‟s preference towards domestic

firms‟ interests and the policies adopted by foreign firms. The state was unable to

promote domestic production for exports and some foreign firms operating in India

prohibited exports (Chibber, 2006). Consequently, import substitution practices and

private firms‟ behaviour which led to foreign reserve crises; and the state was held

responsible for the economic failures (Chibber, 2006). This led to increased private

sector demands for less state intervention and eventually the state had to succumb to

private interests (Chibber, 2006). Furthermore, significant private interest groups such

as those supporting the Tatas and Birlases had diverging interests to national

development and thus infiltrated or opposed the state‟s developmental path (Herring,

1999). Therefore private interests resisted the developmental policies because they

would harm their privileged position (Pedersen, 2008) and they were successful – so

much so that they redirected public policy through piecemeal opposition. Thus, the

state was unable to consolidate private interests for the purposes of development.

Lastly the biggest criticism against India is its poor development performance as

characterised by the relatively low „Hindu growth rate‟ around the 1980s and 1990s

(Pedersen, 2008). Therefore failure of the state to discipline the private sector,

incoherent bureaucracy and challenges of federalism lead to steady but low growth

rates (Herring, 1999). Thus, although the question of whether India can be classified as

a developmental state is objectionable based on our criteria, it is clear that India has

not been able to perform well or implement its development policies with much

success making it a failure.

Nevertheless, there have been objections that India‟s developmental performance may

have been affected by aggregation of its large economy; and that sector or state-level

analyses present a mixed development performance (Pedersen, 2008). Therefore some

argue that the mixed developmental performance negatively impacts India's

aggregate performance because of the sectorial and state-level particularism of

development policy. But, although India may have had specific developmental

successes, the overall picture is that India failed at development performance

(Pedersen, 2008). Regardless though, India‟s recent development performance

challenges the analysis of India as a failed developmental state because of its high

growth rates and extensive industrialisation in more recent years (Pedersen, 2008).

Thus, the question of how developmental India was remains debatable because, even

though it lacks some of the DST prescriptive criteria, India has eventually succeeded at

development and the graph below shows its astounding growth rates in more recent

years.

Figure 1: Annual GDP Growth

Source: Pedersen, J.D., 2008. Is India, or Has It Ever Been a Developmental State? In 58th Political Studies Association Conference. Swansea, 2008. Political Studies Association.

Under the analysis of the DST it seems unlikely that India would achieve developmental

success. Nevertheless, India‟s more recent economic performance and its political

economy make for a critique of the importance and relevance of the DST criteria as

necessary requirements for development. Because, from the forgone discussion on

India the view that it is a failed developmental state we would not expect any

developmental success; but the contrary has occurred and India‟s performance has

outshone some of the idea East Asian cases in more recent years (Pedersen, 2008).

India‟s route to development differs from the East Asian cases which were

characterised by embedded autonomy of the state and bureaucratic coherence.

Instead the Indian state seems to have infiltrated the private sector through:

nationalisation which increased state share of the private sector, relative liberalisation

and state-driven economic planning (Pedersen, 2008); which led to industrialisation

and high growth rates without consolidation of private economic interests,

bureaucratic coherence and insulation from private economic interests. Furthermore,

although the present period is analysed as characteristic of market-led development,

many of the structures setup during the 1950s are still operation and the state is still

plan-orientated, the financial sector is still dominated by nationalised banks, large state

enterprises are still dominant in many sectors and foreign capital is still controlled

through state regulations (Pedersen, 2008). Therefore India‟s story suggests an

alternative approach to development, which runs contrary to the norm of private-

public collaborations; but rather through private infiltration by public sector and state-

led industrial transformation through this infiltration. Thus, India‟s lacking criteria

analytically and comparatively critique the importance of specific characteristics of the

developmental state concept.

Now let us turn towards Indonesia which has the most striking feature of being the

most successful IMF stabilisation programme (Booth, 1995). The Indonesian

government tamed inflation, reduced the deficit and stimulated high growth; which

was an anomaly to the deteriorated living standards and reductions in domestic

production that characterised other IMF stabilisation programmes (Booth, 1995). An

analytical study suggests that the Indonesian government was able to fund its

development projects through clandestine means by monopolising rent-seeking in the

state; making it able to control rent-seeking in the economy in a way that was

consistent with the developmental agenda (MacIntyre, 2000). But how does this fit the

DST criteria?

Firstly the Indonesian state had a strong and insulated economic bureaucracy that was

able to consolidate private and public interests for development purposes. The state

was highly centralised and effective at controlling rent-seeking thus ensuring that rent-

seeking did not lead to inefficient outcomes (MacIntyre, 2000). The state was able to

setup an incentive framework which ensured that rent-seeking did not lead to

inefficiencies and excessive plundering of the economy. The state, under the

authoritarian leadership of Suharto, was able to oversee the extraction and distribution

of rents from regulatory institutions which ensured that no institutions were able to act

independently and that rents were efficiently distributed towards developmental ends

(MacIntyre, 2000). Furthermore, Suharto and his highly trained advisers with PhDs in

economics established highly successful economic and national development plans

(Vu, 2007). Moreover, government bureaucracies such as the National Planning

Commission, the Ministry of Finance and the central bank were led by technocratic

officials who took active roles in policy-making and implementation (Booth, 1995).

Thus the highly centralised and technocratic bureaucracy was strong and insulated

from independent self-interested pursuit of rents, which made it possible to

consolidate private interests for development, resulting in good development

performance.

Secondly, Indonesia was characterised by fluidity of military-civil servants in Indonesia

and the mass subordination of civil society (Vu, 2007). Booth (1995) argues that

although the Indonesian regime is repressive, the citizenry did not blindly accept the

governments say. However, government was able to subordinate civil society and quell

opposition by playing different interest groups against each other without

overextending itself to any specific group (Booth, 1995).

Therefore, Indonesia‟s case has been characterised by a strong and insulated economic

bureaucracies, a weak and subordinated civil society, consolidation of private

economic interests for the purpose of development and good development

performance; which is far more characteristic of the ideal developmental state.

Consequently, although Indonesia has been characterised by pervasive rent-seeking,

which is seen as inimical to development as in many African and Latin American cases

(Menocal, 2004), the developmental state was very successful because of its political

economy. Thus, the fact that Indonesia is a better fit to the ideal developmental state

can be seen as what has contributed to its developmental success which enhances the

importance of the developmental state concept.

What does this mean for the developmental state concept?

Through this descriptive analysis we see that India lacked some of the criteria of the

DST making it arguably unfit to be called a developmental state. Moreover, from this

analysis we would expect India to have poor development based on the DST criteria.

However, a closer analysis of India and more recent development performance data

leaves room for criticism of the importance of the developmental state concept for

development. Although India did not satisfy the DST criteria it has ultimately

succeeded at development. Therefore, the DST‟s prescriptive characteristics have not

been necessary for India‟s development which has been a success even though the DST

would characterise India as a failure. This makes for a critique of the developmental

state concept which is normative in its analysis of development (Gainsborough, 2009).

The critique may be that the developmental state is not the only development-catalytic

political economy.

On the other hand Indonesia seems to be an anomalous case where resounding

development success was attained despite pervasive rent-seeking behaviour; because

it was a much more developmental state. Pervasive rent-seeking, like patronage and

clientelism, is often thought as inimical to development in many African and Latin

American cases (Menocal, 2004). However, Indonesia is an anomalous case since it has

succeeded at development despite pervasive rent-seeking; because, similarly to

Thailand and Japan, it has close resemblance to the ideal case (MacIntyre, 2000; Rock,

2000). Therefore Indonesia‟s developmental success enhances the importance of the

developmental state concept because its developmental success can be attributed to

its political economy which was a close resemblance to the ideal developmental state.

However, fulfilment of the developmental state is not deterministically important for

development as India‟s recent development performance has proven. Therefore the

issues of whether the state: is characterised by a strong and insulated bureaucracy, can

subordinate its civil society and special interest groups, can consolidate private

economic interests for the purpose of development and performs well – although

sufficient for the developmental cannot be said to be deterministic on the

developmental future of states. Thus analysis of India and Indonesia critique and

enhance, but do not detract from, the developmental state concept contribution - that

the developmental state is one amongst many political-economic conditions that are

sufficient for development.

Concluding remarks

Over time the debate on the role of the state in development has evolved from a

contention between state interventionists and laissez-faire policy advocates to the

introduction of effective state interventionism; and the emergence of the

developmental state concept more recently. However, although the developmental

state theory conceptualises characteristics of the ideal case from the developmental

successes in East Asia, the reality of many developmental states has diverged from the

ideal case. Nevertheless, despite the complex epistemological challenge of defining the

necessary conditions for development, the developmental state concept offers an

analysis of the sufficient conditions for development. Consequently, despite the

normative approach of the developmental state theory, a developmental state may not

be necessary for development although it is sufficient. This is shown by the fact that

India has eventually succeeded at development despite this unexpected result because

of its past failure as a developmental state. Meanwhile, because Indonesia had a

political economy which resembled the ideal developmental state closely, Indonesia

anomalously achieved resounding developmental success despite pervasive rent-

seeking. Thus the failed case of India and the anomalous case of Indonesia serve as a

critique and enhancement of the specific elements in the developmental state concept;

amongst a complexity of political-economic conditions that catalyse development.

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* Siyaduma Biniza is currently a B.Com. (Hon) in Development Theory and Policy

student at the University of the Witwatersrand, holding a B.Soc.Sci in Politics,

Philosophy and Economics from the University of Cape Town.