Where from and Why Developmental State? 1. Structuralist development theory had been the prevailing orthodoxy during the 1950s and early 1960s. A central idea associated with structuralism was the belief that market failure is a pervasive feature of the underdeveloped economy with the corollary that the state has an important role to play in correcting it. The Socialism or Welfare State! 2. The neoclassical resurgence, which can be traced back to the late 1960s and early 1970s, attacked structuralism on three separate grounds. First, extensive state intervention to promote import-substituting industrialization had generated inefficient industries, requiring permanent subsidization for their survival with little prospect of achieving international competitiveness. Second, extensive government intervention tended to generate rent seeking on a substantial scale, which detracted the attention of economic agents from productive activities into lobbying for increased allocations of government subsidies and protection. Third, and most significant in the present context, empirical evidence on the experience of the most successful countries to emerge from the Third World, namely the four East Asian countries, Taiwan, South Korea, Hong Kong, and Singapore, showed that these countries achieved extraordinary rates of economic growth, which moreover had been consistent with a relatively egalitarian distribution of income. The unique performance of these economies had been generated by using an outward-oriented model driven by market incentives and a strong private sector. Neoclassical interpreted all successful industrialization episodes as the outcome of free market. These are Neoliberalism (The West)! 3. Institutionalist, argue that the phenomenon of 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 national ends. Fundamental to East Asian development has been the focus on industrialization as opposed to considerations involving maximizing profitability on the basis of current comparative advantage. In other words, market rationality has been constrained by the priorities of industrialization. Key to rapid industrialization is a strong and autonomous state, providing directional thrust to the operation of the market mechanism. The market is guided by a conception of long-term national rationality of investment formulated by government officials. It is the synergy between the state and the market which provides the basis for outstanding development experience. The institutionalist perspective attempts to transcend the structuralist development economics which downplayed the key role of markets in the industrialization process. Similarly, it attempts to transcend the subsequent neoclassical resurgence which rapidly moved to the opposite extreme and interpreted all successful industrialization episodes as the outcome of free markets, with the necessary corollary that the domain of state intervention in the economy had to be restricted as far as possible. These are Developmental State ideology (Ethiopia’s with plus democracy for its originality or of her own type only)! Successful growth-oriented intervention depends on four major elements (p.145): 1. Stable rule by a political-bureaucratic elite that can resist political demands that would undermine economic growth. (We in Ethiopia are facing challenges in this regards because of corrupt mentality of few irresponsible officials – the solution is fighting corruption) 2. Cooperation between the public and private sectors under the overall guidance of a strategic planning agency. 3. Heavy and continuing investment in education for everyone, combined with policies to ensure the equitable distribution of wealth. 4. A government that understands and respects the importance of market-determined prices 5. Democracy (Ethiopias own) Taken from: Chalmers Johnson, “Political institutions and economic performance,” in Fredric Deyo, ed. The Political Economy of the New Asian Industrialism, 1987, pp. 136-164 Haben
Posted on: Tue, 04 Mar 2014 09:36:25 +0000