The Developmental State: Dead or Alive?

Abstract

Before the 1980s, the mainstream Western prescription for developing countries to catch up with the West assigned the state a leading role in governing the market. In the 1980s, this shifted to a framework‐providing role in a largely deregulated and maximally open economy. Also in the 1980s, it became apparent that some East Asian capitalist economies were growing so fast that they would become ‘developed’ in the foreseeable future, marking them out as completely exceptional. Mainstream economists explained their success as the result of following the Western prescription, while other scholars attributed this rapid growth to ‘the developmental state’. This essay compares these two explanations of successful economic development, concluding in favour of the latter — with respect to the catch‐up decades. But what happened subsequently? Several scholars who accept the key role of the developmental state in the early period of fast industrialization in East Asia now argue that South Korea, Taiwan and Singapore have transformed from developmental to close‐to‐neoliberal states. This contribution argues that the erstwhile East Asian developmental states have indeed changed, but they have not transformed into neoliberal states. Rather they have adapted and evolved, but still undertake market‐steering, ‘societal mission’ roles well beyond neoliberal limits. The essay also suggests how other developing countries can learn lessons from their experience.

Industrial Policy in the 21st Century

“…For a review of the debate since 2000, see Andreoni and Chang (2019). For recent contributions see also Andreoni (2016); Cherif and Hasanov (2019); Mazzucato (2013); Salazar-Xirinachs et al (2014); Stiglitz and Lin (2013); Wade (2018). Five recent journal issues covering frontier themes in industrial policy are: Andreoni et al (2019b); Foray et al (2012); Kattel and Mazzucato (2018); Pianta and Zanfei (2016); Storm (2017).…”

Taming Foreign Exchange Derivatives Markets? Speculative Finance and Class Relations in Brazil

“…Accordingly, I argue that the Brazilian IOF on FX derivatives is a form of state power that internalizes the subordinate positionality of Brazil in the global financial and monetary system. In my view, this tells us something particularly important about how financialization patterns reproduce global core–periphery relationships: while I fully agree with Robert Wade and others that the deregulation of cross‐border capital flows is one of the forces that ‘tend to perpetuate the hierarchical core–periphery structure of the world economy’ (Wade, : 538), the Brazilian experience with restricting FX derivatives shows that, perhaps paradoxically, regulating speculative finance can also inadvertently consolidate such a structure.…”

“…This relationship has been mostly approached through one of two angles: on the one hand, financialization as constraint , that is, the extent to which state power has been constrained by financialization processes (e.g. Jayadev et al., ; Wade, ); on the other hand, financialization as opportunity , whereby states actively ‘wield the market‐based practices and technologies of financial innovation to pursue statecraft objectives’ (Lagna, : 167; see also Karwowski and Centurion‐Vicencio, ; Muñoz Martinez, ; Van Loon, ). Both types of approaches highlight how the state actually plays an essential role — whether deliberately or not — in mediating financialization processes, either through directly becoming an actor in financial markets, or by lifting a series of regulations in the realm of money and finance that facilitate financialization .…”

“…Contributors to the Forum 2018 Debate on ‘Financialization and Economic Development’ in the pages of this journal have shed light on the extent to which state power has been constrained by financialization processes (e.g. Jayadev et al., ; Storm, ; Wade, ). A growing body of literature on the ‘financialization of the state’ has also analysed the multiple ways in which states have actually relied upon financialization processes to pursue a series of objectives (e.g.…”

“…Accordingly, I argue that the Brazilian IOF on FX derivatives is a form of state power that internalizes the subordinate positionality of Brazil in the global financial and monetary system and associated patterns of subordinate financialization (Alami, , ; Kaltenbrunner and Painceira, ). As the article demonstrates, this has implications in terms of how financialization processes tend to reproduce global core–periphery relations (Wade, ).…”