Social Policy and Developmental State

Content

Introduction
What is a Developmental State?
Authoritarian State vs. Developmental State
Degeneration of Developmental State
Developmental State to Developmental Welfare State
Conclusion

Introduction

East Asian nations with relatively weaker natural and physical assets have experienced exceptional development, which has been linked to the development strategies used by their "strong" States. With their tireless pursuit of economic progress, nations like Singapore, South Korea, Taiwan, Hong Kong, and Japan have been rapidly advancing into the ranks of developed nations.

All of these nations have a solid "developmental state" basis, which has served as a booster for their economy. A developmental state, yet, what is it? What characteristics define a state as a developmental state, and does this promote economic growth? These are a few queries that we'll attempt to address in this blog post.

What is a Developmental State?

Chalmers Johnson first used the phrase "developmental state" to characterise the extraordinary rate of economic expansion in Japan. "A state where the government is directly involved in the macro and micro economic planning to improve the economy...while trying to allocate its resources in creating better lives for the people" is one definition of a "developmental state" (Rice-Jones, 2013). The post-World War II economic policies that Japan pursued are where the concept of a developing state first emerged. This concept emphasises how important it is for the government to control and direct how quickly the economy develops. The Developmental State has the following basic features, according to the United Nations:

A government with the political will and legitimate mandate to perform the required functions

A competent and neutral bureaucracy that ensures implementation. This requires a strong education system and efficient set of public sector organisations with little corruption.

An institutionalised process where the bureaucracy and government engages with other stakeholders

An established development framework and a comprehensive governance system to ensure the programme is implemented e.g. A central function responsible for overall co-ordination(Rice-Jones, 2013)

A "developmental state" is thought of as an interventionist state that directs the nation's economic policies to accelerate its growth rate rather than leaving development to the whims of the market.

However, the government's interventions do not appear as large public ownerships but rather as important economic policies and instruments like direct financial policies that have a positive effect on a small number of industrial trades, subsidies, tax credits, import controls, credit policies, and export promotion.

The degree of the state's intervention is also influenced by a variety of factors, therefore it varies from one nation to another and through time within a nation. For instance, Japan experienced a clearly manifested interventionist state in the early stages of economic development before withdrawing to focus on only the dying industries.

A country must be in a developmental state in order for the bureaucracy to function autonomously. To establish and carry out policies and instruments as a progressive state, the bureaucratic machinery in this situation must be a "meritocratic bureaucracy" with little political involvement and maximal autonomy. The Developmental State demands that "politicians reign and that the bureaucrats govern," as Chalmers Johnson puts it (Caldentey, 2008).

The State must also win over and actively engage private sector entities in order to accomplish its vision of a state that is developing.

Chalmers Johnson outlined the four components of the Japanese developmental state to describe the idea of a developmental state. He emphasises that economic development must be prioritised above all else for a state to become developmental in nature. As far as economic growth is concerned, economic development is an inclusive phenomena. When creating governmental policies and programmes, Japan always prioritised economic development as its main goal. Therefore, according to Chalmers Johnson, state involvement should be largely developmental in nature rather than regulatory, market-oriented, or welfare-centric.

In his book MITI and the Japanese Miracle: The Growth of Industrial Policy, Johnson listed the four components of the Japanese developmental state as follows:

Existence of small entities with meritorious bureaucrats who are dedicated to identify growing industries, then push some support system to guide their growth and finally to supervise health economic competition in these industries to maintain their effectiveness and comparative advantage.
A non-interfering political system focussed on performing safety-valve function of the state while giving a free hand to the bureaucracy to function and operate in the economy
Adopting market-conforming approach for State interventions with adequate scope for market players towards contributing towards policies and plans without misplacing the objective of economic development. E.g. existence of forums to exchange, debate and receive ideas and feedback, periodical revision in tax rebates and alike
Lastly, the need to set-up organizations such as MITI (Ministry of International Trade and Industry) with direct control over funds and small scale as well focussed approach of intervention in the domestic and international industrial trade sector. When MITI was set up it was one of a kind with no precedence in any advanced economies of the world.(Johnson, 1999)

While the developmental state is built on the lone aim of economic development, competing objectives like equity and welfare are not included on the list of priorities. The majority of the nations trying to emulate Japan's success had to do as it did and abandon all other national priorities in favour of economic development. Like the MITI in Japan, the South Korean government established the Ministry of Commerce and Industry. Through this Ministry, the South Korean government first controlled the country's currency rate policy to encourage exports before nationalising the biggest banks to allow an unrestricted supply of credit to the market for the targeted industries. Finally, it turned to interest rate manipulation to support specific production practises that resulted in the concentration of a select few targeted industries. Therefore, the developmental state policies were not rigid but rather malleable to the priorities of the government. For instance, in the case of South Korea, the first two five-year plans concentrated on the development, improvement, and self-sufficiency of state instruments. The third five-year plan put a strong emphasis on developing rural areas, establishing chemical industries, and increasing exports. Later, the state concentrated all of its efforts on creating industries with a high technological intensity. Therefore, these modifications in the five-year plans' objectives indicate the adaptability of the policies of the Developmental State.

It was common to interpret adopting a developing state's strategy as an effort to hasten the industrialization of one's nation. According to Coates, "it was fairly usual to find that the state itself led the industrialization push, that is, it took on developmental functions, in economies striving to make up for lost ground on previously existent capitalists powers." As a result, the State accepts responsibility for steering the economy toward industrialization and faster economic growth. This argument is different in the case of Latin America because the region's nations immediately adopted the developmental approach after achieving independence. However, the state remained burdened with war costs until the late 19th century and could hardly carry out development policies with sincerity.

In the post-war scenario, several Latin American nations began implementing development policies, such as Brazil's immigrant subsidies, Chile's public funding for education and public works programmes, Colombia's significant investment in public infrastructure like railroads, and Peru's increased public spending on programmes for education, health, and public works. The majority of these actions were similar to those taken by US and European nations to promote development, however these were rendered inadequate in catapulting their economy on the path of economic development. Most of these initiatives were either limited in scope or skewed in its purview

When the Great Depression hit, the state-driven industrialization provided many economies with their sole boost, ushering in the second era of the developmental state. The general idea suggested that state intervention was necessary for development to occur at this stage. While allowing market forces to take control entails that the economy will remain depressed and at low levels of development. Supporting Keynesian economics, the government-sponsored stimulus programme was crucial in reviving numerous struggling economies that had poor demand and productivity. In many economies, these state initiatives also helped to advance the industrialisation process. Additionally, during this same time, the concept of the developing state—a popular East Asian strategy for competing with the advanced industrialised nations in the West—emerged. But is a developmental state a strict authoritarian regime or is it a more moderate form of authoritarianism? Let's talk about the political and economic aspects of the developmental state.

Authoritarian State vs. Developmental State

A strong state is one that is in development and has strong control over its political and economic issues. It is distinguished by the independence from class interests it enjoys, the diversity of demands from different groups, and the possession of the political and economic might to enact the policies of their choosing. These characteristics show a powerful state with the natural characteristics of an authoritarian state.

However, not all authoritarian regimes are also developing states, and not all authoritarian states are also developing ones. Being a developing state is an economic direction, while being an authoritarian state is a political dimension. As a result, there are many elements that influence how an economy and politics shift in a country. As a result of economic transition, the nation moves from the earlier described pure developmental stage to a more constrained developmental state. The limited developmental state supports other political objectives like welfare and foreign policy while simultaneously working toward economic planning and development.

The limited developmental state could be defined as a state having features such as “(1) certain segments of the economy remain plan rational, while the rest become market rational; (2) the orientation is develop- mental in certain segments, but to a reduced degree, while the regulatory function increases in sectors that have become market rational; and (3) the primary policy objectives include development and other goals.”(Kim, 1993)

Many academics believe that the long-term conflict between the developmental state's institutions and autonomy is what ultimately led to its demise. The term "contradiction of institution" describes the situation in which the state fosters the private sector and supports its expansion through subsidies and programmes, which in turn promotes the private sector to be self-sufficient and doubt the effectiveness of state-provided services. Thus, the private sector demands to handle such provisions independently out of self-interest and challenges the State's competence to do so. Second, the progressive state's own success is the source of the autonomy contradiction. "The state's very effectiveness in expanding its function as a corporate actor may damage its ability to stay autonomous and that effective involvement may increase the amount to which the state becomes an arena of social conflict," Rueschemeyer and Evans write. As a result of development, new, powerful classes emerge that seek greater independence before becoming self-sufficient. The State has strengthened certain classes, such as the capitalist classes and labourers, who now compete with one another for power and autonomy rather than working together.

In the case of South Korea, two primary policies—industrial policies supporting large business and restrictive labour rules—exacerbated the conflicts indicated above (Kim, 1993).

Industrial Policies: South Korea made significant investments to help big industry, providing cheap interest policy loans, decreased tariffs, and monopoly privileges as examples of industrial policies. These policies supported the unheard-of expansion of big business, commonly known as Chaebol, in South Korea to the point where these companies began working together to provide services that were previously offered by the government, such research and development. When major company became self-sufficient, it began to seek more freedom and authority, which contributed to the institution's shrinking.

Labor Laws: Repressive labour laws designed to spur economic expansion had a role in the institutional eradication of organised labour. The collective bargaining, collective action, and freedom of organisation were all permitted under the 1953 labour laws. However, the 1963 labour laws were altered to add more room for state interference and tighter restrictions on union membership and activity throughout South Korea's developmental phase. Later in the 1980s, the State abandoned the provisions for collective action and bargaining, which resulted in widespread labourer exploitation due to low pay and unfavourable working conditions. The subsequent rise of labour movements and disputes throughout South Korea as a result of this oppression had a detrimental effect on the country's prosperity. These movements significantly eroded the State's role as an economic protector.

Degeneration of Developmental State

With these policies in place, the State's transition from a democratic to a developmental state was unavoidable.

Contrarily, in this instance, the developmental state's degeneration was promoted by its success.

Although their goals were diametrically opposed, the strengthened and the aggrieved groups, such as capitalists and labourers, both desired freedom from the state-driven eco-system and more autonomy to exercise. Big company owners and capitalists called for a protectionist government that protects the private sector and insulates it from market failures like labour disputes and global economic shocks, but with limited government intervention in the economy. On the other hand, Labour supported a welfare state that protects workers' rights and welfare and insulates them from market-related shocks to their pay and hours of labour. They wanted the government to step in as a welfare provider and guardian of the working people against the rapacious capitalist class.

As a result, this presented the developmental state with a special challenge and marked the beginning of its transition from the comprehensive developmental state to the limited developmental state, which dealt with issues other than economic development and a variety of demands from different social groups. Another name for this change would be from a developmental state to a developmental welfare state.

Developmental State to Developmental Welfare State

Despite being focused on economic development, Developmental State also had a positive impact on society's social conditions. Through the abolition of social classes through land reforms, increasing female labour force participation, and the conversion of the agrarian economy to an industrial one, it brought about a sea of change in the social dynamics of the societies. It was thought that social progress was a requirement for economic development. However, the sectoral and selective welfare measures that are important for the economic development of the economy, such as the provision of social security for important state personnel, characterise the actual developmental state as articulated by Chalmers Johnson. Over the course of the adjustment phase, the developmental state's welfare component evolved, turning it into the developmental welfare state. (2010) Dostal

The earliest example of a welfare state that developed was the Bismarckian welfare state in Germany in the 1800s, where the government took on the responsibility of providing social insurance for different kinds of workers. Numerous European states adopted this strategy and became the state the primary provider of social insurance in their nations. During the political shift to democratisation, there was finally less stigma in East Asia toward state-sponsored social initiatives. The development of the welfare state and the spread of social benefits for all citizens were driven by democratisation.

With a stronger focus on social policies and a shift from selective to universal coverage, the developmental welfare system seeks to address the shortcomings of the developmental state in order to support capitalism, democratic government, and social investment. For instance, in the case of South Korea, the transition to democratisation was accompanied by a reordering of industrial strategies that prioritised foreign policy, welfare, and economic development in addition to each other. This meant that by the late 1980s, social spending had greatly expanded and accounted for about 40% of all government spending. However, after the East Asian Crisis, these policies were abandoned in favour of structural adjustment programmes. Neo-liberal statehood evolved from restricted developmental statehood as a result of liberalisation, privatisation, and globalisation.

Conclusion

The single-minded emphasis on economic development throughout the policy planning that gave rise to the Developmental State's prosperity, ironically, also contributed to its eventual downfall. Numerous academics contend that a capability-enhancing state, which places an emphasis on improving citizens' individual talents and capacities while also prioritising economic growth, will see positive outcomes and have greater support from its people. To secure the involvement of various groups in the nation-building effort, it will work on inclusive policies. This would entail the State becoming more actively involved in the efficient provision of services such as healthcare, education, skill development, and affordable public transportation.

The problems with the developing state's obsession with the goal of economic development will be solved by such diversification in policy goals. The need for the liberal method, which mainly relies on market forces and private players to administer the country, will likewise decline as a result of the state's comprehensive development plan. Therefore, the discourse on welfare development state is essential to understanding 21st-century development.

Reference

Caldentey, E. P. (2008). The Concept and Evolution of the Developmental State. International Journal of Political Economy Vol. 37, 27-53.
CDostal, J. M. (2010). The Developmental Welfare State and Social Policy: Shifting From Basic to Universal Social Protection. The Korean Journal of Policy Studies, Vol. 25, No. 3, 147-172.
Johnson, C. (1999). The Developmental State: Odyssey of a Concept. In M. W. Cumings, The Developmental State (pp. 32-60). Cornell University Press.
Kim, E. M. (1993). Contradictions and Limits of a Developmental State: With Illustrations from the SouthKorean Case. Social Problems, Vol. 40, No. 2, 228-249.
Rice-Jones, G. (2013, October 14). A Beginner’s Guide to the Developmental State. Retrieved from romeconomics.com: http://www.romeconomics.com/beginners-guide-developmental-state/