Neo Developmental State

Topics: Economics, Economic growth, Economic development Pages: 11 (4079 words) Published: October 2, 2014


Why is the role of the state so crucial for the process of development? What is the developmental state? Why is there so much hype about the notion of developmental state? What led to it’s evolution? What are its characteristics? Is the model transferable? What is Neo-Developmental state? I have tried to answer all of them in this assignment according to the order of these questions. Although the nature of answering these questions is by itself a critical analysis but I have also tried give to give my opinion at the end in form of a conclusion.

The state should play a central role in economic development. The fact that there was a noticeable congruence among the early economists that economic development needs an effective state was clearly visible in their writings. Simon Kuznets (1955) believed that the ‘political system’ governing a state might turn out to be an economic variable while explaining economic growth. According to him the state should allow for trickle down of the benefits from rapid growth which would increase per head income. Paul Rosenstein Rodan while laying down ‘The Big Push Theory’ identified that the role of the state is crucial for large scale investments, especially in social overhead capital as private investors would not do so as they are driven by profit motives. While Paul Baran emphasized that the reason behind the underdevelopment of most countries was inexistence of a nationalistic developmental state. On similar grounds Myrdal argued that absence of a ‘hard state’ leads to economic stagnation. Gerschenkron has argued that latecomers need a ‘centralized’ approach to advance towards industrialization and economic growth. (Chang, 1999). Also there has been an idea related to ‘structuralist’ development theory that market failure in underdeveloped countries can be rectified through state intervention and with other policies such as the Import Substitutions Industrialization during late 50’s and earl 60’s realized the importance of the state in economic development (Onis, 1991).Consequently, there has been substantial literature developed on the notion of developmental state. Loosely speaking a developmental state is a state where government is strongly involved in extensive regulation and planning, where economic development is defined in terms of growth and productivity and rapid industrialization is the primary objective of the state. It is somewhere positioned between a centrally planned economic system and free market capitalist system (Boletsa, 2012). Japan, Korea and Taiwan are the most appropriate examples of the classical developmental state model. It has been generally noticed that developmental states progress much faster than other regulatory states. For example it took USA 50 years approximately while England around 60 years to double their respective economies. On the other hand it took only 10 years for China which is a developmental state to double its economy (Kristoff & Wudunn, 2000). Historically, the first sense of Developmental State can be traced back in the sixteenth century, northern parts of the Spanish Netherlands. In case of Japan the notion of developmental state emerged from the period of Meji restoration, a period that restored imperial rule in Japan and led to enormous changes in its political and social structure (Bagchi, 2003). Onis (1991) described two factors which explained that how growth became a long term single minded priority for several East Asian countries or how they move towards what we call them today ‘The Developmental States’. The first factor that these countries followed this path was because of the unusual degree of external threat faced by the East Asian states during the postwar period. The extremely weak resource base and shortage of raw materials in their economies made the security threat more severe, particularly the case of Taiwan which faced an immediate threat from the mainland China. Also the fact...

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