economical development

A Beginner’s Guide to the Developmental State

What is the developmental state?

The Developmental State is a term coined by Chalmers Johnson that is used to describe states which follow a particular model of economic planning and management. It was initially used to describe post-1945 Japan and its rapid modernisation and growth. A simple definition would be that “A Developmental State is a state where the government is intimately involved in the macro and micro economic planning in order to grow the economy”, with the addition “whilst attempting to deploy its resources in developing better lives for the people”.

What are the characteristics of a developmental state?

The UN lists the characteristics of Developmental States as the following:

  • 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

What are some examples of developmental states?

China, Singapore, India, Thailand, Taiwan, Vietnam, Malaysia, South Korea, Philippines, and Indonesia are all categorised as developmental states. When you compare their rate of growth to many Western economies the results are simply staggering. It took the United States around 50 years to double the size of its economy during its period of economic take-off in the late nineteenth century and it is estimated that it took the UK approximately 60 years to do the same. Several East and Southeast Asian countries today have been doubling their economies every 10 years. The Developmental State is integral to government actions to alleviate poverty. China has lifted 600 million people out of poverty in the last 30 years almost exclusively driven by this form of economic planning at a state level. The progress of the UN’s Millennium Development goals is largely due to this form of governance.

What is its relevance to the UK?

But the model goes beyond mere development and also looks at creating a competitive environment. While many nations simply privatise key activities, developmental states actively create competitive businesses to drive efficiency, prices, service and employment. Looking to the UK we can see an example in Royal Mail. There are a myriad of reasons for the anticipated IPO but a key driver is that it has become less competitive over the last 20 years and has struggled to change to meet the needs of todays business and consumer users. In a developmental state system this is not a problem as the government can create a competitive state-owned company with either heavy or light intervention. Heavy intervention would be classified as physically restraining competition with limiting statute. Light intervention can consist of running the business effectively through attracting the right management and implementing efficient practices. There is no reason why a nationalised company has to be inefficient and a private company successful. Continuous improvements in efficiency are driven by a real choice for the consumer which we can see when we contrast the UK airline industry with rail operators. The lack of competition once a rail franchise is awarded results in lack-lustre service that is slow to change.

What could countries learn from the developmental state?

Whilst arguably not a perfect form of governance there is certainly much Western nations could learn from developmental states’ attitudes to long-term planning. The short term planning of Western nations hinders progress and limits growth. In a developmental state the problem of increasing airport capacity or high speed rail networks are never an issue, the money is set aside and the most efficient system is implemented. Often this is only possible through a single party government and results in some people getting a ‘raw deal’. Rather than multiple consultations and reparations the goal is taken because of its overall benefit to society, even if it is at the expense of a minority.

Another way Western countries could learn from developmental states is by putting more emphasis on sovereign wealth funds. These funds are large sums of money that exist purely for the benefit of future generations. It is well documented that if the UK had invested the North Sea Oil proceeds in the same manner as Norway had it would have a wealth fund worth over £450 Billion. A quick glance at Asia reveals that sovereign wealth funds are broadly used. China has created two funds as has Singapore. Hong Kong, Brunei, South Korea, Vietnam, Malaysia and Indonesia all have one as well. I often think that western states who are far from adopting a fully-fledged developmental state could learn to implement policy to drive a longer term vision – albeit this is difficult as short term focus is one of the ‘Curses of Democracy’.

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