Since the mid-1990s, growing concerns have been voiced about the overall failure of the neo-liberal laissez-faire agenda to promote growth and contribute to poverty reduction. Development policies and discourses have moved away from the so-called Washington consensus, which was based on the idea that growth is threatened more by government incompetence and corruption than by market failures. Washington consensus is basically neo-liberalism which lets matters arbitrarily run freely their own course. The prescriptions of the Washington consensus include deregulation, privatization, maintaining a balanced budget, and reducing the role of the state in the economy. These prescriptions were propounded by former US president Ronald Regan and Prime Minister Margaret Thatcher of UK. However, all successful narratives of late development have been associated with a a significant degree of state intervention. Thus, attention has shifted to the role of the state and government institutions from obstacles to potential drivers of economic growth.
This essay attempts to shortly discuss the role of the state in development staring to the framework for understanding what capabilities states need to overcome different types of market failures. In answering this question, it is worth noting not only at growth but also at structural transformation, economic advancement, equity, and human capability enhancement.The orthodox model of Anglo-American development paradigm employs a universal, a contextual model of development. Nations which failed to develop were urged to employ this neo-classical model of development since this has been purportedly already proven to be successful. Yet the main shortcoming of the neo-classical model of development is that it failed to comprehend that each and every nation is bearer of various contingencies and exigencies which are contextual to that specific nation. Employing a universal method across the board to cure socio-economic backwardness is arguably not as effective as investigating the particularities of that specific nation prior to prescribing and devising strategy.
In fact, there is no single universal path to development. Development processes are not linear over time. Contingencies and exigencies of a specific country are analyzed and treated in contextually tailored fashion to that specific country. Different challenges should be seen through the lens of various perspectives. The experiences of development are quite complex and multiple; they do not fall under two opposite, dichotomous categories: ‘capitalist’ or ‘communist’. Whether the indicators are Human Development Index, growth of GDP per capita, or more specific measures of industrial competitiveness, the success of developmental states still remains incontestable. In point of fact, the collapse of communism and cold war and the rise of globalization with ideology disappearing as source of human identity the destiny and future of humanity are not predetermined on the basis of ideological genre other than negotiable terms based on contextual pragmatic analysis.
The debate with regards to developmental state paradigm has been related to what has been termed as the possibility thesis versus the impossibility thesis and the impossibility thesis is primordial by now. The debate about developmental state should move from impossibility and possibility thesis to what constitute the developmental state and it is very crucial to distinguish between state capitalism and developmental state. State capitalism is disparaged for being pseudo capitalism and uses the market as an expedience of state power. State capitalism undermines and disregards democratization process in the name of economic success and harmonious society or social order first. The argument emanates either from ideological preoccupation and/or objective reality analysis of local and global situation focusing on providing local solutions to ideological bankruptcy.
Discourses on developmental state paradigm should address three key questions. First, what do we know about developmental states and why developmental states emerged? Second, what have developmental states historically achieved? Third, what state structures and political institutions will best equip nations trying to enter the status of developed countries?
The possibility thesis looks further at the form and shape of developmental state- ether autocratic or democratic. The option today is, in fact, on the regime type of developmental state that hinges its success in the triumph of competent rent management. The choice is between governments with good or indigent governance practice. The driving thinking behind the developmental state paradigm underscores how big or decisive a role government should play in the economy-either by the forces of the market in liberal market economies or by coordination in coordinated market economies.
It is obvious that market does not have inherent moral mechanism to ensure absolute equality in rents distribution, benefit sharing and correct failures. There are inevitably government failures and market failures. Privatization process and liberalization of the market should be preceded by strengthening state institutions and the development of strong economic policies and plans under disinterest control of the state. Of course the state plays a central role in guiding and promoting successful structural transformation through competent rent management. Historical evidences show that all countries that have successfully transformed from agrarian economies into modern advanced economies had governments played a proactive role in assisting individual firms in the shift. Markets cannot operate in a vacuum. They require a legal and regulatory framework that only governments can provide. In defining and protecting property rights, providing effective legal, judicial and regulatory systems, the state forms the vital core of development.
Alternatives to development are not lacking; one of which is of course ‘the developmental state paradigm’ . The developmental state paradigm falls under neither of the dichotomy. In fact, this reductionist genre of perception could potentially bypass any ‘alternative’ models which do not fit tidily into the two dichotomous models. Alternative modes of development to that of the neo-classical Western model do not necessarily work on the outright rejection of capitalist mode of development for it does not necessarily propel them to the other extreme pole known as socialism or communism. Developmental state paradigm is the alternative catching-up process in the late development efforts. Capitalist developmental states rigorously pursue a capitalist mode of development, even an open economy rather than a closed one.
Late development is an altogether different phenomenon than early development. Late development is not a spontaneous process and it is very different from early developmental processes. Developmental states are born out of the specific contingencies and exigencies of the given country. The essence of developmental state paradigm is acting on the basis of economic nationalism. Developmental state paradigm is a nationalist concept of development. The main concept and very purpose of developmental state paradigm is a stepwise building of national economy in a capitalist mode of development process. The bureaucracy must be insulated and autonomous from public pressure and its policies should be market-conforming as they are designed to maximize economic growth by market activities. In developmental states, the state becomes a catalyst or an actor with the single, if complex, goal of development. Developmental states enjoy state autonomy, committed leadership, a strong bureaucracy, as well as determined developmental experts which drive the development process forward. Technocrat-led developmental states have facilitated national economic development through purposeful interventions in their domestic economies. Having a strong state bureaucracy does not necessarily imply authoritarianism or the suffocation of democracy. There are, of course, multiple cases which were authoritarian, yet there are still other cases which worked within the parameters of democratic rule too. The grand development paradigm is all in option strategy, all what we need to ensure should be strategically right and coherent with country specific contextual pragmatic analysis.
Democratic developmental states try to keep the equilibrium through institutional blending and negotiations among the various interests. Such cases often lead to particular varieties of capitalism where the state tries to maintain partial equilibrium through a blend of spatial and temporal institutional fixes, while filling the gaps which are usually filled by the forces of the market in liberal market economies or by coordination in coordinated market economies. The success in growth achieved by these developmental states was significant, managing to do in ten years what others did in a century. There is no blight when b est practice experiences from elsewhere serve as template for better performance of late development endeavors. The context of one country is so fundamentally different than another that it becomes impossible to prescribe the same universal medicine to different cases. Ideologically driven methods can have their own advantages, but pragmatist approaches such as that of the developmental state paradigm can be equally successful in the field of development. It is unfounded to correlate development failures to neither ideology devoid of empirical analysis of the specific contextual contingencies and exigencies of the country in point.
On this account, governments of developing countries have triple burdens including peace building, state building (peace and security), sustainable development that is climate change resilient and democratic good governance. These dictate that development agendas to follow the development rout of democratic governance precepts and imperatives. Based on the notion of developmental state the government has been working hard to propel Ethiopia among the middle income countries registering remarkable triumphs ensuring that the choice of development strategy on the notion of bespoke developmental state model has generally been on the right track. The developmental state will continue to play a crucial role in economic growth and social transformation. Developmental state paradigm and theory based on empirical and analytical foundations has enduring relevance in the global south. The Anglo-American neo-liberalism is outmoded and anti-statist ideology.