Ha-Joon Chang recently sent me an interesting paper of his on ‘How to ‘do’ a developmental state’, his contribution to a book on the 
prospects for building a democratic developmental state in South Africa. In it, he does one of his typically fascinating comparisons of the ways various other countries have build ‘developmental states’ (which he defines as ‘a state that intervenes to promote economic development by explicitly favouring certain sectors over others’) and draws out some possible lessons for South Africa.
Some highlights:
‘While it practices free trade and welcomes foreign direct investment (although selectively), the Singaporean government owns almost all the land in the country, supplies 85% of housing, produces 22% of GDP, and runs one of the most draconian forced saving schemes in the world (the Central Provident Fund). Unless you actually know these things about Singapore, it is difficult to break out of the conventional wisdom that free trade, private ownership of enterprises, and freedom of individual choice are all necessary for any economic success.’
Within East Asia, he holds up Korea as the most extreme exponent of selective industrial policies, followed by Japan. Taiwan compensated for its lack of large private companies by using state-owned enterprises and state-financed R&D to pursue upgrading. Singapore also used its massive SOE sector.
Outside East Asia, France used sectoral industrial policy along similar lines to Japan and Korea, whereas Scandinavia practised ‘developmentalist welfarism’ with some selective industrial policies, but not on the scale of Korea or Japan.
So what does this mean for ‘doing’ a developmental state in South Africa or other emerging economies? In terms of the politics, the case of Scandinavia shows that the state doesn’t have to be right wing or coercive, (ditto the importance of radical post-World War Two land reform in the take-offs in Korea and Taiwan).
The organizational methods of building a developmental state are diverse. Korea and France (and to a lesser extent Japan) used all-powerful pilot agencies to drive forward their industrial policies. Ha-Joon reckons South Africa’s Department of Trade and Industry might be a candidate for such a role. But coordinating committees in Taiwan or SOEs (everywhere except the US) offer other options.
He identifies the South African government’s lack of control over the banking sector as a serious weakness, as is the lack of support for R&D, but thinks both could be corrected.
Finally, he warns against employing too many economists – the Japanese and Korean miracles were led by lawyers, Taiwan by engineers. He actually thinks the return of battalions of Korean PhDs from US economics faculties is a disaster for his country.
The book looks great, with chapters from Omano Edigheji, Peter Evans and Thandika Mkandawire, among others. And it’s freely downloadable. Looks like another bad day for the Oxfam Printer…….]]>