Deliberately Created Winners (?

):
A Review of Stephen Haggard’s “Developmental States”

During the mid-20th century, unusual developments were observed in East Asia, which
drew the world’s attention to it. Select countries in the region—Japan, South Korea, and
Taiwan—were experiencing unexpected economic development that was accompanied by
rapid, parallel growth. But what makes this phenomenon distinct was the fact that it went
against established models of growth, championed by Western liberal states. In its place,
scholars found heavy-handed states that are intimately involved in shaping and directing their
economic activities. These anomalous drivers of development within the region, then, became
the subject of a rich literature that sought to understand the genesis of these emerging
‘developmental states.’

The curation of this large body of literature is both the purpose and the subject of
Stephan Haggard’s book, ‘Developmental States’. This book is a comprehensive introduction
to the developmental state concept that distills nearly four decades worth of scholarship to
answer the fundamental question: what makes a developmental state? True to its purpose,
Haggard points to government interventionism, deployment of industrial policy, and highly
centralized, coherent state institutions as the distinct characteristics that make a classic
developmental state.

In reviewing this book, I shall first provide a summary of the book’s content, which I
will follow up with a critical discussion relating the developmental state model to the
Philippines. I will then conclude this essay with ruminations on the value of pursuing alternate
means of achieving growth and the book’s role of encouraging such experimentation.

Haggard breaks down the developmental state model by breaking up the discussions in
his book into four primary sections—including the introduction and conclusion would
technically make it six sections in total. In the first section, we are introduced to the heterodox
lineage whose ideas form the basis of the developmental model’s main assertions. Chief among
these is its assertion of the centrality of state intervention, especially in states that started
industrializing rather late. Industries in latecomer states are unable to independently overcome
the challenges of establishing multiple interdependent industries and the competition of
international markets. Hence, they require the state’s assistance in coordinating, protecting, and
financing these vulnerable industries. And the extent of government assistance/intervention
generally depends on how behind they are in their development. That is why economic
liberalization policies are ill-suited to late bloomer states—withdrawing state assistance early
would only lead to further regression. Another key concept that prevails in the heterodox canon
is the idea that industrialization is the key to growth and learning. This is a concept highlighted
by Japanese economist, Akamatsu Kaname, through the Flying Geese model. According to this
model, the emulation of industry leaders through import substitution encourages the growth of
domestic industries up to the point that they themselves will soon be able to shift to export-
oriented strategies as well.
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The second section examines the link between industrial policy and growth, wherein
the persistence of various coordination problems ultimately justifies the need for state
intervention through industrial policies. Essentially, industrial policies are tools of the state that
are used to support certain industries/sectors which have high potential for growth but are
hindered by interdependencies that lead to complications. In this regard, specific cases saw
states taking control of their financial sector to spur the flow of investments and resources
themselves. But industrial policies can also be deployed to do the opposite by controlling
investments in declining industries. Industrial policies also take the form of creating or
restructuring institutions/organizations to increase their efficiency and its political insulation.
Hence, various bureaucratic agencies are created for various regulatory functions that aid in
allaying coordination problems. Additionally, the inevitability of coordination problems across
industries encouraged the need for cooperation: cooperation between the private and public
sectors and cooperation between industries themselves. But to keep both private and public
actors in line, strong and independent institutions must be installed—something discussed in
the subsequent section. That is why the success of industrial policies is wholly associated to
the quality of institutions in place. The prevalence and persistence of coordination problems
emphasize the need for learning through trial and error too. Not all interventions that are
introduced through industrial policies are successful in tackling coordination problems to begin
with.

In the third section, we dwell on the distinct political economy of the developmental
state. We learn here that the developmental state model does not conform with neoclassical
conventions in economics and politics. Instead, it is typical to observe states following this
mold to have a particularly strong state executive paired with an independent and meritocratic
bureaucracy. Although there was no exact link between authoritarianism and growth, Haggard
himself found that states ruled by an autocrat were more capable of disciplining private and
public actors, mobilizing against collective action problems, and establishing coherent policy
regimes. In short, in select cases, authoritarianism can make the state even more efficient. The
emphasis on a highly professional bureaucracy also serves to increase the state’s efficiency to
regulate both private and public actors and to coordinate specific industries assigned to it by
having near-total control over policy making. Another feature of the developmental state is its
political insulation from the private sector, specifically those from the left and labor class. Here,
the dangers of authoritarianism were expected; yet, in select Asian cases these were not
realized. While corruption is still inextricable, state centralization was able to temper its effects,
especially when it comes to rent-seeking practices. Ironically, it is this control of rents that
bolstered its credibility to the private sector—but this still needed the assistance of deliberative
councils that fostered the trust between private sector and government. Moreover, its political
insulation enabled it to effectively keep private actors in line, with due emphasis on the labor
and leftist subset. That is why labor unions are largely absent from such states since their
capacity to organize is limited. Yet, despite its subordination of the working class, the
developmental state actively invests in them and their welfare through profound support in
their education and training—health and other aspects of welfare are still wanting, however.
Also featured here is the attempt to identify the historical origins of developmental states. It
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looks into the colonial roots of strong bureaucratic institutions and the prevalence of external
security threats as potential causes of the distinct development and growth in these states.

The final section deals with the aftermath of the apotheosis of the developmental state
model in the late 20th century and its renaissance in the early 21st century. It briefly lost
relevance as most of the states that embodied the concept liberalized and democratized.
However, the concept was once again brought up in the past decade as a potential alternative
in light of the failures of the extreme market-oriented approach championed by the West. Here
we see how the developmental state model would fare in the present, given a whole new set of
interdependencies with specific consideration to the context of opening the market to the
international economy. In particular, it delves into the effects of ‘new protectionism’, which
came as a response to the success of the East Asian developmental states. It is here as well that
the importance of industrial policies, especially in states in middle-income traps, are
reaffirmed. This comes with a specific emphasis on viewing industrial policies as a process. A
process that entails continuously providing solutions to a plethora of collective action
problems. Finally, this section also covers the application of the developmental state concept
in the context of democracy. Democratic values and institutions can no longer be ignored in
the present. Unlike previous practices, a more profound integration of the broad and diverse
set of private actors into the policy creation process is preferred. But even with increasingly
intimate relations between the state and the private sector, state institutions (bureaucracies)
must nevertheless strive to remain autonomous.

At the end of this book, we are ultimately challenged to think of state development and
economic growth differently—especially with regards to the institutions and policies that
facilitate it. The insistence, bordering on arrogance, of neoliberal economics on market
liberalization and minimized government has long been the dominant view recommended by
the West to any state regardless of their status and degree of development. But when such
approaches are applied without any serious consideration of the present deficiencies of a state’s
productive capacity, then it is likely to do more harm than good. Friedrich List points out that
haphazard liberalization and deregulation in less advanced states against the backdrop of global
competition with already developed states will never lead to the attainment of high levels of
growth observed in precursor states (Seiter, 2020). This is exactly the condition that drove the
aforementioned East Asian states to innovate according to their respective political, social, and
economic context. And it is also a condition that necessitated government intervention. List, in
fact, exposes the hypocrisy of the Western champions of liberalism by pointing to the same
‘artificial’ mechanism, government intervention, as that which propelled their economies
forward (Clift, 2021). The insistence on government deregulation for latecomer states then
becomes dubious. What the literature on these developmental states is able to accomplish is
dispelling the hesitations most have regarding government intervention. The successes of
Japan, South Korea, and Taiwan heralded a new hope for states in similar conditions as seen
through its spread to countries in Southeast Asia and Latin America. But what about for states
that failed to reach the same level of success?
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When delving into the developmental state literature, it is difficult not to draw parallels
between the aforementioned states and the Philippines. The Philippines closely mirrors the
conditions observed in those states but never quite attained the same level of success any of the
exemplars of the developmental state enjoyed. The Philippines, too, had its share of
authoritarian rule during the 70s; started industrializing through import substitution in the 60s;
and was colonized by Japan in the 40s. Yet, none of these factors combined led to sustained
long-run growth. This can be attributed to (1) the absence of truly meritocratic and
professionalized bureaucracies and (2) the predatory nature of the Philippine state. The failure
to establish independent and professional bureaucratic institutions and treating its creation only
as an afterthought led to the generally weak and inefficient structure of the Philippine
bureaucracy (Sidel, 2018). As a consequence, elected elites were able to plunder state resources
without compunction due to the averted eyes of the supposed institutions regulating such
activities. In short, these oligarchical clans’ prey on the weaknesses of the system to develop
and grow their personal wealth instead of the state at large (de Dios & Hutchcroft, 2003). While
there were dominant elites in the aforementioned states, the political insulation of state
executives and bureaucracies were able to discipline them. This highlights the importance of
capable and autonomous institutions to the success of these states as emphasized in the book.

From this we can then glean that there is no single formula or clear-cut model to stable
and successful development. Even Haggard’s ‘Developmental States’ does not offer a definite
development plan, but it does provide a loose framework to follow for those interested in this
path. One of the key takeaways from this book is that context matters: development models are
not static and thus cannot be generalized. Numerous coordination problems arise in varying
state conditions; learning from past experiences and mistakes thus become essential. But the
literature on the developmental states, succinctly condensed in Haggard’s book, provides
readers an opportunity to learn from cases of the past without having to necessarily experience
such challenges firsthand. My professor in political economy once said that state planners need
not look far for solutions because all they had to do was open up any book on economic
development. Well, ‘Developmental states’ is without a doubt among those books that anyone
interested in adaptive growth and development should consult and refer to.
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References:
Clift, B. (2021). Comparative Political Economy: Lineages from Classical Political Economy,
Linkages to International Political Economy. In Comparative political economy: States,
markets, and global capitalism (pp. 26–45). essay, Red Globe Press.
de Dios, E. S., & Hutchcroft, P. D. (2003). Political Economy. In The Philippine Economy
(pp. 45–70). essay, Oxford University Press.

Haggard, S. (2018). Developmental states. Cambridge University Press.

Schneider, G. (2019). The evolution of economic ideas and systems: A pluralist introduction.
Routledge.
Seiter, S. (2020). Growth and integration: Why we should re-read Friedrich List. In Economic
thought of Friedrich List. essay, ROUTLEDGE

Sidel, J. T. (2018). Patrons, bosses, dynasties, and reformers in local politics. In Routledge
Handbook of the contemporary Philippines (pp. 26–37). essay, Routledge.