“The Post-Crisis Developmental State – Perspectives from the Global Periphery” book edited by Tamás Gerőcs and Judit Ricz, research fellows of the Institute of World Economics, Centre for Economic and Regional Studies (IWE, KRTK) and of the Eötvös Loránd Research Network (ELKH) has been published by Palgrave Macmillan. The focus of the volume is on the role of the developmental state in a situation where a series of major crises affects the (semi-) periphery of the global economy. Several research fellows of the IWE KRTK have contributed to the chapters of the volume.
The authors go beyond the established debate on developmental states in East Asia by highlighting a much broader understanding of development and a very different global economic context. They also further the existing debate by covering new country cases, and at the same time by deepening our perspective on developmental states by looking at unusual sectors such as green industrial policy, education and farming.
Following the financial and economic crisis of 2008-9 and in light of the subsequent prolonged economic recovery, we can observe different types of active state intervention and growing state involvement to reduce the effects of the crisis and to revive economic growth and development throughout the world. Since 2020, this process has been exacerbated by the global coronavirus pandemic in almost all countries of the world, though to a differing extent in each.
Correspondingly, governments must act but under new constraints posed (intensified) by new challenges, which require reconsideration of the repertoire of developmentalist policies and state intervention. Some new economic policy tendencies – such as strengthening economic nationalism and new protectionism – are attempts to respond to these new challenges. The edited volume published in June 2021 aims to map the latest theoretical advances and document recent practical experiences. The studies of the volume try to answer some of the following questions: How can new national development strategies be adapted to newly emerging world economic realities? Which are the most and least successful examples in the world? Is there an existing state-led variety of capitalism which appears to function effectively amidst the new and changing economic world order? How has the repertoire of new – and widely defined – industrial policies changed recently? What role do education and social policies play in the current developmentalist public policy mix? Do development strategies differ in the 21st century in the Global North and South, and specifically in the context of the emerging economies?
The starting point of the volume was the East Asian Miracle of the 20th century, and the classical developmental state paradigm (DSP), which aimed at explaining this outstanding economic catch-up. The classical DSP was the child of its own era, valid only in its original time and space, and embedded in the specific historical and regional context. It is argued therefore that it should not be repeated in a different context, and the emulation of the model is not a relevant option for other countries.
Why is it still relevant to speak about developmental states at the beginning of the third decade in the 21st century? On the one hand, although the classical developmental state model is not applicable today, nor it is functional outside the East Asian region and amidst the new circumstances of the 21st century, it can still provide several historical insights that are relevant even today. To highlight a few lessons, we can mention the central role of “good governance”, conditional state interventions aimed at improving economic performance and international competitiveness, performance-based and meritocratic elite bureaucracies, and good quality education and R&D activities as key components of economic development. The authors of the volume also highlight a further important historical lesson, namely the role of inclusive policies, also known as the stakeholder approach. Inclusive policies are mostly sustainable, as shared economic growth benefiting wider segments of society not only generates multiplier effects for economic growth itself, but also provides legitimacy to the implemented development model and ensures the sustainability of policies. One of the main driving forces of the shared economic growth in East Asia has been the high initial levels and continuous improvement and development of human capital, which also sheds light on the central role of the education system.
On the other hand, it is also worth looking at developmental states today, as at the latest developmentalist state interventions following the 2008-9 global financial crisis – in large emerging economies even earlier –have gained new momentum both in economic policy practice and in related theoretical debates. The developmental state approach is undergoing a new renaissance, yet recent international academic literature is not aiming at reviving the classical DSP, instead, a new concept is under construction, even if a new developmental state paradigm is yet to emerge. Nevertheless, as some of the chapters of the volume illustrate, the reference towards developmental states has emerged in the political rhetoric of several emerging economies ranging from Sub Saharan Africa, Latin America, South Asia to Central and Eastern Europe.
New theoretical trends building upon most recent theoretical advances – in a deductivist manner – differ significantly from the classical paradigm, which was constructed based upon the practical experiences of East Asian economies (via inductive reasoning). The starting point for new developmentalist thinking is the capability approach to development, while reconsidering the main objective, as well as reconfiguring the ways and hows of designing and implementing state interventions. At the same time, these theoretical considerations do not yet or barely spill over into economic policy practices or rhetoric. Strong leaders of numerous developing and emerging economies tend to consider the classical developmental state model – or even some kind of oversimplified interpretation of it – as a role model to emulate, and refer to these simplistic views in their political rhetoric, while highlighting some arbitrarily chosen elements of the classical model.
The studies in the volume point out that no new economic (developmental) success story is emerging to date from recent statist experiments, which would be comparable to the East Asian Miracle, even if it might be too early to make any judgement as we still lack the historical perspective. Nevertheless, the documentation of recent decades’ economic policies and the observation of real-world changes, as well as the comparative analysis of these with more recent theoretical insights, makes it possible to formulate novel conclusions, while it is inevitable that these new insights will be compared with historical experiences and lessons.
Finally, one of the main conclusions of the volume is to emphasize that the aim and character of state interventions is crucial with regard to the potential outcomes. Thus, the historical insight of classical developmental states is still valid: the main goal of state interventions should be to increase competitiveness and export performance via market-friendly measures, to promote technological development, to climbing up in global value chains, and to increase economic embeddedness through intensive forward- and backward linkages. However, success depends on pragmatic implementation: successful measures shall be maintained and extended, while those failing to succeed are phased out and suspended according to the trial and error principle. State interventions shall focus on improved economic performance, economic and social “upgrading” – job creation and qualitative changes. Therefore, a favourable institutional setting and supportive economic policies are of special significance.
The research was supported by the National Research, Development and Innovation Office project entitled “From developmental states to new protectionism: changing repertoire of state interventions to promote development in an unfolding new world order” (FK_124573).