Book Review: State-Directed Development: Political Power and Industrialization in the Global Periphery

Kamilia Lahrichi

Author: Atul Kohli
Title: State-Directed Development: Political Power and Industrialization in the Global Periphery, Cambirdge University Press, 2004

How can one explain variations in the rates of industrialization and economic achievement? In other words, why do some countries develop faster and more successfully than others? Asia, for instance, the world’s largest and most populous continent, has become richer since 1960. Yet, this growth has occurred at a different pace across the region. Whilst the East Asian tigers have been hailed as models of achievement, Philippines, the worst performer, grew at about two per cent a year.

In his provocative 2004 volume titled “State-Directed Development: Political Power and Industrialization in the Global Periphery,” Atul Kohli, Professor of International Affairs at Princeton University in the US, contends that the role of the state in promoting development strategies is central for late-late-industrializers in the 20th century. As he puts it, “state intervention in support of investor profits has proved to be a precondition for industry to emerge and flourish among late-late-developers”.

In this respect, Kohli associates himself with statism, a belief that a government should control the economy either through state-owned enterprises or economic planning, without any interference of non-state actors. Sovereignty is vested in the nation-state, not the people. According to the statist school, a strong state should have enough political power to mobilise resources, establish tariffs and subsidies, and promote technology advances for rapid economic growth.

In order to demonstrate the fact the state should be the sole agent for industrialisation, Kohli compares the historical experiences and growth policies of four countries: India, Brazil, Nigeria and South Korea. He deliberately picked populous states because they can develop autonomous economies. India is the second most populous country in the world, Brazil, the most populous South American one, Nigeria, the most populous sub-Saharan African one. As for South Korea, it is among the top 25 most populous countries. In contrast, small states, as Cornell Professor Peter Katzenstein argued in 1985, are more prone to suffering from changes in the international system.

Kohli then divides these countries into three categories of governments based on the degree of state intervention in the economy.

Firstly, cohesive-capitalist states feature a strong centralized government that overcomes dissension thanks to a powerful professional bureaucracy. Policy-makers manage the economy with an iron hand in order to promote a rapid industrialization process.

In this regard, Korea under Park Chung Hee (1961-1979) and Brazil during the Vargas Era (1930 to 1945) and the military dictatorship (1964-1985) embody this type of political system. On the one hand, former leader Chung Hee has been credited with Korea’s industrialisation by encouraging export-led growth, which enabled the creation of large conglomerates called the “chaebols”. On the other hand, during the “Estado Novo” (new state) era, former President Getúlio Vargas enacted a new Constitution aimed at stimulating industrial growth through a system of state-guided capitalism.

According to the author, cohesive-capitalist states are the most efficient state patterns to foster rapid industrialization because they favour the business elites’ consensus and succeed in taming the labour forces due to their authoritarian nature (p. 381). However, they are unable to stimulate human development. As Kohli points out, “systematic labour repression [...] generally kept wage gains well behind productivity gains as workers were mobilized to work hard in the name of the nation.”

Secondly, fragmented-multiclass states are institutionally weak and dominated by leaders who are only interested in remaining in power. Therefore, they exploit social issues such as redistribution, agrarian reform and inequality in order to garner legitimacy. The political regime can take the form of a democracy or an authoritarian government.

India exemplifies this political type. Despite Britain’s divide-to-conquer colonial policy, India succeeded in uniting its various ethnic and religious groups and castes, incorporating the masses and creating political consensus, after independence.

According to Kohli, this pluralistic political system is not as effective as the cohesive-capitalist type in promoting industrialisation because there is a gap between what politicians promise to the masses in order to mobilise support, and what is actually achieved. Nevertheless, it is more efficient in fostering growth.

Thirdly, neo-patrimonial states are also structurally weak and fail to perform their duties. They usually rule a population fragmented along ethnic, religious and class lines. In post-independent Nigeria, for instance, which is a federal republic comprising 36 states, policy-makers took over the country’s natural resources but did not use the billions of dollars generated by oil production in the Niger Delta to spur human development. Due to the abundance of oil revenues, the government did not have any incentive to build a national development plan, overcome its ethnical fragmentation and create a coherent industrialisation programme. As Kohli contends, the neo-patrimonial category is the least likely to promote industrialization because it is concerned primarily with accommodating conflicting interest groups.

One important point that the author demonstrates through a well-researched historical analysis is that each of the four countries studied exhibits the characteristics of more than one state pattern. For example, Brazil and India have, over time, been categorised as both cohesive-capitalist and fragmented-multiclass states because their developmental capacities have changed.

In the end, “State-Directed Development: Political Power and Industrialization in the Global Periphery” is an impressive work that synthesises the main debate in development studies. It is well-argued and sheds light on the puzzle of industrialisation in developing countries. The book’s title might be misleading as the author focuses on industrialisation rather than development, thus disregarding social issues.

Kohli’s academic piece is provocative because it casts doubt on the Western capitalist theory which asserts that political democracy fosters sustained economic development. The author challenges the modernisation ideology and the belief in free-market that associate economic performance with a specific type of political regime, namely democracy. As he underlines, “if the neo-classical argument is that free and open economies subject to minimum government intervention are best situated to maximise growth, then supportive evidence is lacking.”

In contrast, the author suggests that the state pattern that is more likely to promote industrialisation is the cohesive-capitalist regime which, historically, resembles fascist states.

As a matter of fact, fascism espoused the ideology of a strong government that emphasises the nation-state and tames any citizen who opposes industrialisation.

On the other hand, the problem with Kohli’s theory is that it puts too much emphasis on historical legacies to justify national development strategies, as Bruno Borges from Duke University notes. For example, Britain colonised Nigeria and India but the two countries inherited different types of state. The author classifies Nigeria as a neo-patrimonial state whereas he identifies India as a fragmented-multiclass state due to the contrasting political and social conditions after the colonial power left.

In addition, Kohli questions the fact greater productivity necessarily leads to an increase of the society’s well-being. On a pessimistic note, the author points out that policy-makers have to make a tough choice between economic development and individual rights. Industrialisation and freedom, he believes, cannot come together. However, Kohli overlooks the causal relation between industrialisation and human development. In reality though, both are intertwined: industrialisation should be supportive of human development and the latter is crucial for economic growth because empowering people economically, socially and politically increase the effectiveness of industrialisation.

In the end, Kohli’s contention in “State-Directed Development: Political Power and Industrialization in the Global Periphery” is all the more challenging as it is formulated at a time Asia is questioning the Western economic paradigm. Asian countries are rethinking the role of the state in developing a more sustainable economic model that emphasises collective welfare over labour productivity.