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Lecture 3

GOVN 444 Lecture Notes - Lecture 3: Chalmers Johnson, Washington Consensus, Ministry Of International Trade And Industry
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5 Pages
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Spring 2016

Department
Governance
Course Code
GOVN 444
Professor
Dr Sel
Lecture
3

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Unit 3: Development as a Domestic Policy Objective The Role of the State
Learning Objectives:
1. Understand the historic role of the state in the promotion of economic
development.
2. Discuss the political factors leading to the retreat of the developmental state under
the Washington Consensus.
3. Examine the impact of the externally determined development agendas on
domestic policies and their outcomes in the Global South.
4. Compare institutional trends in the Global North and South since the 1990s, and
their impact on the real economy.
5. Analyze the role of institutions and politics in the light of historical and
contemporary patterns.
Study Questions:
1. What is the Developmental State?
In the post-colonial era, most former colonies adopted strategies of
development that were in sharp contrast with their past. There was a
conscious effort to limit integration with the world economy in pursuit of a
more self-reliant development. The lessons of the open economies and the
ravages of the unregulated markets of the colonial era were still fresh in
their minds, and thus the state was assigned a strategic role in development.
This understanding of development strategy informed much of the policy
designfrom industrialization to import substitutionin many developing
countries in Africa, Asia and South America, from the 1960s to the 1990s.
Chalmers Johnson (1982) was the first to synthesize the consensus around the
role of the state in the economic growth of developing countries, and referred
to it as “developmental liberalism.” He defined developmental liberalism, in
the Japanese context in particular, as state-led interventions by bureaucrats,
particularly those in the Ministry of International Trade and Industry (MITI)
to design and implement macroeconomic regulations for economic
development. Subsequently, the notion of the developmental state was widely
used in international political economy as the most compelling explanation
for the economic successes of East Asian countries.
The Developmental State is the phenomenon of state-led macroeconomic
planning in East Asia in the late twentieth century. In this model of
capitalism, the state has more independent political power as well as more
control over the economy. A developmental state is characterized by having
strong state intervention, as well as extensive regulation and planning.
o It took England an estimated 60 years to double its economy when the
Industrial Revolution began. Several East Asian countries have been
doubling their economies every 10 years
o Its not just the rich getting richer but also the poor are becoming less
poor
A developmental state tries to balance economic growth and social
development. It uses state resources and state influence to attack poverty and
expand economic opportunities
2. Why do you think that most economic studies continue to examine the
concept and application of “developmental states” chiefly in the East Asian
context?
The East Asian ‘developmental states’ provide useful lessons for current
initiatives against poverty
The wealth and poverty of nations are still determined by the dichotomy
between raw materials on the one hand and manufacturing and advanced
services on the other. The explosive growth of South Korea started only in
the very late 1960s as the nation diversified its economy away from
agricultural and raw materials and into manufacturing industry.
o Through very heavy-handed industrial policy, Korea broke away
from its ‘competitive advantage’ in agriculture. By comparison,
Somalia being richer than Korea until the mid-1960s did not, and
instead continued to specialize according to its comparative
advantage in being poor
Asia was largely unaffected by the free trade shock and continued their
industrialization strategies, that in India and China had started already in the
late 1940s. In fact, if India and China with their huge populations are removed
from the data sets, globalization has been more a failure than a success
The rapid growth in East Asian economies after World War II has become an
eye-catching focus in academic for a long time. A considerable amount of
literature has attempted to interpret the rousing phenomenon. However, no
consensus about the nature and causes of the remarkable development has

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Description
Unit 3: Development as a Domestic Policy Objective The Role of the State Learning Objectives: 1. Understand the historic role of the state in the promotion of economic development. 2. Discuss the political factors leading to the retreat of the developmental state under the Washington Consensus. 3. Examine the impact of the externally determined development agendas on domestic policies and their outcomes in the Global South. 4. Compare institutional trends in the Global North and South since the 1990s, and their impact on the real economy. 5. Analyze the role of institutions and politics in the light of historical and contemporary patterns. Study Questions: 1. What is the Developmental State? In the post-colonial era, most former colonies adopted strategies of development that were in sharp contrast with their past. There was a conscious effort to limit integration with the world economy in pursuit of a more self-reliant development. The lessons of the open economies and the ravages of the unregulated markets of the colonial era were still fresh in their minds, and thus the state was assigned a strategic role in development. This understanding of development strategy informed much of the policy designfrom industrialization to import substitutionin many developing countries in Africa, Asia and South America, from the 1960s to the 1990s. Chalmers Johnson (1982) was the first to synthesize the consensus around the role of the state in the economic growth of developing countries, and referred to it as developmental liberalism. He defined developmental liberalism, in the Japanese context in particular, as state-led interventions by bureaucrats, particularly those in the Ministry of International Trade and Industry (MITI) to design and implement macroeconomic regulations for economic development. Subsequently, the notion of the developmental state was widely used in international political economy as the most compelling explanation for the economic successes of East Asian countries. The Developmental State is the phenomenon of state-led macroeconomic planning in East Asia in the late twentieth century. In this model of capitalism, the state has more independent political power as well as more control over the economy. A developmental state is characterized by having strong state intervention, as well as extensive regulation and planning. o It took England an estimated 60 years to double its economy when the Industrial Revolution began. Several East Asian countries have been doubling their economies every 10 years o Its not just the rich getting richer but also the poor are becoming less poor A developmental state tries to balance economic growth and social development. It uses state resources and state influence to attack poverty and expand economic opportunities 2. Why do you think that most economic studies continue to examine the concept and application of developmental states chiefly in the East Asian context? The East Asian developmental states provide useful lessons for current initiatives against poverty The wealth and poverty of nations are still determined by the dichotomy between raw
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