Colonial Histories Shape Future Development

Colonial Histories Shape Future Development Paths

Do colonial histories in fact provide a preview into the future for developing nations? Can scholars and researchers look into a nation's past and gain an understanding of why its modern economy and culture exist in the present form? When researching historical circumstances can an alert student see how a nation in development stages achieved the economic success -- at least set the pattern -- it enjoys today? How has structural adjustment worked for nations in Asia and in Latin America? Is the historical use of neoliberalism the answer in terms of jump-starting economies in the developing world?

In the readings there are solid examples that bring these issues into brighter focus, and this paper will review and critique those materials. Yun-han Chu's article, published in 1989, goes deep into economic specifics to explain how some Asian states are restructuring their economies based on some concepts that are historical and some that are inventive and dynamic in response to changing global markets. One wonders at the start how relevant Chu's arguments and assertions could be 20 years removed from the global realities today, and yet he has scholarly instincts and presents an enormous amount of detail that is pertinent to this topic. Atul Kohli discuses the demise (apparent demise) of the so-called Washington Consensus, the idea that if government keeps its hands off the economy of a given nation -- and basically lets the economy do what it will do in the global environment -- economies will soar. That flies in the face, according to Kohli, of the reality that when states intervene with "judicial and unorthodox combinations" of solutions the economic growth is far more vigorous. To read Kohli's scholarly work, one can fairly ask the question, even though the United States is not a "developing nation" is it in fact a prime example of what Kohli terms a fragmented-multiclass state? This further question will be examined -- not to contradict Kohli but rather to put forward the idea that in this global economy, there are states that can be categorized in narrow economic descriptions, but sometimes what one scholar defines as limited to one particular government can spill over into others just as easily.

Yun-Han Chu -- State Structure and Economic Adjustment in East Asia

Yun-han Chu writes in the International Organization journal that newly industrializing countries in East Asia have adjusted their economic policies in order to respond to challenges that have threatened their potential for sustainable, long-term growth. Chu is talking about Hong Kong, Singapore, Taiwan and South Korea as newly industrializing countries (NIC). Those challenges included the "labor-intensive, export-oriented policies" that the so-called "second-tier NICs" of southeast Asia put in place in the 1970s. Another challenge was the "rise of the 'new protectionism' in the more fully industrialized nations, Chu explains.

Chu, Professor of Political Science at National Taiwan University, explains that basically economic adjustment is a "nation's response to changes in the comparative costs of production" along with the conditions and demands that exist in the global market, the "patterns of the international flow of money and credit," and the foreign economic policies adopted by other nations (Chu, p. 649).

Hence there was a need for restructuring of the industrial economies of these East Asian NICs, and Chu's article goes into great detail as to the issues and successes of those restructuring efforts. He points out (p. 648) that the above-mentioned challenges were made all the more difficult because the international economic environment was less than stable -- oil price hikes, monetary instability, and "recurring world recessions."

There are three dimensions that are part of an adjustment strategy, Chu continues. Firstly, the "defining dimension" is the "intensity of state intervention" -- the extent to which a given state directs private domestic firms to go into a strategic change. The way a state pushes private companies into making adjustments is by changing the existing incentives in the marketplace in order to achieve "specific adjustment objectives" (p. 649). One of those objectives include changing credit policies that hands direct control of those private firms over to the state.

The second defining dimension of an adjustment strategy Chu calls "pattern of preference in ownership" -- that is, the state selects which private firms, or transnational corporations (TNCs) and/or state enterprises to go after. There are limitations as to what adjustments a state can ask a transnational corporation to make, so it often boils down to state enterprises in most cases.

Chu's third defining dimension regarding a state's adjustment strategy links the "short-term macroeconomic management and long-term industrial policy" (p. 651). If the state decides on long-term industrial restructuring it must "bear or reduce some of the private sector's risks" that are connected with "external supply shocks" and frequent recessions (p. 651). On the other hand if the state decides to give policy priority to stabilizing prices, some kind of fiscal parity they then are shifting the burden on the private sector.

The decisions that have been made vis-a-vis restructuring for the four NICs are outlined by Chu on page 652. Hong Kong elected to go with a marketer strategy with Minimal intervention in markets, minimal interest in national control and macroeconomic management only. Singapore launched an internationalist strategy and took "Discretionary control of structural incentives," pushing joint ventures and inviting foreign participation, and managing structural changes in industrial restructuring. Taiwan went with a statist strategy, taking discretionary control of structural incentives, initiating state ownership of companies and managing industrial restructuring. South Korea has taken a Nationalist strategy by intervening in the market, assuming national control where it believes it is needed and macromanaging industrial restructuring.

In the recent past, Chu reminds, East Asian NIC governments have shown tenancies to adopt neoclassical economies however now they turn to more rational and market-oriented policies. The idea is that industrial change should be driven by the market and by price dynamics, not necessarily by government interference. That said, Chu turns to a description of state structure and its three dimensions, as a way of understanding how a state bureaucracy can help "shape, constrain, and enable societal and governmental actors" while at the same time bring together different levels and varieties of institutional arrangements" -- all designed to restructure the economy.

Atul Kohli -- States and Economic Development

Kohli is Professor of International Affairs at Princeton University. His expertise is on globalization and his article asserts that historically developing countries' economies have shown a far more robust growth pattern during the era when states intervened than they have in the more recent past with structural adjustment. Kohli is talking about "structural adjustment" in the sense that the International Monetary Fund and the World Bank have made huge loans to countries; but the money was only given with the understanding that certain changes would be forced upon the country in terms of how they do governmental business. The "Washington Consensus" was originally based on the belief on two things: a) that the state-led economic growth (1950 to 1980) was "a disaster"; and b) that "globalization…changed the rules of the economic game so significantly that states had few alternatives but to embrace all out economic openness" (Kohli, p. 213). In his article Kohli challenges both of those notions, basing his assertions and worldviews on his own writings and research as a Princeton professor.

Laying out his opinions in a straightforward way -- Kohli presents narrative in easy to read phrasing, easier to grasp than Chu -- in describing the three historical patterns on how state authority is organized and put to the task in the developing world. Those three are neopatrimonial states; cohesive-capitalist states; and fragmented-multiclass states. In African states economic problems have cropped up due to "historical reasons" such as poor leadership (Kohli calls it "personalistic leaders unconstrained by norms or institutions") by politicians that are "barely legitimate" in bureaucracies that are "of poor quality." How any developing nation could grow an economy with those handicaps is hard to understand (Kohli, p. 214).

These African states he writes about (neopatrimonial) are not modern at all, and have historically been poorly administered because so-called "leaders" (sometimes the leadership is actually a figurehead for a dictatorship) have treated public resources (money from taxes, etc.) as their "personal patrimony."

The reason that neopatrimonial states become disastrously unbalanced and the people remain poor and powerless is that person and "narrow group interests" get in the way of the overall public good. He mentions Nigeria as an example, but certainly Zimbabwe is another classic example of neopatrimonialism in Africa.

Moving into cohesive-capitalist state types the author states -- also referred to as developmental states -- can be seen as the opposite of neopatrimonial states in terms of their effectiveness as governing bodies. They are seen as the opposite of neopatrimonial states because their policies and politics are "cohesive," centralized and respected by their societies. Historically -- and here we again confront the question of whether historical trends define what is happening economically today -- these cohesive-capitalist states have tended to equate national security with rapid economic growth. People can feel more comfortable if their sense of safety results from a strong national security. Political leadership in cohesive-capitalist countries typically has a firm grip on the labor force, albeit sometimes the leadership becomes "repressive and authoritarian" and leaders are known to use nationalism (extreme patriotism) as a driver to keep people believing in the state.

A states that Kohli identifies as having pursued a cohesive-capitalist approach to economy and governing is South Korea under Park Chung Hee. Another country that has historically exhibited a cohesive-capitalist approach is Brazil. Both of those countries have experienced some success, Kohli goes on.

The fragmented-multiclass states have policies that lie somewhere between the two extremes previously mentioned. The leaders in fragmented-multiclass states are held accountable for more dynamics in their societies than others in the previous two state descriptions. For example, on page 215 Kohli states that India and Brazil during several periods in their nations' histories have exemplified what he terms the fragmented-multiclass approach. Leaders in the fragmented-multiclass must worry about political support because there are so many competing factions in their constituencies. They must try to make many different cultural groups within their societies happy -- and that is never easy. Kohli calls this satisfying "multiple constituencies" by pursuing "several goals simultaneously.

Typically a leader in a fragmented-multiclass society must push all the right buttons to ensure economic stability -- through progressive industrialization policies -- but that is only one of his or her concerns. Also that leader must be concerned with "…agricultural development, economic redistribution, welfare provision, and maintaining national sovereignty" (Kohli, p. 215). Leaders in a fragmented-multiclass society certainly must be able to deliver promises, but typically, the leader in this kind of state promises far more than he or she can actually deliver.

Is the United States a Fragmented-Multiclass State?

The more Kohli describes fragmented-multiclass states the more that description seems to fit the United States in many respects. To wit, the fragmented-multiclass leader faces a more politicized situation when trying to make policy -- and anyone watching the current vigorous (and sometimes mean-spirited) debate in the U.S. Congress over health care reform can clearly see a politicized and highly polarized dynamic. So far in this debate only one member of the opposition party (the Republicans) have signed on to the possibility of the government offering a "public option" for those with no insurance. The private sector (lobbyists for insurance companies) flexes muscle and influence in national political workings and that could be seen to be helping in the fragmentation of the American society -- a "multiclass" dynamic in action.