Limits of State Strength: Toward an Institutionalist View of Economic Development

Abstract

Analyses of economic growth have drawn on the experiences of the East Asian newly industrializing countries to highlight the contribution of cohesive and autonomous states in the resolution of market failures. Within an explicit collective action and public goods framework, this article argues for an institutionalist approach to development that incorporates, but also goes beyond, statism. Through an examination of auto manufacturing in five countries in Southeast and Northeast Asia, the article identifies specific collective action problems central to the development process, and it explores limits to the capacities of even strong states to resolve such problems. The article stresses the role of private sectors and joint publicprivate sector institutions, identifies systematic differences within and among local entrepreneurs with regard to development issues, emphasizes the need for research on factors influencing the supply of institutions; and argues for an approach to development that emphasizes cooperation among domestic interests rather than domination.

The Comparative Perspective

“…6 I have addressed it in Packenham 1992a, 305-10, andPackenham 1992b, passim. In recent years I have found the following sources, among others, to be helpful on this question : Hirschman 1981;Berger 1984Berger , 1986Lal 1983Lal , 1992de Soto 1989;North 1990;Perkins and Roemer 1991;Vogel 1991;Doner 1992;Wade 1992. …”

“…Recent theoretical work on state-market relations in developing countries tends to focus on the question of the appropriate mixes of state/nonstate components in development (e.g., Hirschman 1981;Berger 1984Berger , 1986Lal 1983Lal , 1992de Soto 1989;North 1990;Perkins and Roemer 1991;Vogel 1991;Doner 1992;Wade 1992). Such work is extremely important.…”

States, markets and just growth: development in the twenty-first century

“…Particular historical conditions endowed the state in many of the first-tier East Asian NIEs with unusual capacity to transform its society and to pursue development-oriented economic policies (Islam 1992;Rowen 1998). Industrial policy or selective state intervention has been of much poorer quality and less effective in the secondtier South-East Asian NIEs owing to differences in the constellation of political priorities, state structure, and government-business relations (Doner 1992;Weiss 1998). In a similar vein, the possibility for the state to acquire a more complex and strategic capacity, in the context of a highly internationalized economy and amid the trend of political liberalization and democratization, also differs significantly between the first-tier and the second-tier NIEs and, of course, among themselves (Woo-Cumings 1999).…”

“…The state-sanctioned institutional infrastructure enabled the planning technocrats to exact improved economic performance in exchange for government assistance and protection; to keep collaborative governmentbusiness relations from degenerating into unproductive, rent-seeking collusion; and to exclude organized labour and other social groups from economic policy-making (Evans 1995). A softer version of the statist paradigm found in ASEAN also emphasized a significant role of the business sector in policy reforms of the 1980s (Doner 1992;Islam 1992).…”

Political Institutions and the Economic Crisis in Thailand and Indonesia

“…The former is concerned with the extent to which political institutions promote qualities such as efficiency in policymaking and implementation, or the ability to make and carryout difficult but necessary policy decisions in a timely fashion. The literature concerned with state 'autonomy', 'capacity', and 'strength' falls into this category (inter alia Katzenstein 1978;Johnson 1982;Haggard 1990;Wade 1990;Doner 1992;MacIntyre 1994;Hutchcroft 1998). This macroinstitutionalist literature all related directly to the experiences of the high-growth economies of Asia in the 1970s and 1980s.…”