1.Theoretical Concept of the Developmental State
Many studies on developmental states generally refer to the experiences of East Asian countries, especially Japan, South Korea, and Taiwan in the 20th century. Chalmers Johnson is considered a pioneer in developmental state studies analyzing Japan's development model and industrial policy. Johnson (1982) used the concept of the developmental state to describe the Japanese government's role in Japan's remarkable and unforeseen post-war economic growth, highlighting the Ministry of International Trade and Industry (MITI) as a crucial component of Japan's developmental state.
However, there are studies shows that the developmental state and its associated policies were also evident in the early development histories of industrialized economies like Britain, the United States, France, and Germany (Chang, 2002). At an earlier stage in their histories, they used strategies included active use of subsidies, tariffs, protection for infant industries, and other protective measures like granting monopoly rights. Additionally, these strategies focused on developing national capacities through research, development, education, training, stimulating foreign technology acquisition, and fostering public--private cooperation (Chang, 2008).
Countries in the Latin American region have implemented the developmental state model since the 19th century, although the results are not on par with Japan or South Korea Governments in nations such as Brazil, Chile, Colombia, Mexico, and Peru intervened in various economic sectors. The main instruments of Latin's government developmental policies included import and export taxes, tariff exemptions, subsidies, subsidized immigration, and low-interest credit (Caldentey, 2009).
In Johnson's (1982) perspective, the developmental state occurs when the government plays a central role in guiding economic development. This role involves not only setting and implementing policies but also actively intervening in the economy to promote industrialization, technological advancement, and economic growth.
There are several characteristics of the developmental state. First, strong government and effective developmental structures. Through strong government, the state can intervene and play an active role in guiding the direction of the national economy in the developmental state model. A strong government must be supported by an effective developmental structure that can carry out its roles optimally. According to Vu (2007), the developmental structures include a stable, centralized government, a cohesive bureaucracy, and effective coercive institutions. Socially, these structures must rely on an alliance with producer classes while excluding workers and peasants. This setup allows a state, if it chooses, to effectively formulate and implement industrialization strategies with minimal concerns about redistribution.
Within a strong government, there is a strong leader who commands the role of government and policies. The source of authority in the developmental state does not align with Weber's "holy trinity" of traditional, rational-legal, and charismatic sources of authority. Instead, it derives from revolutionary authority: the authority of a populace dedicated to transforming their social, political, or economic order (Johnson, 1999). However, in some cases, it cannot be denied that developmental state regimes tend to be authoritarian.
Second, capacity and autonomous bureaucracy. Johnson (1999) emphasized its importance of bureaucrats' capacity. The responsibilities of this bureaucracy is to identify and select the industries to be developed (industrial structure policy). They also determine the best methods for rapidly developing these chosen industries (industrial rationalization policy). Furthermore, they supervise competition in the designated strategic sectors to ensure their economic health and effectiveness. In addition, the state bureaucratic must be autonomous and have enough independence to enforce regulations, guide economic policy, and make strategic decisions without being unduly influenced by private interests (Evans, 1995).
Third, state-business close relationships. Even though the state bureaucracy is autonomous, the state also has close relations with the private sector. Evans (1995) stated that the state must be both embedded and autonomous. For a developmental state to be effective, its bureaucrats must be deeply embedded in networks that connect them with business leaders and other key stakeholders. In the Japanese experience, Johnson (1999) proposed three patterns of state-business interactions including self-control, state control, and public private cooperation.
In all three periods, Oyama Kosuke -- Japanese reviewer, believed there was a consistent pattern of the state cartelizing or compartmentalizing each industry, limiting entry for new players. Consequently, each industry enjoyed a stable, cooperative environment, allowing it to partition the domestic market and export to the American market. This was achieved by endorsing and safeguarding zaibatsu in pre-1945 and keiretsu after 1945 (Johnson, 1999). To a certain extent, this is also the case in the relationship between the government and the chaebols in South Korea. In this relationship, the developmental state model in Korea was state-sponsored loans during Japanese administrative or state-mediated finance in Park Chung Hee era (Cumings, 2005).
Fourth, industrial policy and export-oriented industrialization. Industrial policy is not a replacement for the market. Instead, it is the state's deliberate intervention to modify incentives within markets to influence the behavior of producers, consumers, and investors (Johnson, 1999). Vu (2007), argued that industrial policies including subsidizing inputs, promoting exports, imposing performance standards on industries receiving state support, and creating industrial groups in essential dynamic sectors. Meanwhile, export-oriented industrialization was a basic strategy for economic growth in the developmental state. In South Korea during Park Chung Hee presidency, the government monitored the performance of businesses and rewarded or punished them accordingly (Sangin, 2011). If a firm successfully met its export targets, it received various benefits such as preferential credit and loans, tax exemptions, and subsidies. Furthermore, the Korean government employed all available discretionary measures to promote exports and economic growth.
Fifth, there was a pilot organization established. One of the central elements in the developmental state model is a pilot organization like MITI in Japan's case. The experience of MITI indicates that an agency overseeing industrial policy should incorporate elements of planning, energy, domestic production, international trade, and a portion of financial oversight. MITI's defining features include its compact size, indirect management of government funds, role as a think tank, specialized departments for executing industrial policy at a detailed level, and internal democratic processes (Johnson, 1999).
South Korea followed the Japanese MITI model with the formation of the Economic Planning Board or EPB (Cumings, 2005). The EPB's served as the strategic planning unit. It identified target industries and business sectors, allocating funds and overseeing projects undertaken by both private firms and public enterprises, functioning akin to business divisions within "Korea, Inc." (Sangin, 2011).
Sixth, investment in education and human capital. Japan and Korea are currently known as countries with high quality human resources. Cumings (2005) explained that education has been one of the main concerns of society in Korea for hundreds of years. This long investment and tradition in the field of education has become one of the bases for development in South Korea in the modern era. It is not surprising that South Korea gets advantages from this side by having skilled human resources who can work in sectors needed by many industries. This high quality of human capital also influences the development of research and innovation in various essential economic sectors.
