Developmental State Theory

Developmental state theory is a theory that addresses the state’s development activities especially in East Asia Region. This theory puts the state’s activity in development area as a top priority. In addition, the state placed as the main actor in encouraging such development. This theory arises from the idea of state-led development. In terms of this theory requires good governance. State should have the ability to control its territory and its main power source, and there must be a certain achievement [1].

The emergence of this theory was initially triggered by significant economic changes, especially in developing countries in East Asia in the 1970s. These states appear with high-tech industries are starting to compete with others industry in developed countries. Meanwhile, the conditions in these countries showed about the high intervention of the state in economic terms. The interesting thing here was the contention of this phenomenon in East Asia with the popular Keynesian view in that time. Keynesians who take the main ideas of liberal theory believes that too large state intervention in economic terms will disrupt the market. In contrary, this idea was not proved in these counties [2].

The development of this theory began in the late 1980s to early 1990s. Robert Gilpin said that this theory appeared to challenge the orthodox neoliberal theory in explaining the success and acceleration of industrialization in East Asia. East Asia countries started to adopt industrialization that originally was a view of neoliberalism on the economic success that called Newly industrializing economies (NIEs). In the neoliberal view, the NIEs are trying to adjust to the market as a form of economic development strategies. The market was more capable than the state policy in determining a country's economic success. This neo-liberal outlook also received support from the Washington Consensus [3].

To develop its economy, the neoliberal view being adopted by governments in East Asia. They opened up its economy to the world, reducing the role of the state in the economy to allow the market to function properly, as well as the pursuit of export-oriented growth strategy. As a result, governments in these countries were successful in industrialization. However, many experts were considered it as different concept with neoliberal concept. Countries were considered to have a crucial role in industrial policy, and the process of economic development was considered still in progress [4].

To understand this condition, Chalmers Johnson started his study of economic growth in East Asia in 1982, especially in Japan. Johnson saw rapid economic growth in the region. Johnson reveals the condition of the country's development in East Asia reflects the state centric. This means that the state becomes the holder of a key role in the success of the country's development. Unlike the conditions in developed countries that submit to the market development. In developed countries model, the market power of the state to be very limited. State had a limited power to regulate the movement of the market, including becoming a catalyst of the market. Meanwhile, state centric concept expressed by Chalmers Johnson was then popular and became a reference of various ideas developmental state [5].

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The concept described in the developmental state theory seeks to change the view of the market led model. The concept of market led was a popular model at that time played by World Bank and IMF (International Monetary Fund). IMF and World Bank were two main institutions capable of guiding the market in developing countries. Power of these two institutions made developing countries should adopt market-friendly development program. The program directed developing countries to liberalize the country's economy as the ideas of World Bank and IMF [6].

While the developmental state theory defines other things on the concept of market briefing. This theory puts the country as a major director of economic development in the country. Therefore, this concept is also known as the state led development. The main principle of state led development revealed by Chalmers Johnson is:

1. Economic development (including growth, productivity and competition) is the country's main priority.

2. Developmental state is not a socialist country so that there is a commitment to the market and individual ownership. However, the market is controlled by the government through the industrialization of strategic policy formulation to promote the development of the market.

3. Bureaucratic state became the main guide that plays an important role in formulating strategic policy and its implementation [7].

This theory also explains the country's development strategy that focuses on export-oriented industrialization. For example, such as high-tech manufacturing industries are considered able to contribute greatly to the economic growth of the country [8].

Meanwhile, Linda Weiss (1995) said that in the development state there is also the interdependence between states and markets. Weiss called it as governed interdependence theory. This interdependence means necessary to have a good relationship between government and industry. This interdependence can be realized from the system of coordination and cooperation that contribute to the economic success [9].

The state's role is very important in maximizing investment while encouraging people to take advantage of investment and development as well as all the resources provided by the state. State is considered legitimate to use repressive measures in order to achieve goals or national interests. The state role as the main actors of development does not necessarily make the whole country took an important role in economic activity. Development theories see that the market and private property as well as being an important addition to the country. While the state's role is to lead the market, keep an eye on the flow of investment, limit imports, changing the structure of society, spreading technological change, and determine which industries will be developed [10].

The development of the developmental state theory emphasizes the importance of the power infrastructure and political commitment. This is in line with what is disclosed Ghani (2005) that the country's development process should at least have two main attributes. The first state should have sufficient capacity to control his powers and has sufficient capacity to design and translate it into policy. Secondly, the state must have a strategy that is able to achieve the goals and have institutional and specific political perspectives [11].

While Leftwich emphasized on the ability of the state. His argument said about the ideal development state shows the state's ability to stimulate, shape, dealing directly and in collaboration with the domestic private sector to develop a framework that is favorable to its interests with foreign parties [12].

Developmental state theory continued to experience growth. Many researchers were encouraged theories about the developmental state. A researcher named Balassa concluded some important points of the model of development that she learned from the East Asian region. The points are a form of government contribution to the country's development model of developmental state, which includes:

1. Development of the modern infrastructure

2. Provide a stable system as an economic stimulus and encouragement

3. Establish bureaucracy capable of boosting exports [13]

Developmental state in general can be seen from the characteristics associated with the autonomy of the state. The first characteristic is the autonomy of the various threats and social pressure. That is, its economic bureaucracy can think of a long-term economic policy without the intervention of private interests. While both visible characteristics of its ability to implement effective economic policies. In that sense, the state can freely take various measures to control the domestic and foreign activities.

Developmental state theory has three main areas in explaining liberalization and internationalization. (1) Deregulation of prices, (2) to loosen the restrictions on the movement of capital, (3) the opening of the market to new competitors and wider range of the financial activity [14].

Robert Gilpin, in his book ‘The Global Political Economy’ also reviewed of the developmental state theory. Gilpin believes that the key to the success of the state development lies in the government, local banks, and industry. Furthermore, Gilpin Paul supports the Krugman’s idea that the economic success depends on the ability of the government with all the policies in accelerating the production levels of capital and labor as the basic production factors [15].

In this case, Gilpin said that the government's role in the developmental state is to manipulate the system. The system should able to address concerns of investors in order to attract maximum investment in the industrial sector. This is done by convincing the various guarantees to investors that their investments would be minimal or even no risk [16].

Gilpin also present the results of conclusions about the developmental state theory which leads to negative sentiment against this theory, including:

1. The industrial policy that aims to promote and define the position of the economic structure is able to accelerate development and increase production. However, this development failed to explain the growth at the regional level. While government intervention is not enough to explain economic growth.

2. Without intervention in the public sector, the market is quite capable by itself to change the structure of the industry rather than to be encouraged by the government.

3. The government controls in the financial sector would likely cause of the financial crisis [17].

To determine the developmental state of a country can be seen from its special characteristics. Fritz and Menocal has its own views on the characteristics of a developmental state, it describes in some aspects include:

1. The main aspects: emphasis on state capacity and autonomy

2. Political Regime: do not have any normative commitment to the various political regimes.

3. Legitimacy countries: achievements and performance is obtained from the state.

4. Political Direction: prioritizing national interests, and prioritize leadership commitment.

5. The role of the state: active in assisting economic development, but avoid the interests of a particular group [18].

While based on a summary of some thinkers Laura Routley developmental state, state developmental characteristics include the presence of:

1. A competent bureaucracy, autonomous yet integrated (Evans, 1995).

2. The political leadership oriented towards development (Musamba, 2010).

3. The relationship between countries that are strong and mutually beneficial partnership that often leads to capitalist industry (Johnson 1982; 1987).

4. The success of policy interventions to promote growth (Wade, 1990; Beeson, 2004) [19].

During its development, the theory that was originally intended to describe the condition of the East Asian development model was also used to describe the condition of development models in other regions, including South Asia such as India. At almost the same time with the growth in East Asia, South Asia following the economic conditions to growth. According to Chang (2006), Hayashi (2010), Jomo (2004), Doner, Ritchie and Slater (2005), the nation-states in South Asia also has similar characteristics to the East Asian countries. It can be seen from the characteristics such as:

1. Economic growth was affected by FDI

2. The range of high economic growth

3. Bureaucracy structured (though not as strong as the countries of East Asia) [20].

However, the classification of countries in South Asia that are included in the developmental state is still debated. The more experts admit that this theory is only appropriate to describe the condition of the countries in East Asia that began with the state authorities in building its economy and not as countries in South Asia such as India that uses a democratic system.

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[1] V. Fritz and A. Rocha Menocal. 2006. (Re)building Developmental States: From Theory to Practice. London: Overseas Development Institute

[2] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[3] Gilpin, Robert. 2001. Global Political Economy: Understanding the International Economic Order. New Jersey: Picenton University Press.

[4] Gilpin, Robert. 2001. Global Political Economy: Understanding the International Economic Order. New Jersey: Picenton University Press.

[5] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[6] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[7] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[8] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[9] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[10] V. Fritz and A. Rocha Menocal. 2006. (Re)building Developmental States: From Theory to Practice. London: Overseas Development Institute.

[11] Menocal, Rocha. 2006. Rebuilding Development State: from Theory to Practice. London: Overseas Development Institute.

[12] Menocal, Rocha. 2006. Rebuilding Development State: from Theory to Practice. London: Overseas Development Institute.

[13] Thomson, Grahame. 1998. Economic Dynamism in The Asia Pasific: The Growth of Integration and Competitiveness. London: Routledge.

[14] Huang, Chung-Hsien. 2002. Space of Flows, Politics of Place: The Embattled Developmental State in Taiwan, 1980s and 1990s. Taichung, Taiwan: Tunghai University,

[15] Gilpin, Robert. 2001. Global Political Economy: Understanding the International Economic Order. New Jersey: Picenton University Press

[16] Gilpin, Robert. 2001. Global Political Economy: Understanding the International Economic Order. New Jersey: Picenton University Press

[17] Gilpin, Robert. 2001. Global Political Economy: Understanding the International Economic Order. New Jersey: Picenton University Press

[18] V. Fritz and A. Rocha Menocal. 2006. (Re)building Developmental States: From Theory to Practice. London: Overseas Development Institute

[19] Routley, Laura. 2012. Developmental State: A Review of the Literature. Manchester: ESID.

[20] Routley, Laura. 2012. Developmental State: A Review of the Literature. Manchester: ESID.