Statist Theory: Background Question from Gerschenkron: Are there any advantages to “backwardness”?

Statist Theory: Background Recall Gerschenkron’s insight Timing matters for how states develop Early and late players in the game of state survival develop differently

Statist Theory: Background Review the question: How do developers amass capital to invest in industry? Early developers (Britain) Firms in a free market Middle developers (Germany) Banks Late developers (Soviet U) State itself

Statist Theory: Background So, what ideologies justify the different development strategies in Britain, Germany, and the Soviet Union?

Statist Theory: Background Different ideologies Early developers (Britain) Laissez-faire (Smith, Ricardo) Middle developers (Germany) Nationalist (List) Late developers (Soviet U) Communist (Marx, Lenin)

Statist Theory: Background Wrap up Gerschenkron Timing matters for how states develop Early and late players in the game of state survival develop differently The later development occurs, the greater the role of the state

Premises of Statist Theory States have the potential to promote development within their own borders (NOT simply “externally conditioned”) States have interests autonomous from society’s in promoting development because they are responsible for national security; they must compete militarily and economically in the international state system Ability of states to promote development depends on the nature of state institutions 7

Statist Theory Characteristics of developmental state bureaucracy Review your notes from last class 8

Statist Theory Characteristics of developmental state bureaucracy Merit/skill-based recruitment technocrats Performance-based rewards With competitive salaries, proper incentives Belief in bureaucratic mission Insulation from societal pressures Power to formulate and implement policy 9

Statist Theory Characteristics of predatory state bureaucracy Recruitment based on patron-client ties Policy based on personal benefit not mission Not insulated from societal pressures Lacking in ability to formulate good policy Lacking in authority/power to implement policy

Statist Theory: Predicted Outcomes Developmental state institutions  wealth Predatory state institutions  poverty

Neo-liberal Theory: Background Long tradition dating back to Adam Smith’s Wealth of Nations

Neo-liberal Theory: Background Adam Smith Human beings have the natural “propensity to truck, barter, and exchange…” Exchange leads to Specialization Division of labor  Maximize productivity

Neo-liberal Theory: Background Adam Smith Individuals’ maximizing their own productivity accrues to the benefit of society

Neo-liberal Theory: Background What’s Adam Smith’s view of the state?

Neo-liberal Theory: Background What’s Adam Smith’s view of the state? “The sovereign” “No human wisdom…could ever be sufficient…to direct the industry of private people towards the employments most suitable to the interest of the society.”

Neo-liberal Theory: Background Adam Smith Minimalist state National defense Domestic order Property rights “Public works” Public goods Merit goods

Neo-liberal Theory Deepak Lal, UCLA Neo-liberal theory views individuals as naturally self-interested and rational actors “Numerous empirical studies from different cultures and climates show that uneducated private agents—be they peasants, rural-urban migrants, urban workers, private entrepreneurs, or housewives—act economically as producers and consumers. They respond to changes in relative prices as theory would predict. The economic principle is not unrealistic in the third world; poor people may, in fact, be pushed even harder to seek their advantage in the market than rich people.” Free markets ‘state of nature’ 18

Neo-liberal Theory Deepak Lal, UCLA State intervention is the problem, not the solution “From the experience of a large number of developing countries in the postwar period, it would be a fair professional judgment that most serious distortions are due not to imperfections of the market mechanism but to irrational governmental interventions.”

Neo-liberal Theory: Predicted Outcomes Reliance on free markets wealth Excessive state intervention  poverty

Neo-liberal Theory Willing to tolerate Inequality Slower growth on the way to wealth  Because the alternatives (state intervention) are worse