In 2007 Prime Minister Meles Zenawi had been invited to a forum organized in Columbia University, where he declared ‘the neo-liberal paradigm’ failed Africa, thus a paradigm shift is needed.
The alternative he proposes, the ‘developmental state paradigm’ is outlined in a 51 pages paper he presented at the forum. The paper, titled ‘African Development: Dead Ends and New Beginnings‘, states on its cover page states it is a ‘draft for discussion comprises selected extracts of a monograph under preparation. They include drafts of a couple of chapters in their entirety, the concluding sections of several chapters and in some cases, only the chapter headings.’
The cover cautions that it is ‘Preliminary Draft’ and ‘Not for quotation’. Moreover, it notes that though ‘the author is the Prime Minister of Ethiopia, the views expressed are personal and do not necessarily reflect the official position of the Government.’
However, I deemed the paper indicative of how EPRDF views the relationship between democracy and developmental state. At least, it provides a general picture, I presume.
Thus, I posted below the two relevant sections(Chap. 6 and 7) of the paper. [Notice that The emphasis in the text are mine]
6. The Developmental State
In previous chapters we have argued that inhibiting rent seeking, behavior does not depend on the size of the state on the degree of its activism in economic matters but on the nature of the state without however defining the nature of the state, which can be an activist state at the same time as inhibiting socially wasteful rent- seeking activity. Similarly we have argued that developing countries face formidable market failures and institutional inadequacies which create vicious circles and poverty traps, which can adequately be addressed only by an activist state. We have shown that the historical practice bears this out. We had not however defined what sort of an activist state is required. The analysis of the developmental state in this chapter is intended to fill this gap.
We can thus conclude that in the end, development is a political process first and economic and social process later. It is the creation of a political set-up that is conducive to accelerated development that sets the ball of development rolling. Only when there is a state that has the characteristics of a developmental state can one meaningfully discuss the elimination of rent-seeking behavior. In its absence rent-seeking will be rampant no matter what the size of the state might be. Only in the context of such a political environment can one debate about development policy in a meaningful manner. In its absence all government policy and action however limited and timid it might be will be riddled with rent-seeking behavior and this particularly so in developing countries as these countries will be coming out of a social and political environment where vertical, patron-client networks are pervasive.
The neo-liberal paradigm states that socially wasteful rent-seeking is the result of government activity and of the size of government activism. It does not distinguish between different types of state activism. This leads it to conclude that most if not all government intervention in the economy is detrimental to growth and hence to suggest that the night watchman state is the best state from the point of view of accelerated growth. Historical practice has shown that state intervention has been critical in the development process. Economic theory has shown that developing countries are riddled with vicious circles and poverty traps that can only be removed by state action. The theory of the developmental state completes the alternative paradigm by showing what type of state can intervene in the economy to accelerate growth while at the same time limiting socially wasteful rent-seeking activities.
7. Democracy, Developmental State and Development
(Extract from chapter)
7.4 Democracy and the Developmental State
As we have shown the requirements for the establishment of a developmental state and the emergence of democracy – initially an agrarian one largely coincide, the only divergence being that of the political rules of the game. We have also shown that building consensus on the rules of the game is not only consistent with the requirements of a developmental state but may also reinforce and consolidate it. But a number of apparent divergences have been pointed out by some analysts. We shall now address the more important ones.
One of the concerns has been with the “hustle of democracy”. It is argued that the developmental state should be single-mindedly focused on doing what is needed to accelerate growth. If it also has to deal with democratic legitimization of its rule, not only will it be forced to spend a lot of time in doing so, but it may be forced to engage in patronage and socially wasteful rent-seeking activities. It could obviously be reasonably argued that democracy is so important that if this is the price to be paid for having it – so be it, a limited reduction in growth that may ensue is not too much of a price. However valid such an argument might be it assumes that the structure of all democratic politics is based on patronage and rent-seeking, and a fascinating study carried out in Italy has shown that this is not necessarily so.
Italy is as homogenous a country as it is possible to get when it comes to language ethnicity etc. But in many ways it is also two countries in one. The North and South have had such divergent historical and social evolution prior to unification that even after unification there has been a very clear divide between the two.
In the North there is a very dense network of civic organizations of all types and an individual is usually a member of a number of them at the same time. Such networks are horizontal and based on mutuality. People actively participate in public affairs. There is a large measure of trust. People assume and expect that the law will be obeyed by everyone. People including politicians are relatively honest. Politicians and the people value equity and tend to seek mutually beneficial solutions, they do not take politics as a zero-sum game.
In the South civic organizations are very thin on the ground and those that exist are mainly of the vertical linkage variety. The south is the home base of what has been called “amoral familialism” the family is the key “network” and amoral organizations such as the mafia have been based and superimposed on it. People are not involved in public affairs, they leave it to the “bosses”. Political parties are important but involvement in them is based on their role as patronage machines. Corruption is the norm and it is taken to be the norm by the people and the politicians. There is very little trust and everyone expects everyone else to violate the law. As a result they seek someone else to enforce the law and impose it.
The North has ample social capital, the South has very little of it. The North has ample civic virtues, the South has very little of it. The North has been the home base of democratic and progressive thinking in Italian politics. The South has been the home base of the Mafia and anti-democratic tendencies in Italian politics. Since the introduction of regional governments in Italian politics, the North has had effective regional governments that people are satisfied with and politics in the regional arena has been relatively free from patronage and rent-seeking. The South has had very weak, ineffective and corrupt regional governments. Regional politics has been riddled, through and through with patronage and rent-seeking. If the South had been a separate country its politics would have been comparable only with Africa and not with Europe.
The path of economic development of the two parts has also been very divergent. About ten years after unification, in 1881 Italy was still a predominantly agricultural country. The South and the North did not differ much in terms of economic development. 60% of the population of the country lived in the rural areas, only 15% was engaged in industry including in cottage industry. The South was slightly more urbanized than the North. But Northern Agriculture was more productive and as a result per capita income was 15% – 20% higher in the North than in the South. By 1911 the North had made enormous strides in industrialization while the South had become less urban. Per capita income differences had increased to 50%. Despite the huge amounts of money thrown at the South to accelerate its development and the many twists and turns of Italian politics in the twentieth century, the South continued to lag and by the mid eighties, the difference in per capita income had reached 80%.
High social capital in the North has been blessed with virtuous circle, low social capital in the South has been cursed with a viscous circle, no policy turn, no amount of money has been able to overcome those differences and reverse the differing economic fortunes. The North has had a flourishing democracy, which is relatively free of rent-seeking and patronage. It is based on mutuality and public spiritedness. One can legitimately doubt as to whether the South would have been democratic if it had been a separate country, but as part of Italy it has had democracy but its politics has been patronage politics par excellence.
The experience in one and the same country tells us patronage and rent-seeking is not a necessary characteristic of democracy. It depends on the structure of politics. Where patronage is low, where social capital is high and public spiritedness adequate, democratic politics can be relatively free from patronage and rent-seeking . Where social capital is low, patronage high, public spiritedness low, all politics cannot but be riddled with patronage and rent-seeking. The political structure, which accelerates development is also the same structure that is relatively free from patronage and rent-seeking , and that which inhibits accelerated growth is the one which is riddled with patronage and rent-seeking and rent seeking.
Even if a developmental state was to be solely concerned about accelerating growth, it would have to build the high social capital that is vital for its endeavors. It would have to stamp out patronage and rent-seeking. These are the very same things that create the basis for democratic politics that is relatively free from patronage. A successful developmental state would thus be very well placed to be both developmental and democratic.
There is a catch, however. When a developmental state is established it is unlikely to find a situation where rent-seeking has been stamped out, social capital accumulated etc. If that were the case the country would have been engaged in accelerated growth even before the establishment of a developmental state. It is therefore the developmental state that will have to prepare the ground and accelerate development at the same time. Initially therefore the risk of democratic politics becoming riddled with patronage and rent-seeking will be there. A more subtle argument has therefore been how can the developmental state clean-up the mess of patronage and rent-seeking in the initial states of its establishment by anything other than undemocratic means?
A related issue has been the need for continuity of policy. Developmental policy is unlikely to transform a poor country into a developed one within the time frame of the typical election cycle. There has to be continuity of policy if there is to be sustained and accelerated economic growth. In a democratic polity uncertainly about the continuity of policy is unavoidable. More damagingly for development, politicians will be unable to think beyond the next election etc. It is argued therefore that the developmental state will have to be undemocratic in order to stay in power long enough to carry out successful development.
Neither of these two related concerns could be dismissed off-hand. That is perhaps one of the reasons why democratic developmental states have been an even rarer species than developmental states in general. But those states that have played a developmental role and have done so in a democratic fashion, such as the social-democratic coalitions in some Scandinavian countries and the center-right coalition in Post Second World War Japan, the so called dominant partly democracies can point to one way out.
Studies have shown that stable long-term coalitions which stay in power for a long period but do so by democratic means can provide the needed continuity and stability of policy. The typical examples in these regard have been coalitions based on the labor movement and the middle classes in some Scandinavian countries, and coalitions between rural population and the right in Japan. The ruling coalitions in these countries have had regular, free, open and fair elections, and the basic political and human rights have been respected. They thus fully qualify as democratic regimes. But they have won elections repeatedly and have been in power for long-stretches. In the case of Japan the ruling coalition has been in power for almost 50 years.
A critical issue is therefore can such a stable, democratic and at the same time developmental coalition be established in a developing country. It is not difficult based on our analysis so far, to identify who the candidates of such a coalition can be. One group that cannot be part of the coalition is the private sector. One of the defining characteristics of a developmental state is that it must be autonomous from the private sector. It must have the ability and will to reward and punish the private sector actors depending on whether their activities are developmental or rent seeking. It cannot do so if the private sector is in the coalition. Obviously it does not mean that the coalition will have to be hostile to the private sector. It cannot be hostile to the private sector and bring about accelerated development in the context of the market economy. In the end, what the developmental state does will strengthen the value creating part of the private sector more than any other alternative. It only has to be independent from the private sector while at the same time doing things that will punish the rent-seeking part and reward the value creating part of it.
Any democratic state, developmental or otherwise, in a developing country will have to be agrarian at least in its initial phases. The other alternative is to wait until a substantial business and middle class has been created i.e. until much of the work of accelerated growth has been carried out. The problem, however, is that without a developmental state, most if not all of these countries will be stuck in the poverty trap and the substantial business and middle class will not be created. The question therefore is whether a developmental state can be firmly based in the rural areas and whether it can use this to establish a stable coalition that rules democratically.
We have shown that agriculture is and must be the engine of accelerated growth at least in the initial period of the process of development. We have argued that widespread and relatively equitable ownership of assets is a requirement for accelerated development of agriculture. It is clear accelerated agricultural development will have to include commercialization, it cannot be based on sustaining subsistence farming. We have also argued that various local voluntary organizations to support marketing and improvement in productivity have to be established. Finally we have shown that resource transfers from agriculture must be such as to maintain the incentives for farmers to continue to increase production.
All of the above are fully consistent with the interests of the farmers. One can even claim, that it is very difficult to envisage any other package that would be more in tune with the interests of the farmers. The rural population can therefore be the solid base for a stable developmental coalition in a developing country. The steps that have to be taken to accelerate agricultural development are also the steps that are needed to bring about the changes in the social structure of the peasant to transform him/her into a force for democracy. The activities of a developmental state will thus not only be consistent with the interests of the peasants but also with their social transformation into a force of democracy. There will be the normal limitations of a dispersed rural population, but we have seen that under certain circumstances it does not become an insurmountable hurdle for democracy.
The only other fly in the ointment has to do with resource flows from agriculture. This could be a source of tension between the developmental state and the peasants. But in any case every developmental state will face the problem and will have to resolve it in a manner that maintains the incentive for the farmer to produce more and improve his/her income in so doing. Potentially, therefore, the peasant is the bedrock of a stable developmental coalition. With the votes of the peasants who constitute the bulk of the coalition, with the democratic potentials of a socially transformed peasant, the developmental coalition will have what it needs to rule democratically to ensure continuity by democratic means and to stamp out patronage and rent-seeking activities. A coalition based on the very sector, which has historically been the victim, rather than the beneficiary of patronage and rent-seeking activities will have all the will to stump it out.
The urban middle classes and labour, however small they might be could also be members of such coalition. It has of course been argued that they do benefit from patronage and rent seeking in the context of what has been called urban bias. The crumbs they may get from such activity is however nothing when compared with what they could get from job creation in the context of accelerated growth that is broadly equitable. They tend to be much easier to organize than the rural population and under the appropriate environment more democratic in their orientation than even the socially transformed peasant.
A coalition that covers much of the rural and urban population but is firmly based on the rural base, that includes all those that have very little to gain from patronage and rent-seeking, a coalition that includes the vast majority of the population and hence can guarantee continuity through the democratic process would be a solid base for a state that is both democratic and developmental. Such a state would in effect be one form of the so-called dominant party or dominant coalition democracy. Such a state based on a solid and dominant coalition of forces who have no stake in patronage and rent-seeking would be able to avoid and overcome socially wasteful patronage and rent-seeking.
Technically policy stability and continuity could be achieved even when parties regularly replace each other in governing the country. But this can be so only where such a solid consensus among politicians and the population on fundamental policy has been achieved and where politics is confined to dealing with trivialities and personalities. Such a situation is very unlikely to emerge in a developing country. In addition politics based on personalities can easily degenerate to patronage politics. The most likely scenario for a state that is both democratic and developmental to emerge is in the form of a dominant party or dominant coalition democracy.
Most of what a developmental state has to do in order to be a developmental state are also the things that need to be done for a stable democracy to emerge in a poor developing country. The critical additional step required is to establish a solid developmental coalition to govern the country democratically. The basis for doing that are those steps that a developmental state will have to take any way. There is therefore no reason why a developmental state should necessarily become undemocratic. There is every reason to suggest that if a developmental state were to also be democratic the “hegemonic” nature of its development project would be achieved faster and held more deeply because it would emerge from free debate and dialogue. A democratic developmental state is thus likely to be even more effective as a developmental state than an undemocratic one.
In previous parts of this chapter we have shown that a stable democracy can emerge in a poor country and what the requirements are for such a polity to emerge. They largely coincide with the requirements for the emergence of a developmental state. Where the circumstances for the emergence of a developmental state do not exist, the circumstances for the emergence of a stable democracy in a poor country do not exist. One can therefore conclude that the prospects of a stable democracy in a poor country are intimately related to the establishment of a developmental state and achieving accelerated development. In poor developing countries, a developmental state, accelerated development and stable democracies appear to be parts of the same package.
The only exception one can make is that accelerated development and developmental state can occur in a non-democratic polity. But that would not change the basic conclusion. Where the circumstances for a developmental state do not exist the chances for a stable democracy to emerge are indeed very remote. Where they exist while there is no guarantee for democracy, there is a reasonable chance for a developmental and democratic state to emerge. In the end, therefore, the chances of a stable democracy in a poor country are related intimately to the emergence of a developmental state and accelerated development associated with it.