State-led Growth Research Articles

Macroeconomic ingredients for a growth model analysis for peripheral economies: a post-Keynesian-structuralist approach

ABSTRACT The growth models approach (GMA) has become increasingly prominent in Comparative Political Economy over the last years. While it has originally been developed for advanced economies, there is a growing number of applications for developing countries. This raises the question of how readily transferable the GMA concepts are to the peripheral capitalist experience. This paper explores the analytical building blocks for an extension of the GMA to developing economies from post-Keynesian-structuralist perspective. It argues that in a developing country context supply-side considerations will be more important and build on structuralist theory to understand the ‘real’ constraints in the developing countries' growth process. It uses Minskyan theory to understand how currency hierarchy creates financial causes for international economic stratification. As a consequence, the role of the state is more crucial than in advanced economies, but at the same time states are more vulnerable. This paper concludes by reflecting on the key concepts of GMA, finance-led, export-led and state-led growth in the light of developing economies and identifying neoliberal as well developmentalist versions of these.

Poverty as a Consequence of Structural Imbalances and State-led Growth Failure in Iraq and the Kurdistan Region (1970 - 2020)

This paper sheds light on economic contradictions, or structural imbalances, of the Middle East and North Africa (MENA), with special references to Iraq and the Kurdistan Region of Iraq (KRI), which occurred across the last 50 years. These contradictions, or imbalances, have resulted in a weak economy and political instability, and gradually generated a high level of poverty. The study emphasizes the correlation between state-led growth, structural imbalances, resource curse, and socio-economic outcomes such as poor economic performance, low levels of private-sector development, and increasing poverty rate. It also analyzes the constraints of reforms by social actors. The paper relies on secondary data collected by NGOs, government organizations, researchers, etc. It concludes that poverty is first and for most a consequence of the economic contradictions, or economic imbalances and state-led growth including but not limited to instability in oil rents versus high growth rate of population, and a large public sector versus a weak private sector.

China’s Local Government Debt: The Grand Bargain

China’s rapidly growing local government debt problem has long been recognized by foreign observers as a risk, but inside China, only recently was this problem called out as alarming. Why has local government debt been allowed to grow with little direct intervention from central authorities? We argue that it has much to do with a “grand bargain” between the central government and localities during the 1994 fiscal recentralization reform. While much scholarly attention has been paid to the consequences of the 1994 reform that left localities with a tremendous fiscal gap, our findings show that Beijing in fact gave localities the green light to create new backdoor financing institutions that counteracted the impact of fiscal recentralization. In essence, these institutions were the quid pro quo offered to localities to sustain their incentive for local state-led growth after 1994. The bargain worked, and growth continued. The drawback, however, was that China’s economic growth has been accompanied by the accumulation of local government debt with little transparency and central control. When the global financial crisis slowed growth, and local deficits and debts spiked, Beijing began to shut down backdoor financing and opened front-door options that were transparent and under the control of national authorities—but with limited success. In the wake of COVID-19, the question is whether the pendulum will swing back toward more tolerance of local debt for the sake of economic growth.

Landscape staging, representations, and landscape thinking in three touristified Shui villages in southern Guizhou (China)

This contribution questions landscape representations amongst the Shui who live in Guizhou province (south China). This ethnic group, which has a strong specific cultural component, has seen its daily landscapes transformed by the implementation of tourist activities. The state-led growth of the tourist industry that started in rural areas during the early 1980s and reached Guizhou in the early 2000s has unfolded according to a highly standardized official scheme. Territories have been transformed drastically in order to set new landscape stages. In this context, the article highlights the way tourismification is changing the relationship between the Shui and their daily landscape, or more broadly, their milieu (to borrow the words of Augustin Berque). Tourism is now an integral part of this milieu through the hybridated representations of the landscape that have emerged from local residents, tourists, and the state.

Brazil: Chartering a New Economic Pathway

The presidential elections of 2018 marked an inflection point in Brazil’s quest towards establishing a sustainable economic pathway. The “populist years” of Brazil’s hard left, has resulted in economic stagnations, losses of economic competitiveness, massive corruption, and high levels of unemployment. In 2019, Brazil’s new administration is introducing a private sector-led economic growth strategy, instead of the state-led growth strategy of previous decades. This paper will elaborate on the new economic paradigm being set in place and its likely impact on Brazil’s economy and business environment. 

Transition from growth point policy to liberal urban development in Zimbabwe: The emergence of Ruwa Town, 1980–1991

This article traces the transition from growth point policy to liberal development in the emergence of Ruwa Town in Zimbabwe from independence in 1980 to 1990/1991 when the town was declared an urban area under the administration of the Ruwa Local Board. In this period, there was a dire need for urban infrastructure (catalysed by a boom in urban population) in what was originally a commercial farming area. The article also analyses the role of private– public sector partnerships in promoting urban development. It contends that the establishment of Ruwa Growth Point and the town is closely associated with the rise of Private Land Developer Companies (PLDCs) in Zimbabwe. It further argues that all post-colonial established towns in Zimbabwe emerged out of the Government’s direct investment initiated under the growth centre policy. However, the development of Ruwa was not influenced by the Government, but by a transition from the State-led growth point policy to a liberal urban development approach, which involved public–private partnerships in infrastructural development and facilitation of public amenities. The economic liberalisation process adopted by the country in the early 1990s weakened the growth point policy and gave private actors leverage to enter the urban land market, which was originally monopolised by the Government. The failure of the Government-led growth point policy and the local authorities’ incapability to finance infrastructure development to improve service delivery forced the Ruwa Local Board to seek partnerships with PLDCs. The post-colonial State’s acquiescence to draw on the services provided by PLDCs demonstrates that the companies were effective instruments in ensuring the success of the liberal urban development strategy

Measuring urban sprawl and exploring the role planning plays: A shanghai case study

Measuring the degree of urban sprawl largely depends on the local context and available data. This research establishes a multidimensional index which combines city expansion, urban compactness and urban form to measure sprawl. Urban planning, as part of the state-led growth approach, has exerted dramatic impact on city growth in China. Recent studies have discussed the role of planning in city growth. However, measuring the impact of planning on sprawl, has not been conducted. Taking Shanghai as a case study, this paper builds a multidimensional index to measure the spatio-temporal characteristics of urban sprawl in Shanghai from 1990 to 2010. It finds that urban sprawl was more serious in 2000s than in the 1990s, and the sprawl also presents spatial heterogeneity within different areas of the city. While quantifying the role of planning in urban sprawl, this study adopts the Geo-Detector based on spatial variation analysis of the geographical strata in order to assess the impact of planning on urban sprawl. It finds that planning is strongly correlated with urban sprawl, in other words, urban sprawl is kind of a "planned sprawl" in Shanghai. The research concludes with future planning policies necessary for a more sustainable and compact development pattern.

Extension of State-Led Growth Coalition and Grassroots Management

This study intends to enrich the literature of comparative studies on growth machine and urban regime through contextualized analyses of growth politics in Shanghai, China. An analytical framework is developed to advance our understanding of the variation of growth politics in a different urban setting. In particular, this study contends that local government’s dual goals of promoting economic growth and managing development-related conflicts are the key to making sense of growth politics in Shanghai. This specific configuration of institutions suggests that growth coalition has to extend itself spatially into neighborhood level and temporally into postdevelopment phase to sustain urban growth. This extension requires pro-growth players to exploit infrastructural power to contain homeowners’ activism. This research calls for attention to the nexus between economic and political dimensions of urban growth, a refined conceptualization of local states, and the interaction between pro-growth and antigrowth forces which shapes the forms and dynamics of urban regime.

Impacts of state-led and bottom-up urbanization on land use change in the peri-urban areas of Shanghai: Planned growth or uncontrolled sprawl?

During the last several decades since the opening reform, peri-urbanization emerged in the developed areas of China. In Shanghai, peri-urban areas expanded rapidly, and land use in these areas experienced significant changes and restructuring. This paper examines the expansion of peri-urban areas, and their social-economic characteristics in Shanghai from 1990 to 2009. By combining Landsat TM images and land use maps based on site survey, this paper analyzes the spatio-temporal characteristics of land use change in the peri-urban areas of Shanghai, and we find that expansion of non-agricultural land has been mainly characterized by the growth of industrial land, and has caused significant loss of cultivated and forested land. This paper then examines the driving forces of land use change from the perspectives of state-led growth and bottom-up development. It argues that state-led growth has played a dominant role in the expansion of non-agricultural land, and the impact of bottom-up development has been much less significant. Planning has played a critical role in regulating the space to accommodate the increasing demand of population and economic growth while at the same time promoting space growth to attract outside investment.

ACADEMIC SCRIBBLERS AND DEFUNCT ECONOMISTS

Three broad theoretical approaches characterize the history of development economics: state-led growth, which dominated from the 1930s until roughly 1980; liberalization theory (the ‘Washington Consensus’), which dominated in the 1980s; and institutionalism, which dominated subsequently. After 2000, development scholars increasingly focused on the legal institutions that support markets: property, contracts, and business law. This essay focuses on legal institutions that support economic innovation, which causes sustained growth. Developing countries mostly innovate by discovering new markets and adapting organizations, which is risky. A risky venture that unites capital and new ideas poses a problem of trust: the investor must trust the innovator not to steal his money, and the innovator must trust the investor not to steal his ideas. If institutions supply the means for entrepreneurs to solve the double trust dilemma, the economy strides ahead through innovation. Conversely, if institutions fail to supply the means for entrepreneurs to solve the double trust dilemma, the economy hobbles along without improvement. The origin of a nation's laws – whether common or civil law – is not so important as the ability to adapt law to business innovations.

Brazil: The Road to Democracy

In the last 25 years, the democratic issue has dominated the agenda of Brazilian political science. After two decades of military rule and past frustrations in democratizing the political order, the successes and failures of the ongoing demo cratic experience have mobilized the attention of scholars and policy-oriented analysts. Many of the publications on the subject have not had a long lasting impact, being too centered on transient contextual factors. This is not the case for the books that we examine here. We look at two publications that contribute from distinctive angles to a clearer understanding of diverse aspects of Brazilian politics. The first publication is the volume edited by Ranulfo Melo and Alcantara Saez, which provides a broad overview of the performance of democracy in the country. The interplay among the powers, the party system, electoral behavior, and new forms of participation are some of the many dimensions under scrutiny. The second book under consideration is an appraisal of the new terms of interaction between the State and market in the process of consolidation. Renato Boschi and Eli Diniz focus on the new model under construction, one that takes the country away from the classic state-led growth model inaugurated in the 1930s, as well as from the neoliberal one that later became the cooking recipe advertised for the developing world.

Comment on “Crisis and Recovery: What Have We Learned from the South Korean Experience?”

Lee and Rhee's paper (2007) is very good at what it sets out to accomplish. I would like to step back and raise some issues that are not considered in this paper; consequently, these comments should be interpreted as supplementary or complementary in nature. The paper disposes with the background to the crisis rather perfunctorily in the opening paragraphs, vaguely alluding to institutional weaknesses and panic. Although this can be justified in terms of focus on the ex post“lessons,” the neglect of any deeper consideration of the sources of the crisis limits eliciting broader lessons for either South Korea or other countries. During its period of rapid growth, South Korea pursued a policy of financial repression as part of a state-led development strategy. Problems arose as the country approached the international technological frontier and opportunities for easy technological catch-up attenuated. The disappearance of straightforward paths for industrial upgrading based on imitating the prior trajectories of more advanced economies put a heightened premium on the ability of corporate managements and their financiers to discern emerging profit opportunities. Decades of state-led growth had bureaucratized the financial system, however, and created a formidable constellation of incumbent stakeholders opposed to liberalization and transition toward a more market-oriented development model. As the paper observes, alternative sources of corporate finance were suppressed: the development of money markets and bond markets was retarded and issuance was effectively dependent on bank-guarantees. The government discouraged the development of an efficient auction and secondary market for bonds, and no swap, bond, or interest futures markets existed. As for the stock market, in 1990, the government established a quarterly quota on new issues and criminal proceedings documented how firms resorted to bribing officials to bring their initial public offerings to the market. Comprehensive capital controls were used to insulate the domestic financial market from the global market (Noland 2007). Portfolio flows and even direct investments were discouraged through various prohibitions and limitations. Interventions create their own constituencies, and the liberalization undertaken in the early 1990s was a function of political competition among domestic financial and corporate institutions over declining rents and foreign financial service providers seeking to enter South Korea. A combination of South Korean policy, its accession to the Organization for Economic Cooperation and Development, and the Basel Accords on capital adequacy created unintended incentives for short-term bank borrowing. The highly leveraged nature of the economy, together with the currency and term mismatches embodied in the mid-1990s surge of foreign debt exposure, left the economy vulnerable to a variety of negative shocks. In 1997, in the context of the broader Asian upheaval, South Korea experienced a financial crisis. South Korea seemingly recovered quickly, yet the “dumbing down” of the financial system produced by decades of financial repression may have left lingering effects. Concerns center on the apparent difficulty of changing the lending culture of until recently bureaucratized financial institutions and the counterpart challenge of improving the quality of market-oriented financial oversight by regulators more experienced in systems of greater direct control. As the paper notes, prudential regulation has been consolidated and strengthened through the creation of the Financial Supervisory Commission and the introduction of new regulatory practices, approaches, and standards. Competition was injected into the financial sector by the increased role of foreigners through a variety of institutional arrangements. The lending culture appears more resistant to change. In the aftermath of the crisis, lenders went from bingeing on corporate lending to bingeing on household lending: South Korean household debt registered the fastest growth in the world, increasing 18 percentage points of the gross domestic product in 2 years, before ending in crisis with the insolvency of the country's largest credit card issuer. A current challenge involves the extensive use of financial derivatives by South Korean financial institutions and the concern that the regulatory regime may not have kept pace with financial innovation. Institutional investors tend to be affiliated with the major chaebol. Independent institutional investors capable of monitoring management have been slow to develop, and although some foreign institutional investors and the nascent shareholder rights movement have exerted a salutary influence, the country still lacks a real market for corporate control. An open question is whether the crisis was avoidable: was there a politically feasible alternative path out of the state-led model, or was the constellation of incumbent stakeholders such that a crisis was needed to reform the system? I am skeptical that a smoother exit path was feasible: neither government officials nor the intelligentsia evinced much commitment to the notion of freer financial markets, and perhaps more importantly, there were some large and powerful interest groups opposed to liberalization.

Implementing Growth Management

State-led growth management has been criticized as inflexible in addressing the range of situations that communities face. A second issue is that while many of the goals of smart growth can be achieved through regulation, others require funding for implementation. In 2000, the Commonwealth of Massachusetts passed legislation called the Community Preservation Act (CPA), an experiment in enabling communities to tax themselves to implement growth management/smart growth actions at the local level. This article examines that act as to whether it demonstrates flexibility in its application across communities in the state, analyzed according to sub/urban to rural character. The act is found to appeal to a wide range of communities for overlapping but also divergent reasons and provides a flexible method to aid communities in implementing a limited set of smart growth goals.

From State-led Growth to Globalization: the Evolution of Israeli Capitalism

This article examines the development of the Israeli capitalist class and the role played by the state apparatus in that development. In contrast to analyses claiming that Israel was a "socialist-type" economy prior to the mid-1980s, it argues that the Labor Zionist movement fostered the emergence of an indigenous capitalist class by encouraging the growth of private capital through key conglomerates initially tied to the state. Following the 1985 Economic Stabilization Plan, these conglomerates were placed in private hands linked with large foreign capital. Israel's recent incorporation into the global economy has undermined the traditional sustaining elements of the Zionist project, producing a crisis of legitimacy in the state. It also has important ramifications for the future of Israeli-Palestinian relations.

Reconceptualizing the Developmental State: Public Savings and Economic Growth

Developmental state theory suggests that rapid economic growth can be achieved when states allocate financial resources to strategic industrial sectors. While not denying this mechanism, I argue that an equally important component of state-led growth is public sector efforts to mobilize financial resources for investment and growth. I support this argument with crossnational statistical evidence, and a Brazilian case study, both of which suggest that public savings substantially influence economic growth rates.

A Political Economy of the Middle East: State, Class, and Economic Development. By Alan Richards and John Waterbury. Boulder: Westview, 1990. 439p. $45.00 cloth, $19.95 paper.

The framework of the study overview of economic growth and structural change the impact of rapid population growth human capital health and education agriculture and food security the emergence of the public sector contradictions of state-led growth the emergence of Infitah urban political economy political regimes - as they are and as they view themselves solidarism and its enemies the military and the state labour migration, regionalism, and the future of the oil economies class interests and the state.

Baku Oil and Transcaucasian Pipelines, 1883–1891: A Study in Tsarist Economic Policy

The leading role of the state in nineteenth-century Russian industrialization is one of the most widely accepted notions in economic history. Thus state-sponsored industrialization, deeply rooted in the strength of the despotic state and the subservience of an undifferentiated peasantry and an insignificant middle class, began in earnest in the era of the Great Reforms, after the Crimean War had shocked the government out of its economic lethargy under Nicholas I and Finance Minister Kankrin. It continued unevenly thereafter until it crested in the burst of state-led growth in the 1890s. The “statist interpretation” of prerevolutionary Russian industrial development has been most notably expounded by Alexander Gerschenkron in a series of influential essays and by Theodore Von Laue in his biography of Sergei Witte. It thoroughly dominates non-Soviet scholarship and serves as the point of departure for almost all general investigations.