12 Facts About Developmental state

Developmental state, or hard state, is a term used by international political economy scholars to refer to the phenomenon of state-led macroeconomic planning in East Asia in the late 20th century.

The developmental state is sometimes contrasted with a predatory state or weak state.

Developmental state argued that Japan's economic development had much to do with far-sighted intervention by bureaucrats, particularly those in the Ministry of International Trade and Industry.

In states that were late to industrialize, the state itself led the industrialization drive, that is, it took on developmental functions.

The United States is a good example of a state in which the regulatory orientation predominates, whereas Japan is a good example of a state in which the developmental orientation predominates.

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Regulatory Developmental state governs the economy mainly through regulatory agencies that are empowered to enforce a variety of standards of behavior to protect the public against market failures of various sorts, including monopolistic pricing, predation, and other abuses of market power, and by providing collective goods that otherwise would be undersupplied by the market.

In contrast, a developmental state intervenes more directly in the economy through a variety of means to promote the growth of new industries and to reduce the dislocations caused by shifts in investment and profits from old to new industries.

Specifically, what is meant by a developmental state is a government with sufficient organization and power to achieve its development goals.

All of this is important because the Developmental state must be able to resist external demands from outside multinational corporations to do things for their short-term gain, overcome internal resistance from strong groups trying to protect short-term narrow interests, and control infighting within the nation pertaining to who will most benefit from development projects.

Only a development Developmental state can have the influence to enforce such a policy on rich multinational corporations, and only a development Developmental state can have the influence to enforce such a policy against the demands of their own rich citizens who want the imported goods and want them then at a cheaper price, not waiting for infant industries to produce suitable products.

Such interventions by the Developmental state are termed as "deliberately getting relative prices wrong", which means that the prices are intentionally deviated from the 'right' prices, the market equilibrium.

One pioneer in this experience has been Medellin, whose experience with a local development Developmental state has been highly praised by researchers at the Overseas Development Institute.