To put it bluntly, there isn’t one economic theory that can single-handedly explain Singapore’s success; its economy combines extreme features of capitalism and socialism. All theories are partial; reality is complex
Prof. Ha-Joon Chang
- Former Consultant – (UNCTAD, WIDER, UNDP, UNIDO, UNRISD, INTECH, FAO, and ILO),
- Former Consultant – The World Bank, the European Investment Bank, the Asian Development Bank.
- Former Consultant for the Governments of Argentina, Brazil, Canada, Ecuador, Indonesia, Japan, Malaysia, Mexico, Namibia, Saudi Arabia, Singapore, South Africa, UK, Uruguay, Venezuela, and Vietnam.
- Winner of the 2003 Myrdal Prize.
- Winner (jointly with Richard Nelson of ColumbiaUniversity) of the 2005 Leontief Prize for Advancing theFrontiers of EconomicThought awarded by Tufts University.
- Winners of the Prize include the Nobel Laureates Amartya Sen and Daniel Kahnemann as well as John Kenneth Galbraith and Albert Hirschman.
- He was ranked no. 9 in the Prospect magazine’s World Thinkers 2014 poll.
The ‘classic’ developmental state is an ideal type derived from the East Asian – more specifically Japanese – experience between the 1950s and the 1980s.
There were of course variations even within East Asia. Korea actually went further down the road than Japan did, although now it has moved to the opposite extreme, embracing neo-liberalism as if there is no tomorrow. Between the 1960s and the 1980s, the Korean state pursued some of the most market-defying selective industrial policies, using an extremely powerful pilot agency (the Economic Planning Board, or the EPB) and total state ownership of the banking sector, both of which were missing in Japan. The Taiwanese state may have intervened in the affairs of the private sector less forcefully and dramatically than Japan or Korea did, but that was in part because there were few no large private sector firms in whose affairs the state felt the need to intervene. The other side of the coin of the weakness of the private sector in Taiwan was that SOEs (especially in upstream intermediate inputs industries, where scale economy is crucial) and state-financed R&D played a more important role in Taiwan than in Korea or Japan. Singapore used yet another model, combining free trade, a welcoming (albeit carefully targeted) approach to foreign direct investment, and a massive SOE sector (one of the biggest in the non-oil-producing world, producing 22% of GDP, when the world average is 9-10%).
Even the ‘classic’ developmental state was, however, not confined to East Asia. During the same period, under a similar political condition of nationalistic, interventionist rightwing hegemony, France used a very similar strategy of economic development, involving (indicative) planning by Commissariat Général du Plan (the planning commission), sectoral industrial policy (of course, somewhat constrained by the imperatives of European integration) led by elite bureaucrats, and aggressive use of SOEs (Cohen, 1977, Hall, 1986, Hayward, 1986, and Chang, 1994). There is even anecdotal evidence that Japanese bureaucrats stationed in France were reporting on French policy practice.
If we broaden our definition of the developmental state to include any state that deliberately intervenes to promote development, we could argue that the Scandinavian countries also practiced a variety of developmentalism, especially since the 1950s.