ISU DAN TEORI PEMBANGUNANSTATE – MARKET – CIVIL SOCIETY

CONTENDING THEORIES OF POLITICAL ECONOMY (1)

The study of Political Economy of Development has been marked by several debates between competing paradigm:

Modernisation (state interference and traditional institutions hindered the operation of capitalist markets)

Dependentistas (economic dynamic of capitalism created social and political institutions, so that state and cultures were only epiphenomenal)

CONTENDING …. (2)Recently, the assumptions of both approaches were challenged by the rapid economic growth that occurred in the developing world, most particularly East Asia. This led to a new scholarly tradition of explanation namely ‘bring the state back in’.

Argument: strong ‘developmental state’ could promote successful industrialisation process. State power is needed to mobilise adequate resources to overcome the high ‘entry barriers’ that late industrialised faced and could be used to overcome the great disparities in structural power emphasised by world system theory.

CONTENDING… (3)The rise of Statist theory created a new debate over whether "state" or "market" is the key factor in explaining the undeniable economic growth and industrial transformation that have occurred recently in a given places in developing world?

State must almost inevitably play a leading role in promoting industrialisation in ‘late developing’ nations (strong developmental states which exist in East Asia validate this argument).

In contrast, Neo-classical Economics argued that the best performing Third World economies are those that have opened their markets to establish niches of comparative advantage in the global economy.

The touchstone of the debate between them is their very different assumptions about

what stimulates effective economic action?

THE “STATIST”what is needed are strong and autonomous Development States

o only institution capable of creating significantly better living conditions in many societies;

o To be effective in overcoming the market imperfections, government must be both strong in the sense of ability to effectively make and implement policies;

o autonomous in the sense of being able to ignore pressures from powerful interest groups;

o Developmental state, therefore, requires both a powerful political leadership to implement developmental policies; and a well-trained technocracy to develop such policies.

o Autonomy viewed as the key to preventing the state from becoming a vehicle for powerful economic classes and interests; to consolidate their control over the economy and to extract massive ‘rents’.

THE DEVELOPMENTAL STATE

"The state in combination with the market provides an insufficient explanation for readily observable differences in developmental outcomes. Thus, additional variables denoting state-society relations and the business environment:

entrepreneurial talents, the foundation of human capital, the incentives and disincentive for various types of economic activities, and the cultural environment in which a political economy operates.

In short, just as statist theory added ‘state’ to ‘market’ as an important factor shaping developmental outcomes, this nascent approach can be viewed as a call for bringing society back in”

Some Agreements

1. maintaining political order including holding political corruption and squeeze on business to an acceptable minimum;

2. creating a stable legal order for market relationship, using macroeconomics policy to curb inflation and dampen the business cycle;

3. financing expensive physical infrastructure projects that are vital for commerce and business expansion;

4. the involvement of state policies in market liberalisation, which is a common method for moving from ISI to export led-growth.

INWARD AND OUTWARD LOOKING

OUTWARD1. Free trade and export

expansion Import policies

2. Open type domestic economic policies

3. Open door policies towards foreign aid and official capital flows

4. Open door policies towards direct private foreign investment

5. Open door policy on immigration

INWARD1. Protectionist and

substitution policies 2. Insulating type domestic

economic policies3. Reliance on domestic

savings and resources self-sufficiency

4. Restriction of direct private foreign investment

5. Restriction on immigration