Sustainable Development of Developmental and Neo-Liberal State - Term Paper Example

To what extent can the developmental and neo-liberal in developing countries implement sustainable development in today’s conditions of globalisation? Introduction The purpose of this paper is to address this main question: to what extent can the developmental and neo-liberal state in developing countries implement sustainable development in today’s conditions of globalisation? In order to answer this question adequately and precisely, the following sections are organised as follows. The next section discusses the theory and premises of developmental state and its success and failures in implementing sustainable development in developing countries. The neoliberal paradigm is then analysed. The final section wraps up the discussion by arguing what model is better suited to the pursuit of developing countries for sustainable development. The conclusion is based on the review of the weaknesses and strengths of each paradigm. Concrete examples are given. Globalisation and Sustainable Development in Developing Countries Globalisation is simpler to difficult to define or characterise. This is due to the fact that, in its current structure and function, it is a multifaceted, dynamic, and global trend, which gives different meanings to different populations and different meanings to the same populations temporally and spatially (Samli 2002, 8). However, for the purposes of this paper, the definition of globalisation by the United Nations (2000) is adopted: Present day globalisation is a unique convergence of technological, economic and political forces of daunting power and influence, having a massive impact on all aspects of public and private life in economic, social, political and cultural affairs at global, national and local levels. As it influences states and their partner actors, it is also exploited and shaped both positively and negatively by those with the foresight and resources to appreciate its power. Yet, so diverse and overwhelming is globalisation’s manifold influences that no one group or sector can control or stop it. As such, it has been responded to and manipulated by a range of actors in the public, private and civil society actors, is instigated in good and bad motives, and has benefited some social and economic groups, but has hurt others who have become more vulnerable and disempowered due to its influence (UN 2000, 10). Recently, nations across the globe have turned out to be more economically and financially interconnected, motivated by the possible advantages of financial globalisation. A major advantage of financial globalisation is the expansion of the financial segment. Financial markets functioning in a global context facilitate global risk diversification and enable public and state spending (Samli 2002, 13). Even though financial globalisation has a number of possible advantages, it also raises disadvantages. The 1990’s crises, subsequent to numerous countries’ financial liberalisation, have challenged somewhat the advantages of globalisation (Kiggundu 2002, 62). Nations become vulnerable to external disarrays and instabilities not merely produced in their own nation but from contagion impacts as well. In the preliminary phases of the liberalisation process, if the appropriate foundation is not established, financial liberalisation can result in heightened risks (Kiggundu 2002, 62-63). Furthermore, according to James (1996, 141-143) in an integrated economy or financial market, legislators have lesser policy devices to carry out economic strategy or regulation. Hence, given the advantages and disadvantages of financial globalisation, what does it imply for sustainable development in developing countries? Above all, we should first define sustainable development. Sustainable development does not only concern the environment, but also the social and economic dimensions. Employment, environment, and competitiveness are the functionally-vital domains of sustainable development (Kiggundu 2002, 53). Therefore, the sustainable development policy programme puts emphasis on mechanisms, such as those associated with construction, agriculture, production, resource use, and so on. Yet, sustainable development seems to be largely absent in underdeveloped economies (Kiggundu 2002, 53-55). This has amounted to a severe predicament to industrial manufacturing in these nations, which has become apparent in the difficulties of satisfying the necessary requirements of their local markets for products/services. Yet, according to Samli (2002, 44) the untapped resources of developing countries have been discovered, and then used, by developed nations for utilisation as unprocessed materials for manufacturing. The process of globalisation reinforces this development exercising the domineering policies of global institutions that are mostly governed by the developed world. The Developmental State The paradigm of developmental state centres on the idea that the ‘plan-rational’ state or defined as a ‘state led by technocrats who enjoy a high degree of political autonomy, insulation, from societal demands, and yet who are simultaneously embedded in that society’ (Boyd & Ngo 2005, 1) can manipulate or orient economic progress. Proponents assume that East Asia experienced precisely this and that the developmental state has the capacity to be a paradigm for other Third World countries across the globe. Successes The deliberation about Africa’s adoption of developmental state has emerged once again due to the failure of the Washington Consensus and the malfunctioning of the massively hyped global economy’s neoliberal restructuring in numerous developing societies where the neoliberal ideologies were espoused far and wide irrespective of the distinctive needs and demands of each of these societies (Nissanke 2001, 3). The emergence of neoliberalism, according to Yeldan (2001, 3), was based on the supposed ineffectiveness of the developmental state where in the state served a major function in mobilising investments and capital, distributing credit through fiscal and economic regulations and where in the state worked with local investors to promote local development in an ever more globally integrated world. The Structural Adjustment Programmes (SAPs), for instance, forced nations to concentrate on the production and trading of main goods like coffee and tobacco to bring in foreign exchange (Nanda et al. 1993, 28-30). Unfortunately, these goods have extremely unstable prices vulnerable to the quirks of international markets which can bring down these prices precisely when nations have already ventured in these purported ‘cash crops’ (Nanda et al. 1993, 30). Through currency devaluation and abolition of price regulations, according to Ghai (1992, 9-10), the instant effect of a SAP is normally to severely raise prices, aggravating poverty and unemployment. The key to a successful developmental state-driven sustainable development is state competence, or the capacity to create and put into effect developmental principles. For a country to attain this kind of result does not simply requires an effective system of government, it also requires a productive affiliation with the local capitalists that will unavoidably be at the core of any thriving developmental programmes (Tarp & Hjertholm 2000, 73). Peter Evans, in a comparative analysis of industrial development in Latin America and Asia, introduced the concept of ‘embedded autonomy’ (Seabrooke 2006, 30) to explain the best affiliation between prospective developmental state and the local capitalists. Evans, using a neo-Weberian premise, which, according to Turner (2008, 39), views the state as a differentiated institution and territorially defined with a centre that wields domineering policymaking reinforced by the despotic state powers, (Seabrooke 2006, 30) claimed that the effective developmental state has to be near to, and detached from, the local capitalists it created to manipulate and foster. Nevertheless, it is not just in East Asia that effective developmental states have produced drastic industrialisation. Europe, at the aftermath of the Second World War, has brought about several thriving developmental states (Bagchi 2000, 420). Michael Loriaux (1999 as cited in Woo-Cumings 1999, 237), for one, reports that France has an interesting similarity to Japan in terms of the fundamental components of developmental states. Loriaux specifically states that “it is a paradigmatic case of the developmental state as characterised by the preponderance of a certain kind of actor [non-state actors (e.g. non-governmental organisations, religious groups, multinational corporations) and local authorities], pursuing a certain kind of ambition, and employing a certain kind of power (as cited in Woo-Cumings 1999, 237)”. As further stated by Woo-Cumings (1999, 203), countries like Austria and Finland were also successful developmental states. These countries realised that the key to effective developmental-driven sustainable development is national unity and modernisation. In the meantime, the experience of Africa with developmental states is not that encouraging. Yet this is not due to the fact that developmental state is unable to develop in Africa. Because Ghana attained self-government in 1957, Cape Verde, Mauritius, and Botswana were successful in utilising the state productively to fuel high levels of growth, enhance trade and commerce and reduce poverty (Sindzingre 2006, 14-15). Many of the developmental states in East Asia may have attained their sustainable development objectives under autocratic circumstances, but in a ‘constitutional democracy’, like South Africa, the implementation of the developmental state will not simply have to occur in the social and economic domains, but should intensify and expand democratic processes (Tarp & Hjertholm 2000, 388). Several intellectuals, according to Sindzingre (2006, 8), remain profoundly doubtful that the developmental style initiatives of East Asia can be replicated somewhere else. Failures The case of Africa has been more generally a developmental state letdown. According to Sindzingre (2006, 14-15), in several instances, the economic failure and debt predicament produces absolutely weak and unsuccessful states, such as the Congo-Zaire. Several societies in Latin America and Africa adopted a state-driven model of development. As stated by Young (2004 as cited in Fritz & Menocal 2006, 10) regarding Africa, “the moment of African independence [in the 1960s] coincided with the zenith of confidence in state-led development” (Fritz & Menocal 2006, 10). This technique has been somewhat effective in numerous instances, mostly at the onset. For instance, Africa underwent a significant improvement in the health and education sectors; nations like Kenya and Ghana documented decent levels of economic progress (UNCTAD 2007, 13). The same patterns were apparent in Latin America. In nations like Mexico, Brazil, and Argentina, the state served a major function in main industries and segments and ventured greatly in public services delivery and physical construction (Woo-Cumings 1999, 163). Several of these nations also developed at rapid and extensive levels. Yet, according to Bagchi (2000, 423-425), severe weaknesses in the state-oriented development framework became evident all over Latin America and Africa in the latter part of the 1970s. However, according to Rodrik (1997), the weaknesses of the developmental framework in Latin America in the 1970s have been caused by several factors, such as weak government intervention, failure to initiate the needed macroeconomic reforms in the monetary, fiscal, and foreign exchange sectors, and inability to deal with local social problems created by the global economic crises during the 1970s.  Even though certain conditions differed from nation to nation, major dilemmas linked to this model may be discerned regionally and nationally. A great deal of capital in the productive segments was unproductive; administrations sustained constantly increasing debt levels to financially support additional development programmes. As stated by Yeldan (2001, 3), these basic weaknesses were revealed by the 1970’s oil price increase, powerful countries’ incursion rooted in Cold War standards, and growing social unrest. For example, as mentioned by Sindzingre (2006, 4-5) the policy emphasis on market-limiting misappropriation in Africa, and the vulnerability of African societies to policy schemes established by benefactors has arise as an outcome of the ineffectiveness of interventionist and statist rules implemented by many African nations in the 1960s and 1970s. These strategies were unsuccessful because African nations in general failed in creating state facilities for administering the social reforms that they aimed for. The particular strategies were usually ill-advised, according to Sindzingre (2006, 6), specifically given the narrow consideration paid to establishing a workable capitalist domain and the effort in several nations to implement socialist policies in underdeveloped societies.  Neoliberalism Primarily, the neoliberal framework supports absolute liberalisation of capital and products/services movement. It encourages aggressive, free competition in the global market. To attain these goals, it tries to eliminate price regulations. On the contrary, labour is the sole good which is not liberated in the market, perhaps because of the requirement for fixed state control to lessen its cost (Scholte 2005., 9-10). Neoliberalism would abolish the state’s regulatory duties and encourage the privatisation and decentralisation of its products/services. Rather than the state, it prefers utilising the market to control incentive and distribution (Ghai 1992, para 9-10). The laissez faire market, according to Heillener (2000, 5), is to deal with technology advancement, efficiency growth, products/services movement, and strengthening of comparative leverage. In free markets, added by Heillener (2000, 5-6), the capitalist assumes considerable risk to start a venture, or invest, with the expectation that the business will prosper. If the risk is regarded a drawback, when the venture thrives, the profit and management of the enterprises are decided by the proprietor, not the government.  Yet, when the state disintegrates, the sustainable capacity of the local economy to survive external demands of the economy is weakened, due to the fact that the state is the only entity that could have adequate power over regulatory processes and resources to reduce the impact. To reduce the unfavourable social implications of the perspective, according to Onis (1995, 98), proponents of neoliberalism have developed “particular tools and defence mechanisms”, or programmes implemented by neoliberalism to counteract its inherent negative outcomes, like conflict resolution and social support initiatives which are more of an endorsement than functional, and the development of the informal economy. Successes The World Bank and IMF, according to Hildyard (1997, 5), exploited the debt problem in the 1980s to pressure debtor nations to take out the government from economic decisions and activities as the cost of acquiring credit. Hence, structural adjustment programmes (SAPs) obliged governments to focus expenditure on debt servicing rather than on state-owned ventures and social services. State-owned enterprises and development programmes were privatised; state expenditure cut down; deregulation of markets; and social services outsourced (Ghai 1992, 9-11). In industrialised countries, the same policies have also been launched, allegedly to reduce public expenditure and to enhance the competence and quality of services. These neoliberal mechanisms are extensively claimed to have contributed to the progress of developing countries, and the historical account can be interpreted as substantiating these arguments (Ghai 1992, para 9-11). As stated by Nissanke (2001, 9-10), the value of export-driven progress became broadly recognised as a vital component of neoliberal insights motivating political and economic reforms across the globe. Failures According to Mark Weisbrot (2001, 6), majority of the neoliberal ideologies that have substituted the paradigm of developmental states is broadly accepted and recognised in the intellectual community. However, neoliberalism has stark failures in developing countries. Those Third World countries that complied with the economic proposal of Washington have met conclusive failure. For instance, income per capita in Africa increased by roughly 34% from 1960-80, but started to drop by about 15% since then (Weisbrot 2001, 6). This drop in growth rate has been experienced by many developing countries. Economist Joseph Stiglitz substantiated the claim that the principles of neoliberalism have been utterly unsuccessful (Hedlund 2011, 258): The world has not been kind to neo-liberalism, that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently, and serve the public interest well. It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favour of privatisation, liberalisation, and independent central banks focusing single-mindedly on inflation (Hedlund 2011, 258). In other words, the neoliberal regime has linked with it a cluster of results that should discredit it. It is defined by intermittent problems of shifting degrees, prompted by developments in currency or capital markets, leading to retarded growth, heightened poverty and increasing unemployment. Although inequality and poverty has constantly been a problem in all countries across the globe, two accounts are indisputable, one, that these problems are highly manifested in developing countries, and two, that there has been an abrupt escalation in the prevalence of poverty in the 1980s (Kiggundu 2002, 38). Critics of the neoliberal paradigm ascribe this to the execution of neoliberal strategies. It was estimated that 13-18 million individuals, in the early 1990s, died of poverty and starvation annually (Spaeth 1992, 149). Many of the developing countries at this period experienced economic collapse, broadening inequality, and increasing poverty. The SAP came about in Latin America (Spaeth 1992, 149). Similarly, privatisations implied that the trade unions were useless. Hence the availability of positions in the British public sector between 1979 and 1994 dropped by 29 percent (Chomsky 1999, 68). Throughout the Thatcher administration, more than 2 million people (Chomsky 1999, 68), mostly children, in Britain endured retarded growth and infirmity, which was ascribed to pervasive poverty.  The subsistence of people reliant on agriculture disintegrates and is even threatened (UNCTAD 2009, iii). The unrestrained movement of private capital leads to rapacious activities that has damaging impacts on the already impoverished and the dispossessed and on the ecological system. It changes the structure and reduces the level of state expenditure (UNCTAD 2009, iii-iv), negatively influencing the level to which the state’s welfare spending can counteract these unfavourable results for a vast portion of the population. Certainly, as revealed by the World Development Report (WDR) of the World Bank, state expenditure in relation to the larger economy has kept on escalating in OECD nations, and recently sustains 50% of GDP (Hildyard 1997, 5). In the meantime, in developing nation, state spending has barely touched 25% of GDP (Hildyard 1997, 6). Scholars remarked about the current global economy (Hildyard 1997, 6): “Government everywhere has grown, and kept on growing... Big government, far from being dead, is flourishing mightily.”  Conclusions and Discussions These following observations are derived from the articles of Bagchi (2000), Rodrik (1997), and Sindzingre (2006). First, effective sustainable development necessitates a combination of collaboration and competition. Second, there is no single means towards effective sustainable development in terms of particular institutions or rules. There are diverse measures depending on the original features of the country, as well as its cultural and ideological foundation. Third, the state can definitely occupy a major and helpful position in the process of development. Nevertheless, its capacity to carry out a positively contributing task is not determined by characterisation but relies on its organisational features such as the level of internal solidarity, the competence of its employees, and extent of independence. Fourth, the state is never the single major agency in the process of sustainable development that affects market forces. Locally, nonstate players like local capitalists can fulfil a favourable function in guaranteeing teamwork among the major entities involved. And lastly, development needs a concentration on the sustainable economic concerns of technology, capital, and resilience in adapting to shifting circumstances, while controlling state involvement. References n.a. (2011) “Africa’s Need for a Developmental State” Economic Report on Africa 2011, 95-111. Bagchi, A.K. (2000) “The past and future of the developmental state” Journal of World Systems Research, 398-442. Boyd, R. & Ngo, T. 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