The developmental state has been a central feature of the East Asian economic miracle, which has made possible the region’s rapid growth towards prosperity while lifting millions of people across Asia out of poverty. Essentially, the developmental state is an institutional set-up comprising four key characteristics: an efficient and technical economic bureaucracy; the insulation of economic officials from political pressure; the existence of a pilot agency in charge of planning the national strategy for economic development; and market-conforming methods of state economic intervention.
The developmental state model was first termed by Chalmers Johnson in the 1980s to delineate the institutional architecture that supported Japan’s post-war development, though its key features have been recognised in the developmental experience of other countries, including South Korea, Taiwan, and – to some extent – China, too. In their developmental phase, on the economic front the state apparatus in all these countries took the role of coordinating and guiding the private sector towards national industrial development, usually sustained by high investment rates and a mercantilist trade strategy. Meanwhile, on the political front, the national leadership assumed authoritarian traits or, at best, a less-than-accountable attitude towards public opinion.
Naturally, the wave of democratisation and economic globalisation that has swept over East Asia over the last three decades has drastically undermined developmental institutions, with many scholars agreeing the developmental model is a thing of the past. But is it really so? In the last few years, new digital technologies have emerged and uprooted much of the pre-existing social and economic normality, especially since the outbreak of the Covid-19 pandemic. So much so that it can be argued that the process of digitalisation is reshaping the state institutions and state-society relations upon which the East Asian developmental state was built.
Winds of Disentanglement and Accountability: A Death Knell?
Neo-liberal globalisation was one of the main forces pushing against the developmental model. Making it possible to move capital and knowledge around the globe at low costs, information and communication technologies (ICT) have had the critical role of enabling trade, economic, and financial liberalization since the end of the twentieth century. This ICT-enabled trend of neo-liberal globalisation applied severe pressure on key policy instruments of the developmental state – such as trade protectionism, financial controls, and substantial fiscal incentives – while mature and globally-competitive domestic companies pressed the state to relax the constraints imposed by developmental institutions. Faced with pressure on multiple fronts, East Asian states were often forced to disentangle from the complex set of policies and state-business relations that was inherited from the developmental phase. Under PM Koizumi Junichiro, Japan underwent a “neo-liberal revolution” aiming at curtailing the capacity of state economic intervention to implement strategic economic plans, while in South Korea, during the presidency of Lee Myung-bak, the pilot agency guiding the national technological upgrade was dismantled to give more room to market forces.
However, social media was the domain where the digital revolution had the biggest impact on the developmental state’s institutions. One of the requirements of the developmental model was the autonomy – or at least a good degree of leeway – of the political-bureaucratic bloc relative to popular pressure and bottom-up political demands. In several East Asian states, this tenet was already critically undermined by political democratisation, but the spread of digital social networks has further enhanced the power of public opinion to hold national leaderships accountable. The 2016 downfall of South Korean President Park Geun-hye epitomises this trend: large nationwide demonstrations were organized on social media to demand her resignation following an influence-peddling and bribery scandal that involved Park, a close aide of hers, and some of Korea’s biggest corporations.
Yet, the capacity of digitalisation to erode developmental industrial policies as well as the insulation of state elites from bottom-up political pressure has not proved to be definitive. ICT-enabled globalisation might have made East Asian developmental states more open to transnational flows, yet key features resisted change. In Taiwan, the developmental pilot agency known as the Council for Economic Planning and Development might have lost its original economic strategy-planning purpose, but it was the Ministry of Economic Affairs that stepped forward to steer the national industrial ecosystem towards technological upgrading to keep it competitive within a globalised economy. Meanwhile, as for the capacity of social media to empower public opinion’s scrutiny of national leaderships, during the last few years South Korean high-ranking officials have reportedly funded cyber-activists to boost online comments and posts praising the government in order to manipulate popular discourse around President Moon Jae-in.
Keeping the Eye on the Digital Prize
Nevertheless, the developmental state is not merely a passive object to digitalisation. The economic transformation enabled by the advent of new digital instruments – including artificial intelligence, internet of things, or cloud computing – has the potential to reshape the global industrial landscape with computer-integrated manufacturing, digitalised services, and wholly new data value chains. For instance, according to an estimate, 5G could enable up to 13.2 trillion USD of global economic output by 2035. The opportunities offered by the digitalisation of the economy are simply something that East Asian developmental elites would not afford to miss.
Many authors have noted that the developmental state did, in fact, adapt to the digital age and morphed its appearances but not its substance. Whereas in the last century the East Asian developmental state could target selected national companies to drive industrial and technological growth, nowadays developmental elites target selected national technological-industrial sectors to drive economic growth. Instead of “picking the winner” according to efficiency criteria, market-conforming methods of state interventions now rely more on deploying regulatory instruments to channel economic resources in their preferred direction. China – which, among East Asian states, retains the biggest developmental apparatus comprising state-controlled enterprises, capital controls, and massive fiscal power – has supported its technological upgrade in part thanks to technical regulations encouraging foreign companies to invest in key Chinese industries, thus spilling over their technological know-how. Meanwhile, in less than a decade South Korea has established a thriving ecosystem for innovative start-ups as a result of regulations approved by Park’s government, which incentivised the mobilisation of private financial resources.
Yet, economic interventions continue to take more direct forms, like with the Korean New Deal proposed by Moon Jae-in in 2020 to relaunch the South Korean economic recovery after the pandemic. Part of the planned spending strategy includes investments in national digital infrastructures as a short-term stimulus, which in turn will build overhead social capital that could support long-term digital economic growth. It is all the more interesting to note that pilot agencies might soon be back, too. After his inauguration, Japanese PM Suga Yoshihide announced his intention to create a new digital agency tasked with becoming a “control tower” promoting the digitalisation of government work and resetting the rules for data generation and collection. The plan is bold, as the ultimate goal is to lead the digitalisation of Japanese society as a whole.
As such, it is hard to dismiss the developmental state as pertaining to the past. Digitalisation has affected the model’s pillar institutions. However, state and society have rearranged their relationship to preserve the integrity of the original developmental mission, in what scholars have pointed out to be a testament to the resilience of a “developmental mindset” inherited from the days of the economic miracle.
Chu, Yin-wah (2021) Democratization, globalization, and institutional adaptation: the developmental states of South Korea and Taiwan, Review of International Political Economy 28(1).
Larson, James F., and Park, Jaemin (2014), From developmental to network state: Government restructuring and ICT-led innovation in Korea, Telecommunications Policy 38(4).
Poon, Daniel and Kozul-Wright, Richard (2019), Learning from East Asia: Catch-up and the Making of China’s Developmental State, in “How Nations Learn: Technological Learning, Industrial Policy, and Catch-up”, edited by Arkebe Oqubay and Kenichi Ohno.
Schaede, Ulrike (2012), From developmental state to the ‘New Japan’: the strategic inflection point in Japanese business, Asia Pacific Business Review 18(2).
Wade, Robert H. (2018), The Developmental State: Dead or Alive?, Development and Change 49(2).