Three Essays on Developmental States

Marcel Dumas Gautreau

Advisor: Garett Jones, PhD, Department of Economics

Committee Members: Christopher J. Coyne, Peter T. Leeson

Online Location, Online
April 26, 2023, 12:00 PM to 01:30 PM

Abstract:

The concept of the Developmental State emerged to explain the rapid growth of a number of countries in East Asia in the postwar period. Arguing for the distinctive features of developmental states, its proponents emphasized the role of government intervention and industrial policy as well as the significance of strong states and particular social coalitions. This dissertation addresses the developmental state literature in the light of contributions by Public Choice, Austrian, and Development Economists.

The first chapter, “Rolling The Dice on Liberalism” considers Fukuyama’s “End of History” thesis, Olson’s “Stationary Bandit” model, Bueno de Mesquita’s “Selectorate” theory, and Albertus and Menaldo’s work on Autocratic Constitutions. It argues that there are two primary obstacles for any authoritarian regime’s willingness to engage in reforms, market-based or otherwise. The first is the possibility of overthrow by internal or external forces. The second is a time inconsistency problem in existing democratic states. One administration may be willing to engage with authoritarian regimes engaging in partial liberalization, while the next one may be satisfied with nothing less than regime change. Worse still, an authoritarian leader may step down under an expectation of amnesty from his immediate successors, only for a later administration to insist on a human rights tribunal. We argue that Fukuyama’s long-run prediction of a common marketization of the world should not be considered disproven by recent waves of populism and militarism around the world, on the grounds that authoritarian regimes face increasingly powerful incentives to engage in institutional upgrading.

The second chapter, “And the Economists Fled to Japan” investigates the connections between Developmental State Theory and the German Historical School of Economics, from the perspective of the Austrian School of Economics, and in particular the Misesian critique of the dynamics of interventionism. The particular fallacies, motivations, and crises attributed to interventionism by Mises in Human Action do not readily describe the rationales for industrial policies pursued in countries like South Korea or Taiwan. The bundle of policies pursued by Developmental States, are informed by a heterodox economic lineage that can be traced back to the German Historical School of Economics. The paper further calls for a thorough reevaluation of the Misesian narrative on the historical setting of the Austrian School, which paints the GHS as the first of the school’s irreconcilable enemies. Mises identifies the Austrians with the Marginalist revolution, and through it associates the school with philosophical liberalism and pro market schools of thought with their origins in the British Isles. In fact, the GHS should be properly understood as a precursor to the Austrian School, and we argue for an Austrian re-integration, or at least re-evaluation, of pre-Schmollerian GHS thought, for example as practiced by Joseph Schumpeter. This will allow the Austrian School to more effectively recognize its place in the social sciences, and address interventionist arguments that do not come from a Keynesian or Marxist perspective.

The third chapter, “Freedom, Unity, Capitalism” explores how Bashar al-Assad attempted to liberalize the economy of the Syrian Arab Republic. The term he used, “social market economy,” originally referred to the reforms implemented in post-National Socialist West Germany. He was likely inspired by the transformations of China and neighboring Lebanon. We find that Bashar al-Assad faced constraints similar to developmental states like Singapore, South Korea, and Taiwan, and replaced appointees based on his kin network with foreign-educated Syrians of a more technocratic inclination in an attempt at what has been called “authoritarian upgrading”. His early reforms, however constrained the reach of the patronage networks on which his Ba’ath Party relied not only for graft, but as a channel for Syrians to report social and economic grievances. This compromised his ability to appropriately gauge the threats to the security of the Syrian state.