Development in the 21st century: India and Brazil
Photo credit: Anasps
Debates over the possibility of a great convergence spurred by the relatively higher growth rates in parts of the developing world – in China, yes, but also in a number of other large countries such as India and Brazil – have provided stimuli for renewed debates in a wide-ranging array of topics, including those over the nature of the developmental state. Focusing on India and Brazil in this context may raise some eyebrows, for, unlike the successful catch-up of Japan and other East Asian ‘tigers’ with which the developmental state concept and its more recent reiterations have been associated, neither the Indian nor the Brazilian state managed to secure their developmentalist credentials, especially when the outcomes of the developmental strategies they followed are compared to those of the Asian ‘miracle’. But using the successful East Asian state form as the yardstick for the application of the developmental state concept everywhere would only betray the extent to which our collective grasp of political economy has been limited and ahistoricised: as the painstaking work undertaken by Eric Reinert and colleagues at the Other Canon suggests, the complementarity of economic and political development and the central role state had to play in orchestrating technological, economic and social development were well known to states in their various forms – city-republican, mercantilist, imperial and so on – for the last 500 years, if not before.
During this period, the developmental state has always been one that designs and orchestrates socio-economic-political strategies aimed at catching-up with whatever it deems an advanced economy or economic dynamic at a given point in time. The developmental state is, like all states, spatially Janus-faced – looking both inwards and outwards and anchored simultaneously in the national and the global terrain – but its role in making and remaking domestic socio-economic structures is primarily orientated towards the goal of catching-up with the more advanced economy/ies. This it must achieve not only in the shadow of the latter, but also in competition with other states vying for the same in an unequal world market whose dynamics, to make things worse, are always changing, thus requiring novel and ever more complex strategies to succeed.
The purpose of reconstructing the concept of the developmental state in these terms is not to restore the developmentalist credentials of the Indian or the Brazilian state, but rather to locate their developmental strategies in the historical ‘catch-up treadmill’ and, in so far as it makes clear that the developmental state is perpetually pursuing a moving target in an uneven global terrain, to pose the question of what possibilities and obstacles the current juncture presents them. In light of the complex implications of their dual anchorage in the domestic and the global terrain, addressing this question calls for analysis of a depth that cannot be afforded here or indeed in any single piece of work. But the aim here is much more modest, for I simply wish to point out only one contemporary challenge that no other developmental state in the last 500 years has had to face: catching-up in the face of de-industrialisation.
What has the Indian and Brazilian state done towards dealing with this challenge so far? Very little when de-industrialisation initially reached their shores; although by 1980, their respective strategies had succeeded in creating a significant industrial base – around 44% and 24% of total GDP in Brazil and India, respectively – the application of technology and the resulting degree of competitiveness varied greatly within and between them, with high-tech sectors accounting for a relatively small part in both cases, largely in the form of ‘pockets of excellence’ in atomic research, space technology and defence in the case of India, and aeronautics, agricultural research and petrochemicals in Brazil. The point here is that industrialisation had not yet succeeded in creating a cohesive domestic productive structure and their industrial bases were hardly ‘mature’ and ‘ripe’ for de-industrialisation of the kind that was visited on them: the share of employment engaged in manufacturing in Brazil peaked in the 1980s at 15% of total employment whereas in India it peaked later (2002) but at the even lower rate of 13%.
Not only did the state do little to stem de-industrialisation in both India and Brazil, but it contributed to it by its own embrace of a new developmental/catch-up dynamic, one based on ‘competitive insertion’ in global markets whose dynamics were being reformulated along neoliberal lines from the 1980s onwards. As they opened up their economies – more cautiously, but still decisively, in the case of India – and deepened their integration with advanced economies with higher levels of economic and technological sophistication, their most advanced industrial sectors were the first casualties. It is in this sense that India and Brazil can be said to have ‘imported’ de-industrialisation from advanced economies, but this was not entirely forced on them. Many factors no doubt contributed to the adoption of a new catch-up strategy at this point in time, but the important role played by the re-orientation of the Indian and the Brazilian state should not be underestimated. For it was key fragments within each state that decided to respond to the changes in the world economy during the late 1980s in favour of a catch-up dynamic orientated towards becoming competitive knowledge powers as the US – the advanced economy then casting a long shadow on developmental states everywhere – had redefined itself. This orientation survived changes in governments of different political orientations in both countries from the late 1980s onwards; India’s aim of becoming one of the top five global knowledge powerhouses is now officially a state project, as is Brazil’s goal of becoming the technological and environmental power of the 21st century.
The adoption of a raft of institutional reforms towards these goals, more often than not taking their cues from similar reforms undertaken by the US state, further contributed to de-industrialisation. The liberalisation of FDI, banking and capital flow rules, macroeconomic, intellectual property and other institutional reforms have resulted in the further weakening of the domestic productive structure, whose ‘pockets of excellence’ cannot generate the necessary capabilities to operate close to the technological frontier, a key prerequisite for becoming a knowledge/learning economy today. In practice, the gap has been filled by services and commodities in the case of Brazil and services and informal manufacturing in the case of India. Although these sectors are not condemned to technologically-unsophisticated and low value-added status, they may remain so unless unorthodox institutional reforms are undertaken.
I use ‘unorthodox’ intentionally here, for the more the state in India and Brazil has sought to catch-up with advanced economies by replicating their model, the more distant possibilities for unique social-economic visions have become. But alternatives are not impossible; precisely because development implies pursuing a moving target in an uneven global terrain, it cannot be achieved merely by following the lead of advanced economies, but requires unorthodox, imaginative and innovative strategies and, perhaps more importantly given the serious problems affecting developed economies today, novel visions of development altogether. While their dual anchorage in the national and the global economy necessarily limits states’ room for manoeuvre, even when both states were contemplating a new developmental/catch-up growth regime in the 1980s, the continental size of their economies – India’s more so than Brazil’s – offered them options that were not available to smaller developing countries.
What options are available to them in the decades ahead? If industrialisation as a catch-up strategy has been closed to them in the immediate future, this has less to do with technological change than with the financialisation of the world economy into which they are now (differently) integrated; certainly, it has little to do with their industrial bases having exhausted their potential. Finding a way to ‘reign finance in’ would help with the task ahead, as would establishing ‘smart’ production-based sectors that are research-intensive and aimed at overhauling production and consumption patterns in ways that favour quality, durability, low energy, recyclability, waste management and so on. Experimentation with different policies is key in achieving these goals; apart from turning finance away from speculation and into supporting these sorts of initiatives, the ongoing enclosure of knowledge in private hands, largely as a result of institutional reforms undertaken so far imitating similar developments in the US and other advanced economies, requires immediate attention. If services or commodities are to be the future engine of growth for these two countries and they are to become knowledge-intensive, unorthodox policies are required that replenish the knowledge commons and reverse the ‘tragedy of the anti-commons’ whereby accumulated intangible assets bloat the market evaluation of large firms and attract financial speculations, but severely limit real investments opportunities and the wide diffusion of knowledge in the society.
What is required to achieve these goals, first and foremost, is the abandonment of the perception that the developed countries hold the key to the only real and credible route to development. In concrete terms, that would mean a shift away from attempting to become competitive knowledge economies in the US mould, towards knowledge social economy visions that are India’s and Brazil’s own. The continental size of their economies and the long-list of social needs for large parts of their population – e.g. access to decent housing, education and healthcare, food security, good work opportunities and working conditions, and adequate social protection – makes such visions possible. But a knowledge social economy that makes meeting these needs simultaneously the means and the ends necessitates at the very least institutional innovations that counter the tendency of market players’ technological efforts from innovations based on short-term returns regardless of social or environmental costs towards meeting social needs, that direct finance towards job-creation in ‘smart’ productive processes and services, that stimulate much wider access to knowledge and considerable investments on upgrading the competencies of low-skilled workers, that enhance trust and respect for the independence of non-economic forms, that promote collective solutions and distributional policies that share economic dividends widely. Provided they are willing to experiment, only in pursuit of such social visions may the Indian and Brazilian state take advantage of existing windows of opportunity to reach the ‘developed’ status that has eluded them - and others - so far.