1. Statist Theory: Background
Question from Gerschenkron:
Are there any advantages to “backwardness”?

2. Statist Theory: Background
Recall Gerschenkron’s insight
Timing matters for how states develop
Early and late players in the game of state survival develop differently

3. Statist Theory: Background
Review the question:
How do developers amass capital to invest in industry?
Early developers (Britain)
Firms in a free market
Middle developers (Germany)
Banks
Late developers (Soviet U)
State itself

4. Statist Theory: Background
So, what ideologies justify the different development strategies in Britain, Germany, and the Soviet Union?

5. Statist Theory: Background
Different ideologies
Early developers (Britain)
Laissez-faire (Smith, Ricardo)
Middle developers (Germany)
Nationalist (List)
Late developers (Soviet U)
Communist (Marx, Lenin)

6. Statist Theory: Background
Wrap up Gerschenkron
Timing matters for how states develop
Early and late players in the game of state survival develop differently
The later development occurs, the greater the role of the state

7. Premises of Statist Theory
States have the potential to promote development within their own borders
(NOT simply “externally conditioned”)
States have interests autonomous from society’s in promoting development because they are responsible for national security; they must compete militarily and economically in the international state system
Ability of states to promote development depends on the nature of state institutions 7

8. Statist Theory Characteristics of developmental state bureaucracy
Review your notes from last class 8

9. Statist Theory Characteristics of developmental state bureaucracy
Merit/skill-based recruitment technocrats
Performance-based rewards
With competitive salaries, proper incentives
Belief in bureaucratic mission
Insulation from societal pressures
Power to formulate and implement policy 9

10. Statist Theory Characteristics of predatory state bureaucracy
Recruitment based on patron-client ties
Policy based on personal benefit not mission
Not insulated from societal pressures
Lacking in ability to formulate good policy
Lacking in authority/power to implement policy

11. Statist Theory: Predicted Outcomes
Developmental state institutions  wealth
Predatory state institutions  poverty

12. Neo-liberal Theory: Background
Long tradition dating back to Adam Smith’s Wealth of Nations

13. Neo-liberal Theory: Background
Adam Smith
Human beings have the natural “propensity to truck, barter, and exchange…”
Exchange leads to
Specialization
Division of labor
 Maximize productivity

14. Neo-liberal Theory: Background
Adam Smith
Individuals’ maximizing their own productivity accrues to the benefit of society

15. Neo-liberal Theory: Background
What’s Adam Smith’s view of the state?

16. Neo-liberal Theory: Background
What’s Adam Smith’s view of the state?
“The sovereign”
“No human wisdom…could ever be sufficient…to direct the industry of private people towards the employments most suitable to the interest of the society.”

17. Neo-liberal Theory: Background
Adam Smith
Minimalist state
National defense
Domestic order
Property rights
“Public works”
Public goods
Merit goods

18. Neo-liberal Theory Deepak Lal, UCLA
Neo-liberal theory views individuals as naturally self-interested and rational actors
“Numerous empirical studies from different cultures and climates show that uneducated private agents—be they peasants, rural-urban migrants, urban workers, private entrepreneurs, or housewives—act economically as producers and consumers. They respond to changes in relative prices as theory would predict. The economic principle is not unrealistic in the third world; poor people may, in fact, be pushed even harder to seek their advantage in the market than rich people.”
Free markets ‘state of nature’ 18

19. Neo-liberal Theory Deepak Lal, UCLA
State intervention is the problem, not the solution
“From the experience of a large number of developing countries in the postwar period, it would be a fair professional judgment that most serious distortions are due not to imperfections of the market mechanism but to irrational governmental interventions.”

20. Neo-liberal Theory: Predicted Outcomes
Reliance on free markets wealth
Excessive state intervention  poverty

21. Neo-liberal Theory Willing to tolerate Inequality
Slower growth on the way to wealth
 Because the alternatives (state intervention) are worse