If it still looks like a duck, swims like a duck, and quacks like a duck – then it probably still is a

Recent years have witnessed a notable re-embrace of the state鈥檚 role in the economy, leading to declare that the set of free market economic policy reforms widely known as the Washington Consensus has .

First popularized by U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher in the 1980s, the Washington Consensus policies offered a set of policy guidelines for developing countries, many of which were struggling with high debt and high inflation at the time. These free market reforms included trade and financial liberalization, privatization, deregulation, the removal of capital controls, fiscal austerity (cutting public spending) in order to achieve strict targets for maintaining low inflation and low fiscal deficits, the adoption of independent central banks, and deregulating restrictions on foreign investment, among others. Broadly speaking, the policies sought to roll back the role of the state in the economy and unshackle the animal spirits of the free market. In the 1980s, adopting the policies became binding conditions for developing countries to receive debt relief and new lending by the International Monetary Fund (IMF) and World Bank, in the 1990s, the policies served as the basis for World Trade Organization (WTO) membership rules 鈥� and ever since then, the policies have become a cornerstone of the curricula in economics departments at universities across the world.

In addition to diminishing the importance of the role of the state in development, one of the profound changes introduced with the Washington Consensus was to overturn the previous, long-standing notion that developing countries needed to adopt long-term national economic development strategies which sought to achieve structural transformation 鈥� i.e., shifting their economies over time from being based on primary commodities towards ones based more on manufacturing over time. The old idea was that countries would first develop their national economies and only later focus more on integrating into international markets. But the Washington Consensus inverted that logic, throwing out the focus on long-term development strategies and manufacturing and instead encouraging developing countries to integrate into the global economy right now, as they are, and to just stick with their current comparative advantages in primary commodities. Simply being successful commodity producers would be the new ticket to their development.  

Despite the widespread acceptance of these ideas for the last four decades, recent years have seen the Washington Consensus grapple with new forms of state capitalism. And on the face of it, some of these trends appear to mark a significant departure from the Washington Consensus. For example, even before the Trump administration dramatically increased tariffs on major trading partners, there had been an increase in the number of new , sovereign wealth funds, and state-owned enterprises of various types in both advanced and emerging economies around the world. China, Russia and others appear to be promoting new types of hybrid . Notably, the changes have occurred in the aftermath of 2008 global financial crisis, when free market enthusiasts were by the failure of markets to 鈥渟elf-regulate鈥� as promised, leading to the crash and nearly a decade of the state coming to the rescue with 鈥渆xtraordinary monetary policies鈥� adopted by the world鈥檚 largest central banks.

Shortly after the IMF changed its official on capital controls from 鈥渁bsolutely never鈥� to 鈥渨ell, maybe sometimes,鈥� the former IMF Managing Director, Christine Lagarde, sought to distance the fund from its notorious structural adjustment programs with loan conditions based on Washington Consensus policies. 鈥淪tructural adjustments? That was before my time,鈥� she to a press conference question. 鈥淚 have no idea what it is. We do not do that anymore.鈥�

In 2016, the IMF鈥檚 internal research department made a stunning : for decades, the institution had been overselling the benefits of two of its major policies on fiscal austerity during economic slowdowns and the deregulation of financial markets. It that not only had the two policies 鈥渘ot delivered鈥� the higher economic growth rates that had been promised, but they may have even done more harm than good by exacerbating economic inequality, which itself could become a drag on future economic growth rates.

Even before the COVID crisis struck in 2020, the IMF鈥檚 new chief economist, Gita Gopinath, sometimes sounded more like John Maynard Keynes than Milton Friedman as she questioned the conventional wisdom on capital account liberalization and openly championed the use of large fiscal deficits for fiscal stimulus (in the rich countries). The change in tone has also come from other unexpected free market stalwarts ranging from the to the president of the to , all of whom now say that 鈥渋ndustrial policy鈥� is back in fashion. Thomas Piketty鈥檚 was a best-seller, resonating with growing concerns about widening economic inequality and making it to call for raising taxes on the rich. And now, with post-COVID fiscal policy let loose, central banks are funding massive fiscal stimuluses, deficits have been blown out of historic proportion, while very few seem worried about inflation. Even the IMF, as it doled out billions of dollars in emergency lending to developing countries in the wake of the COVID economic slowdown, seemed to the immense deficits being run up by its borrowing countries without its traditional consternation. All of these developments led Financial Times columnist Martin Sandbu to recently that the IMF and World Bank have undergone a remarkable 鈥渃onversion鈥� from free markets orthodoxy to now supporting the 鈥渁ctivist state.鈥�

But is it all really so?

While the IMF has certainly on its new flexibility during the COVID crisis, an independent of expenditure projections in the IMF鈥檚 October 2020 World Economic Outlook database shows that austerity cuts are expected in 154 countries in 2021, and as many as 159 countries in 2022, with the trend continuing for an average of 139 countries per year through 2025 鈥� not exactly a striking departure from its traditional predilection for austerity.

But beyond the issue of the IMF鈥檚 fiscal austerity, the policies of the Washington Consensus are collectively much farther-ranging and have often had a critical impact on the shape of the economic development strategies of developing countries. In order to believe the consensus has really ended, we would need to ask many more questions about the policy challenges still faced by developing countries that are struggling with integrating into the global economy. For example, if the IMF and World Bank have truly renounced the Washington Consensus, have they changed their position on trade liberalization for developing countries, or what critics would call premature trade liberalization, i.e. lowering tariffs before domestic industries have become competitive in international markets? (In contrast, tended to do , by keeping tariffs high until industries were competitive in global markets, and lowering tariffs). Have the institutions called on the WTO to alter its membership rules that require premature trade liberalization of its developing country members?

Similarly, have the IMF and World Bank called on the WTO to undo its restrictions on a host of critical 鈥渁ctivist state鈥� industrial policies that had been used historically by rich countries to build up their manufacturing sectors over time? Rather than discouraging industrial policies and telling countries to just focus on their current (static) comparative advantages in primary commodities, are the institutions now really advising countries to adopt ambitious industrial policies that defy their current comparative advantages and seek to develop higher valued-added manufacturing industries over time? Have they called on developing countries to renegotiate their many international investment agreements and free trade agreements that contain on industrial policies?

Have the IMF and World Bank advocated for the re-regulation of FDI in developing countries to ensure that it supports domestic industry and the pursuit of strategic priorities of long-term national development strategies? On labor issues, has the Bank finally stopped giving countries higher scores on its coveted annual Doing Business rankings if they lower wages and quash labor rights? On monetary policy, has the IMF renounced its fixation with raising interest rates in order to keep inflation at unnecessarily low levels, a practice that can end up blocking needed increases in public investment? Is the IMF now advising countries to abandon tight fiscal and monetary policies in favor of more expansionary ones to support increased public investment, employment and GDP growth? And to enable this, is the fund now suggesting that countries bring their 鈥渋ndependent central banks鈥� back under the direction of their finance ministries?

Has the World Bank abandoned its recent efforts to seek additional infrastructure financing from private capital markets through the and instead begun promoting the reestablishment of public development banks for infrastructure financing? After decades of advising the privatization or commercialization of public health and education services, are the IMF and World Bank really now suddenly promoting publicly financed and provided healthcare and education services with universal access? Are the institutions today calling for the of the public services and utilities they once insisted be privatized?

And at the broadest level, are the Bretton Woods institutions actually now rethinking the need for developing economies to 鈥渋ntegrate into the global economy鈥� first, and worry about national economic development later? Are they instead now encouraging such countries to focus first on building up their national economies through long-term national economic development strategies to build up the domestic manufacturing sector, and worry about global integration later?

Since the answer to all of these questions is 鈥減resumedly not,鈥� it is safe to say that not a whole has changed yet.

While it’s easy to be swayed by the institutions鈥� fashionable new lingo on gender, inequality, green investment and Covid stimulus, we would do better to look at the institutions鈥� full body of current policy advice on development strategy and the actual loan conditions to see how the nuts and bolts of the Washington Consensus remain quite intact.

is an Adjunct Professorial Lecturer in the School of International Service at American University in Washington DC. Photo: by Carol M. Highsmith /Library of Congress

More expansionary fiscal and monetary policies听are needed to meet the Sustainable Development Goals

This month, the international community will gather at the United Nations in New York to review progress on the implementation of the 17 Sustainable Development Goals (SDGs) that are intended to reduce poverty, hunger and economic inequality and promote development, particularly in developing countries. But only one of the SDGs, #17, says anything about how to finance all the efforts. While SDG 17 calls for more international cooperation and foreign aid, it only suggests that developing countries strengthen domestic resource mobilization (DRM) by improving their tax collection and curtailing illicit financial flows, etc.

While important, this approach neglects much bigger problems with the prevailing set of macroeconomic policies that hamper the ability of developing countries to increase public investment, employment and scale-up the long-term investments in the underlying health and education infrastructure needed to achieve the SDGs. The policy framework used in many developing countries is characterized by an overly restrictive low-inflation target achieved by using high interest rates and backed up by strict inflation targeting regimes at independent central banks.

These prevailing policies place major constraints on the ability of countries to mobilize more domestic resources, thus present a major obstacle to achieving SDG 17. The problematic nature of the policies was underscored in a 2017 joint publication by the听听which called on countries to adopt 鈥渁 more accommodating macroeconomic framework.鈥� This would entail lowering interest rates and allowing governments to use 鈥渉igher budget deficit paths and/or higher levels of inflation without jeopardizing macroeconomic stability鈥� in ways that could enable increased public investment. But doing so would bump up against the prevailing conservative policy orthodoxy as practiced by most central banks and finance ministries around the world and enforced by the International Monetary Fund (IMF) through its loan conditions and policy advice to developing countries.

The IMF insists the policies are needed to first ensure 鈥渕acroeconomic stability鈥� before other goals like the SDGs can be pursued. But there is concern that the IMF鈥檚 definition of macroeconomic stability is too restrictive. While policies have been successful at reducing inflation in developing countries, they tend to suppress aggregate demand and make it difficult for governments to generate higher GDP growth and employment. Most importantly, they undermine the ability of countries to engage in deficit spending needed to significantly increase public investment for long-term development. To achieve and maintain low inflation, the IMF typically advises central banks of developing countries to raise the interest rate at which they lend to other banks to between 15 and 25 percent or higher, which can quickly make any deficit financing by governments unaffordable. The net effect is to constrain governments鈥� ability to increase long-term public investment as a percent of GDP in key听. The deficit reduction policies reduce resources available for long-term capital expenditure and instead often lead to layoffs, hiring freezes and public sector wage caps, which tend to听听the basic functioning of government over time. In other words, today鈥檚 advocates of the SDGs have a 鈥渕onetarism problem鈥�.

The prevailing orthodoxy is monetarism, a school of thought in economics which came to听听with the Reagan/Thatcher revolution of the 1980s and that proposes that the size of the money supply in an economy is the key factor to control for reducing inflation and managing economic cycles. Although their central theory about a link between the money supply and nominal GDP rates was disproven over time, monetarists still influence contemporary policy: primarily, the prioritization of low inflation over other goals and use of high interest rates as the key policy tool to lower inflation.

The ILO, UNICEF and UN Women report called for a 鈥渕ore accommodating macroeconomic framework,鈥� in which more expansionary policy options are considered by developing countries. These听听allowing for higher budget deficit paths and/or permitting higher levels of inflation. While annual inflation rates above 20 percent are certainly a problem, the historical record on the听听shows that countries were able to maintain moderate levels of inflation 鈥� between 10-20 percent 鈥� for long periods without jeopardizing macroeconomic stability. This stands in stark contrast today鈥檚 prevailing monetarist orthodoxy that prioritizes inflation at 5 percent or lower for developing countries.

Monetarist policies have been broadly criticized for slowing potentially higher GDP growth rates and undermining the ability of countries to scale-up long-term investment in public health, education, and infrastructure. Important听听have been issued about how IMF policies 鈥渙verly concerned with macroeconomic stability鈥� may be too austere, lowering economic growth from its optimal level and 鈥溙齪rogress on poverty reduction.鈥�

While the academic literature on the impacts of IMF programs on economic growth is mixed, there is considerable听听that IMF听听is correlated with听听, and negative听听on听听and听(the IMF opposes听). There are also concerns about the disproportionately negative economic听, and how the policies听governments鈥櫶齮o fulfil economic and social听.

But听听the criticisms, the IMF is听听conditioning loans and advising developing countries to adopt overly restrictive fiscal and monetary policies. This situation presents a challenge for advocates of the SDGs who want countries to do more than just increase tax collections.

There is much more that developing country governments could do on DRM. In addition to a 鈥渕ore accommodating macroeconomic framework,鈥� advocates of more progressive approaches to DRM are calling for听听the critical role of听, and in particular,听. Despite the projected trillions of dollars needed to meet the SDGs, there is听听that 鈥渢raditional鈥� public funding sources cannot fill the gap. Central banks, too, have historically played听听roles in policies designed to achieve national development听听that should be听. Others听听the IMF could听听to better support countries鈥� efforts to achieve the SDGs 鈥� but doing so is likely to require political pressure by civil society advocates.

But expanding the tool box will require challenging the dominant orthodoxy on macroeconomic policy and exploring听heterodox听approaches that offer options for increasing public investment. With more expansionary policies, developing countries could increase GDP growth, employment and long-term public investment while improving听. Advocates for the SDGs can start by insisting that the entire range of macroeconomic policy options is fully explored and opened to a broader and more inclusive public debate.

Rick Rowden recently completed his PhD in Economic Studies and Planning from Jawaharlal Nehru University (JNU) in New Delhi.

This essay was first published on the听.听

In the fall of 2017, SPERI鈥檚 Matthew Bishop and Anthony Payne gathered essays from a group of nine development economists who produced essays on 鈥樷�� (SPERI Paper No. 43). They drew upon a body of work published on the SPERI Comment blog and in other publications about the state鈥檚 appropriate role in development and the nature of a modern industrial strategy. The essays examined the current status of the notion of a 鈥榙evelopmental state鈥� in today鈥檚 contemporary context of globalization. This article reviews the series, highlights some key takeaways, and considers some other elements that were not addressed by the essays.

The key takeaways from the SPERI series

Bishop and Payne described the traditional key goal of a developmental state as building markets, but then deliberately distorting them in order to pro-actively support the build-up of domestic manufacturing firms over time. Typically, developmental states used trade policy, public financing, subsidies, tax incentives and other industrial policies to build-up their manufacturing sectors. They noted that the free market approach would have countries only exploit their current 鈥榗omparative advantage鈥� as if it was a naturally determined and static condition, whereas a developmental state would view comparative advantage as dynamic and changeable over time, and to be manipulated in a long-term process of constant industrial upgrading.

Today, Mariana Mazzucato reminds us of the critical role states have played in not only making markets but also supporting technological development and innovation. She builds on a tradition of work by Alice Amsden, Chalmers Johnson, Robert Wade, Peter Evans, Meredith Woo-Cummings and many others, not to mention Alexander Hamilton and Friedrich List.

The free market critics of state intervention have long claimed that the private sector can do it all by itself 鈥� if the state would just get out of the way. In contrast, as SPERI鈥檚听听(2017) noted, the state has unique coordination and convening powers, and the ability to pool risk, create markets and provide public goods that the private sector cannot undertake.

Therefore, as David Booth鈥檚 essay noted, the debate over a role for the state in development 鈥榠s largely settled鈥�. The question today is how states can best carry out these functions.

Some essays alluded to the importance of state support for long-term research and development (R&D) coordination between the government, public research institutes and universities and domestic manufacturing firms. States have the financing, coordinating and convening powers to support R&D that develops firms鈥� capabilities in new technologies, product and process innovations, and market development. From the earliest experiences with industrialization strategies, countries learned that waiting for private companies to finance their own R&D by themselves did not produce very many new innovations. Instead, public support for R&D by 鈥榙evelopmental states鈥� was essential.

Henry Wai-chung Yeung noted the benefits of state support for industrial clustering, and how clusters promote cooperative industrial ecosystems and inter-firm and inter-industry linkages. Clusters can also help firms to leverage new sources of technologies and markets needed for accessing global production networks. While integration with global production networks can be useful, it can also stifle development when firms face low-price pressures by monopsonies and are unable to move up the value-added production chain. State-led support for R&D can be critical for overcoming such challenges and enabling skills and technological upgrading.

Developmental states must have governments which have made long-term commitments to pursuing a pro-active industrialization strategy that are sustained over time. This requires a broad political consensus or settlement agreed among key domestic political constituencies and key sectors of the economy. Only with such a political settlement in place can a country proceed with adopting the right trade, foreign direct investment (FDI), monetary, finance, taxation, R&D and technology policies needed to pursue an industrialization strategy over time.

In many countries, however, there is an absence of such political settlements. Instead, the consensus is to maintain the status quo as a producer of primary agriculture or extractive commodities. In these cases, the small or nascent manufacturing sectors tend to be relatively newer and politically weaker than the entrenched commodity producers, and lack the political support for getting the type of trade and macroeconomic policies needed for their development. As David Booth noted, often the most important policy weaknesses in many countries have domestic causes. So, having the right political settlements in place is the critical first step for a developmental state to succeed.

Regarding discipline, experiments with industrialization in Latin America and Africa in the 1950s, 60s and 70s often went badly because the states lacked independent domestic bureaucracies and institutions which had the political will to cut-off trade protection and subsidy support from firms which were not working to improve their efficiency and competitiveness over time. In contrast, the institutions in many East Asian economies had the political support and independence to discipline non-performing firms by cutting-off industrial policy support. Thus, Kunal Sen noted the importance of political settlements that allow for the state to discipline even politically-connected firms.

On financial deregulation, Valbona Muzaka noted that the industrialization efforts in India and Brazil have become stifled not so much because of technological change but because of their premature degree of financial integration into the global economy, and that both countries will need to find a way 鈥榯o reign finance in鈥�. If states deregulate their financial sector too prematurely, investors will prioritize short-term speculative initiatives over long-term national economic development priorities. As Ziya 脰ni艧 noted, developmental states must pro-actively direct finance in strategic ways in order to drive industrial development 鈥� which cannot happen with a听laissez faire听approach to financial regulation. Courtney Lindsay pointed to the importance of strategically targeting subsidies, financing and tax incentives to support the development of infant and exporting firms as critical tools.

脰nis also noted that FDI cannot be left unregulated. Rather, incentives and disincentives must be used by developmental states to prioritize the most appropriate types of FDI needed to support strategic development priorities. For example, China鈥檚 openness to FDI was always based on 鈥榓n active bargaining process focused on aligning the terms of entry with its broader strategic priorities鈥�.听Other entry requirements such as local content rules are critical for incentivizing FDI to establish forward and backward linkages with domestic firms. Traditionally, developmental states used rules of entry for FDI that included technology-transfer requirements to assist domestic firms (but these have been largely outlawed). Notably, such an approach to regulating FDI is fundamentally different from the听laissez faire听open-door approach to FDI.

David Booth noted that developmental states have typically tried to ensure that an industrialization strategy is first based on improvements in the productivity of the agricultural sector. If food production becomes more efficient and fewer resources are used to produce food, it is presumed more resources could be redirected to developing manufacturing and services. There are also useful synergies that can occur between improving agricultural productivity, local farmers and manufacturers of agricultural machinery.

While the East Asian success stories tend to get a lot of attention from development economists, Valbona Muzaka reminded us that it is useful to consider the whole range of historical experiences with industrialization going back over 500 years to the earliest examples in the UK, Europe and the US. Throughout history, 鈥榯he 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 at a given point in time鈥�.

Things missed by the SPERI series

Although it was occasionally touched on in passing, such as by Valbona Muzaka, one critical item neglected by the authors in the series was the imperative to move towards green industrialization. Muzaka noted the need 鈥榯o establish 鈥渟mart鈥� 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.鈥�

This is where 21^st听century development economics must make a big leap forward from its 20^th听century predecessors. The crises of climate change, environmental pollution, natural resource depletion and species extinction demand that industrial production and consumption are radically overhauled going forward. Developmental states must aggressively scale-up new green production systems based on renewable energy, materials sciences, recycled inputs and recyclable outputs, and closed systems with zero pollution, etc.

None of the essays explicitly mentioned the utility of trade protection (tariffs and quotas, etc). Economic historians such as Alice Amsden, Erik Reinert and Ha-Joon Chang have explained how developmental states used trade protection while first building鈥搖p their domestic manufacturing industries until the point at which they were competitive in world markets, and only then began to liberalize trade in those areas. Although this approach is diametrically opposed to free trade theory, this was a basic rule of thumb for all successfully industrialized economies. Today鈥檚 developmental states may want to think twice about signing trade treaties and investment agreements that prematurely lower their tariffs.

Today鈥檚 trade negotiators from industrialized countries and many mainstream university economics curricula promote the notion of a need for 鈥榓 level playing field鈥� in international trade relations, which strongly appeals to most people鈥檚 sense of 鈥榝airness鈥�.听 Despite the ubiquity of the concept, fairness has no basis in the history of how the rich countries industrialized, and the concept never guided their trade and FDI policies during their industrialization trajectories. If anything, the key takeaway from the historical record is that developmental states must temporarily pursue decidedly 鈥榰nfair鈥� trade relations precisely so they can support the development of their domestic manufacturing industries. Successfully pursuing structural transformation has never been about being 鈥榝air鈥� to your trading partners.

The series did not explicitly spell out the important role of public development banks as critical institutional tools for developmental states. Development banks provide the essential long-term, low-interest 鈥榩atient capital鈥� that private banks and international financial markets cannot. This is because short-term profit is not the overall goal of public development banks. Instead, their goal is to support public policy objectives that are necessary for implementing long-term national economic development strategies.

Public development banks can also steer needed finance to important sectors or regions that would not otherwise get it from private finance, supplement the financial sector by filling gaps in credit supply or demand, and promote economic stability through counter-cyclical lending. Public development banks can also support social goals such as improving standards and by linking financial access to improvements in social or human rights safeguards.

From the earliest experiences with industrialization strategies, countries learned through trial and error that waiting for private entrepreneurs to establish critical industries when the private sector was either unwilling or unable to do so was not a winning strategy. It became clear that in some sectors, the state would need to step in as the 鈥榚ntrepreneur of last resort鈥� with state-owned enterprises. Mazzucato goes even further, suggesting that states can step-in pro-actively as entrepreneurs of 鈥榝irst resort鈥�, particularly when they are willing and able to take on extreme risks, independent of the business cycle.

While innovation is important, the essays did not underscore the importance of the art of reverse-engineering, emulation and the process of 鈥榣earning-by-doing鈥� that are so critical to upgrading manufacturing skills over time. Today鈥檚 industrialized countries did not strictly enforce patents and copyrights, and regularly poached innovators and innovations alike from other countries during their industrialization trajectories. Only much later, when they had something to lose, did they start becoming concerned about intellectual property rights (IPR) enforcement. Yet, stealing advanced technologies, reverse-engineering and emulation have long been critical learning-by-doing pathways for manufacturing sector development.

Today鈥檚 developmental states may want to think twice about signing trade treaties and investment agreements that promise to more strictly enforce IPRs of more advanced competitors. Notably, it can take more than a few years from the time when a complaint for IPR infringement is first filed, a final ruling is issued and corrective measures are fully implemented by the offending party. Therefore, it may behoove developmental states to pro-actively violate their IPR commitments when necessary for as long as possible in order to foster strategic industrial upgrading because the long-term gains from learning-by-doing and emulation could outweigh the short-term losses from fines and penalties.

The essays neglected to mention the critical problem with what the IMF and most macroeconomists today call 鈥榩rudent鈥� and 鈥榮ound鈥� fiscal and monetary policy. In 1980, Milton Friedman鈥檚 monetarism 鈥� the belief that very low inflation and very low budget deficits are more important than anything else 鈥� was but only one of several acceptable positions along a range of viable fiscal and monetary policy options. It was a conservative one, but only one of several options. Yet, over the last 40 years, this one position has come to be the only thing taught at nearly all university economics departments and in nearly all textbooks.

As a result, today most central banks in developing economies regularly prioritize raising interest rates very high in an effort to keep inflation very low. But, consequently, the high interest rates make crucial deficit spending on long-term public investment unaffordable. Applied year after year for the last few decades, this approach has left public investment as a percent of GDP in many countries chronically underfunded, with often dilapidated or nonexistent infrastructure.

In contrast, developmental states understood that greatly scaling-up long-term public investment in the health and education of the workforce, national infrastructure and public transport were critical components for increasing future overall productivity rates, upon which the development of the manufacturing sector depends. Developmental states must adopt a more accommodating macroeconomic framework that involves permitting higher budget deficit paths and/or higher levels of inflation without jeopardizing macroeconomic stability.

Conclusion

In sum, the 9-part SPERI series,听, provided a fascinating overview of how the 鈥榙evelopmental state鈥� is perceived by development experts in today鈥檚 globalizing economy. It reminded us about the critical the role of the state in long-term national economic development strategies, and why 鈥榙evelopmental states鈥� are still relevant today. The essays recapped some key lessons learned throughout history of the industrialized countries, namely the importance of: establishing domestic political settlements; disciplining non-performing companies when administering industrial policies; regulating the financial sector and incoming FDI; and increasing agricultural productivity. Notably, the series showed that some of these historical practices are at odds with today鈥檚 dominant free market orthodoxy, while others can be more aligned with it.

However, the essays neglected some other important lessons. Chief among these are the need to pursue green industrialization; the fact that trade liberalization is not an either/or proposition, but rather a matter of strategic timing, pacing and sequencing; trade policy has nothing to do with 鈥榝airness鈥�; there is a need for public development banks and state-owned enterprises; and that future developmental states are presented with serious constraints posed by the growing scope of IPR enforcement and overly-restrictive IMF fiscal and monetary policies.

Overall, the SPERI series makes the case for why, despite many changes in today鈥檚 modern global economy, developmental states are still needed today more than ever. Developmental states face a growing array of hurdles and obstacles at both the domestic and international levels. Yet, despite these challenges, the series also showed that there are still creative pathways that developmental states can still pursue 鈥� if they can first establish the domestic political settlements necessary to pull it off.

Rick Rowden is a Doctoral Researcher at the Centre for Economic Studies & Planning, Jawaharlal Nehru University (JNU), New Delhi.

This essay was first published on the .听Photo by听