Remaking the case for a ‘developmental state’ in Britain

Tony Payne - Director of SPERI

I even offered up a definition (which was admittedly rather wordy) of development, namely, ‘the collective building by the constituent social and political actors of a country of a viable, functioning political economy, grounded in at least a measure of congruence between its core domestic characteristics and attributes and its location within a globalising world order, and capable on that basis of advancing the well-being of those living within its confines’.

The conceptual leap proposed here still seems to me to be a useful insight. At a stroke, as it were, no country is ever deemed to be fully developed.  Everyone, everywhere has to negotiate development constantly – adjusting domestic economic and political settlements, seeking out and maintaining appropriate positions in the fast-changing geo-economic landscape of globalisation and building a functioning, and indeed improving, society on these bases.

In case the implications of my argument are not immediately apparent, let me spell them out: I meant and still mean all of this to apply to Britain as well! Like all countries when viewed from this perspective and despite what some members of its elite might like to think, Britain is just another developing country that needs a development strategy (exactly as we might say, without controversy in the field of development studies, that Botswana or Jamaica or Malaysia or Tanzania needs a development strategy).  In fact, I think Britain presently needs a development strategy with desperate urgency.

After all, what does Brexit constitute other than a deliberate decision to end the strategy of pursuing British national development inside the European market? This has been the (more or less agreed) elite approach not just since British entry into the EEC in 1973, but from the even earlier moment when the Harold Macmillan government tabled the first British membership application in 1961 in the hope of catching up on some European-style economic growth.  In other words, it is well over 50 years of development strategy that is being abandoned with Brexit and it’s quite obvious that a massive re-think is needed to chart the future.

I should say too in the spirit of personal candour that in re-making these arguments here I am admitting my failure thus far to get the debate about Britain’s current predicament framed in these developmental terms. It’s interesting to speculate on why my claim has had little traction outside of the academy.  The reasons probably derive at root from a woeful over-confidence about the lessons of British history and a deluded sense of the weight that Britain carries into the global political economy these days.  You don’t have to hear much of late from the main ‘Brexiteers’ to get a sense of what I am getting at.

But that’s not my main concern in this post. I want instead to make the case for Britain seeking to follow the example of those countries (largely in East Asia, like Japan, South Korea and Taiwan) that have pursued development with the greatest success over the past 20-30 years and accordingly to place the building of a British ‘developmental state’ at the core of its post-Brexit development strategy.

At the heart of this argument is a moral position: a belief in the power of the democratic state to do good for its citizens, to represent them and, if necessary, defend them in the face of threatening global economic shifts. This is a claim, of course, that either appeals or appals.  It is a matter of world-view.  But what can’t be easily denied, even by those it appals, is the considerable recent historical evidence that ‘developmental states’ do work.

What is meant, then, by a ‘developmental state’? I will start with a negative: it means more, quite a bit more in fact, than the ‘entrepreneurial state’ advocated by Mariana Mazzucato.  In her book of this name published in 2013 Mariana brilliantly debunks the popular myth of the lumbering bureaucratic state mixing ineffectually on key technological terrain with dynamic private-sector innovators. She shows instead via a series of technological studies (ranging from IT to biotech and emerging green tech) that the private sector often only finds the courage to invest, and make its profits, after the ‘entrepreneurial state’, as she dubs it, has made the key innovations and taken the real risks.  Her account of this process is delivered con brio, as they say, and is highly persuasive – as far as it goes.

The problem is that in Britain today we need more than an ‘entrepreneurial state’. This is not to diminish the arguments made by Mazzucato and others on this front.  There can’t be any doubt that the country badly needs an innovation system that works more along these lines, nor that there is still a lot of work to be done at the top end of industrial strategy to make this happen.  But the reality is that even more is needed of the state if our country is really to move towards a new and more successful development path.

The key point is that only the state can chart a strategy of development on behalf of all of a country’s citizens, because only the state can represent a people.  What’s vital is how it does this – and here we can learn much from the literature on the record of the East Asian ‘developmental state’.  This was far from being some kind of heavy-duty, Soviet-style, planning state.  Rather, at its best, it was light on its feet and strategic in purpose, but also always ‘big-thinking’ in its reach and ambition.  It genuinely sought to discern, negotiate and then deliver a strategy of development for a whole society, recognising that, in order to pull all of that off, it had necessarily to work constructively with, and not in any way against, the grain of the society it was seeking to move forward.

The intellectual origins of this brand of development theory can be traced back as far as Friedrich List and Alexander Hamilton. Other theorists, like Alexander Gerschenkron and Gunnar Myrdal, played their part too and in the East Asian debate there are many sources on which to draw (including Chalmers Johnson, Alice Amsden and Robert Wade).  But space here is limited and I will highlight as key to the theorisation of the ‘developmental state’ the notion of ‘embedded autonomy’ advanced by Peter Evans.

Evans argued that ‘developmental states’ were characterised in the main by the co-existence of two attributes:

1. a sufficient autonomy possessed by an elite agency (or agencies) of the state, with staff recruited wholly on merit and charged with identifying the country’s best prospects for industrial transformation and global competitiveness; and

2. a real embeddedness of the state machinery in a set of social ties that allowed for the continual negotiation and ultimate embrace, via a consensus, of the main policy thrusts.

The two attributes had to co-exist because they needed to feed off each other. Leadership, vision and planning were obviously vital, but there also had to be deliberation, amendment and eventual support from key economic and social actors.  In short, development was a national mission or it was nothing.

The key elements of the ‘embedded autonomy’ of a ‘developmental state’ still need a lot more unpacking in the British context. Nobody has yet really worked through what it might mean.  But, that said, I think it’s possible to see immediately some of the things that would need to be done to get us moving in this direction.

Let me highlight just three for starters. It would require further exploration of reform of the institutional apparatus by which Britain makes economic policy, notably with respect to the Treasury (on which front SPERI has already recently put forward some ideas). It would benefit from the revival and re-engineering of a body like the National Economic Development Council (often known as ‘Neddy’), which did exist in Britain from 1962 to 1992, albeit with declining regard from the early 1980s onwards.  Above all, it would depend on there being struck some kind of new ‘national deal’, involving formal representation of business, trade unions and other parts of civil society, on what were to be the main elements of our future collective and post-Brexit development strategy.