Caspe, Lilac

Certeza, Jason

Diestro, Laurence

Tugade, Ruby Rosselle

PoS131: International Political Economy

TITLE

One cannot speak of International Political Economy without at least wading through the fundamental debate between the degree of importance of political structures and market forces in economic development. This dynamic serves as one of the basic foundations of the discipline itself as well as subsequent major schools of thought. Theories in International Economy have been founded on empirical observations on the economic conditions of a set of cases and are, as Robert Cox posits, critical of the circumstances from which certain politico-economic configurations emerge[1].

A contemporary theory that has surfaced in the last few decades is the developmental state theory which sought to explain the precipitous economic progress of East Asian states after the Second World War. Although the initial outcome of adopting developmental strategies among East Asian states have shown the theory’s potency as a basis for economic development policies, subsequent events especially the results of Southeast Asian attempts to pattern itself after developmental strategies have put into question the developmental state’s efficacy as a long-term arrangement. Specifically, the Philippines’ status as an “anti-developmental” state[2] serves as a channel for criticism of the developmental state theory through other IPE theories not only in terms of strategies and policies, but also in the deeper level of societal conflict and political structures.

The origins of the Developmental State and its basic premises

The literature on developmental state theory attributes its conception to Chalmers Johnson who argued in his book MITI and the Japanese Miracle, that “Japan’s road to capitalism differed from that of the West, with the central role played by a state elite subordinating market forces to a strategic plan to force-march the country to industrialization.”[3] The origins of the theory are situated in the analysis of the Japanese “economic miracle” after the Second World War. It is a historical fact that Japan suffered one of the greatest damages after WWII and it had to face the challenge of rebuilding its vital infrastructures and public institutions.

Instead of taking the route of liberalism—that is, privatization of firms, engaging in free trade, and deregulation—the Japanese state, through its Ministry of Trade and Industry, opted to use nationalist measures to support its recovery and economic development. Local firms and enterprises were state-supported; exports were the main source of national income; and industrial technology was borrowed from more developed countries in order to jumpstart production at the domestic level. The initial revenue generated from basic industries such as textile production (in the case of Japan) funded the further modernization of modes of production which then attracted foreign direct investments. However, the surge of these investments did not necessarily signal the liberalization of the developmental states; rather, they maintained their minimum participation in the strategies of the other state. This model is what is usually referred to the developmental state model which took root in East Asian countries like Japan, South Korea and Taiwan. The developmental state strategy became the basis for the distinctiveness of Asian capitalism.

Along with the rise of Japan as an economic and industrial powerhouse came the “flying geese” model which posits a hierarchical structure within the Asian region in terms of industrialization. As Japan and newly-industrialized economies shifted to capital-intensive production, it outsourced labor from lesser developed countries in the region for the labor-intensive industries. This trend prompted the adoption of developmental strategies among the less-industrial countries[4]. It can be then asserted that the developmental state hinges upon the strength and efficacy of public policy and, more fundamentally, the political elites and the state apparatus itself. This allows for the intermingling of a proactive political structure with market forces.

However, the developmental state model was not successful in certain states which tried to adopt it. Specifically, the case of the Philippines’ failure to pattern itself after the developmental strategy of its Asian neighbors serves as an avenue for the criticism of the developmental model both in its practical and normative levels.

The Philippines as an “anti-developmental” state

The political economy of the Philippines was founded on a long history of feudalism that was instituted during the colonial era and continued after its independence. Consequently, members of the landed elite were the ones who had access to resources that could sustain powerful political machineries; as such, these local lords naturally dominated the then newly-established Philippine state. What resulted was a state apparatus that was founded on bourgeois interests that had no definite and consolidated long-term economic plans and strategies. While the post-Martial Law era saw the culmination of the Philippines’ failure to adopt developmental strategies[5], it is important to trace the roots of this issue in terms of social and structural forces.

The succeeding first three decades after WWII was a witness to the Philippines’ own attempts to revitalize its political and economic structures that were led by the political-economic elites whose power had been reinstated. Upon the death of the first post-war president Manuel Roxas, his successor Elpidio Quirino instituted a string of nationalist and protectionist economic measures. One such measure was a plan to initiate import substitution development, whose goal “was to stimulate industrial production by limiting imports and allowing local industry to grow in a protected market.”[6] The Central Bank was a vital institution which helped restrict imports and support local industries. The Magsaysay administration pursued reform which still had a state-centric orientation. One of the major pieces of legislation that was passed during his administration was RA 997 that, among other things, empowered the executive and structured a five-year national economic plan. Magsaysay’s successor Carlos Garcia had an overt nationalist economic agenda too, which was evident in his Filipino First policy. Diosdado Macapagal established the Program Implementation Agency (PIA) to implement protective tariffs. Finally, the early years Ferdinand Marcos’ regime encouraged the production of raw materials that maintained the export-oriented economy at that time. Early industrialization at this period also came from imported technologies[7].

It can be safely deduced then that the early post-war conditions of the Philippine economy are approximately akin to the developmental strategy of the aforementioned East Asian states. However, the Philippines’ unsuccessful attempt to jumpstart its economy in the same degree as Japan’s or South Korea’s opens up the channel for reevaluating the developmental state model at a level other than policy analysis or state action.

Marxist Critique to the Developmental State attempts of the Philippines

The failure of the developmental state strategy in the post-war Philippines demands a critique that would have to involve more than an analysis of policy outcomes and state outputs primarily because a historical materialist analysis would show that the ruptures in the Philippine economy are the result of different social and political dynamics.

In a more basic and profound level, the Marxist school of thought could offer theoretical tools to examine the failure of the Philippines as a developmental state in order to explore the weakness of its conceptual foundations. This approach demands a fundamental exploration of the state and society. As such, several elements have to be looked upon: 1) the historical development of the Philippine state; 2) the impact on and responses of the different social classes on developmental strategies; and 3) the extent to which global capitalist forces and capitalist actors impinged upon the developmental state strategies of the Philippines.

The Marxist conception of the state as a functionary of the bourgeoisie initially targets the developmental state’s reliance on the state apparatus in carrying out economic progress. Developmental state theory places a primacy on the state capability to implement policies as one of the primary indicators of the success of its economic strategies. On the other hand, a historical mapping of the evolution of the Philippine state would reveal that it possesses a weak central state apparatus for power emanates from the bailiwicks of local political lords who, more often than not, are also part of the landed elite. The patronage network built from the local level translates into upper class interests in the national arena in the form of state policies mainly to protect estates. The aforementioned nationalist/protectionist thrusts of past presidents may have increased national wealth but concentrated it in the hands of the few, which had crucial social implications.

A facet of economic development that was left in the dark by developmental theory was the analysis of class struggle and social conflict as a factor that contributed to the weakening of the developmental state. The period during which nationalist economic policies were adopted by the Philippine state transpired during a period when social upheavals and unrest were brewing in the grassroots level. The growing suffering of peasants due to insufficient income and rising prices of basic commodities[8] strengthened the movement of communist forces in the rural areas through the struggle of a Partidong Komunista ng Pilipinas-led Hukbong Mapagpalaya ng Bayan. This group was active in recruitment of proletarian forces among their ranks during the 1930s to 1960s while a breakaway group named Communist Party of the Philippines “renewed” the struggle by involving young radical intellectuals[9] against exploitative conditions.

The above mentioned aspects already challenges some basic tenets of the developmental state; that is, having a set of elites who are firm with industrialization and the capacity to mobilize people towards working for a common national goal[10]. Finally, a holistic Marxist criticism of the developmental state must be that of taking the argument into the level of international economic and political conditions. A single critical factor which should never be overlooked in the discussion of Philippine economic development is the United States’ influence on the Philippines’ policies and policy makers. The US’ liberal capitalist stance after WWII had placed a significant amount of pressure on the Philippine government, which was its ally during the war. Although the Philippines operated under a nationalist guise, US firms benefitted from import and currency regulations through their subsidiaries which qualified as dollar importers[11]. Also, exported raw materials that were produced by peasants in the rural areas were exported to the US for the production of consumer goods. In the Marxist-Leninist parlance, this resonates the law of uneven development whereby more advanced economies “create dependencies to serve as markets, investment outlets, and source of food and raw materials.”[12] Also, the post WWII environment marked by an ideological war between capitalism and communism could have contributed to gradual liberalization of the economy, which is a basic threat to the interventionist model in East Asia[13].

Even with excluding the prescriptive and revolutionary elements of Marxist criticism, it is evident in the Marxist theoretical analysis above that the developmental state theory is greatly flawed in its articulation of the conditions for the emergence and maintenance of a kind of economic progress that resonates strongly from the domestic level.

Towards reassessing and reevaluating theories of economic development

The economic activity of Asian states for the latter half of the 20th century had been an unprecedented step towards the evolution of paradigms for national progress. While it is clear that the developmental state theory have had its merits, it is still wanting in terms of a more organic analysis of economic development. The failure of states such as the Philippines in executing its developmental plan specifically shows its substantive weaknesses as a theory.

What is demanded from the academic community is a reappraisal of such prescriptive models. Theory can never be perfectly adopted practically but the potency of knowledge to create real-life power relations should never be underestimated. A state-centric approach such as that endorsed by the developmental state theory inevitably creates conflict and contradictions within society that are effectively excluded from discussion and analysis because of the bias of the theory towards the apparatus of power and its technical outputs.

True economic development must go beyond the concern for increased national wealth or industry modernization; true economic development must be responsible in the most holistic way possible. A number of lessons can be picked up from the experience of developmental states as well as “anti-developmental states”. A tangible response to challenge of present-day economic reform in less-developed nations should never be generic one-size-fits all answer. Pure pragmatism should no longer be the order of the day when it comes to economic modeling. A commitment to the issues of social justice, class interest articulation, and spillovers of economic growth should be the main driving forces of contemporary analysis instead.

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[1] Cox, Robert. “Critical Political Economy”
[2] Bello, Walden. “The Developmental State Debate and the Development of International Political Economy in East Asia”.
[3] Ibid.
[4] Martin Hart-Lansberg and Paul Burkett. “Contradictions of Capitalist Industrialization in East Asia: A Critique of ‘Flying Geese’ Theories of Development.”
[5] Walden Bello focused on the Aquino administration’s interaction with IMF policies regarding debt servicing as a manifestation of the anti-developmental stance of the Philippines. This paper, however, opted to examine post-WWII/pre-Martial Law conditions in order to pin down the genesis of the Philippines’ unsuccessful assimilation of developmental state characteristics since it tackles the same historical period when the “Japanese economic miracle” took place.
[6] Abinales, Patricio and Amoroso, Donna. State and Society in the Philippines. Pasig City: Anvil Publishing Inc., 2005. p. 173
[7] Abinales and Amoroso
[8] Abinales and Amoroso, p. 193
[9] Abinales and Amoroso, p. 198-199
[10] Bello
[11] Abinales and Amoroso, p. 178
[12] Gilpin 1987 39
[13] Beeson 6