Vivek Chibber, Locked in Place: State building and late industrialization in India (2003), Chapter 2.

Chapter 2: Late Development and State-Building

* “The changing form of intervention is of considerable analytic importance, because with it come different responsibilities, which, in turn, necessitate correspondingly different capacities on the part of the state” (13)

 

=== The Two Dimensions of Industrial Policy ===

* late development is a shift from managing the effects of accumulation to accelerating its pace (14)

* land reform was one method, but an increasingly important one has been the public subsidization of domestic enterprises

* State has provided capital, guaranteed rates of return and provided protection from things such as trade barriers (15)

* Other responsibilities, besides fiscal, emerge, such as the need to coordinate the investment decisions of firms to avoid coordination failures, and the regulation of funds away from private gain and towards higher social returns – _Coordination_ and _Compulsion_

* For the developmental state, subsidization and discipline of capital are two sides of the same coin (17)

 

=== Industrial Policy and State Capacity ===

* Both dimensions require formidable organizational resources – which is often more problematic than financial resources to secure (18)

* What is needed in an institutional environment which allows for _industrial planning_ to turn into _disciplinary planning_

 

_The Elements of State Capacity_<br />

_A Rational Bureaucracy_<br />

* policy agencies must be guided by norms of bureaucratic rationality (a la Evans) (19)

* well-oiled bureaucracies prevent the slide into individualistic predation as well as the easy colonization of state agencies (20)

 

_Nodal Agencies_ <br />

* Developmental state requires _strategic_ rationality – one that is geared towards a _particular_ end. Without this, agencies will work at odds with each other and result in a fragmented state apparatus. (21)

* The need then is _interagency coordination_ – often the result of some sort of nodal agency which has the power to coordinate the ministries and policy agencies

 

=== Embeddedness ===

* Internal cohesion is necessary, but so too is embeddedness in society (Evans again) – particularly integration with firms in the industrial sector

* Whatever institutional form, ‘this dimension of state structure has proven to be of central importance in the construction and implementation of disciplinary industrial policy.’ (22)

* “A proper bureaucracy, a nodal policy agency, and dense ties to the industrial sector – together these three elements go a considerable distance toward providing he state with the capabilities it needs for disciplinary industrial policy.” (22)

* Why do results not match what is needed? What are successful policies so rare?

 

=== State Capacity as Dilemma ===

_The Appearance of Consensus_

* There is a difference between an agreement around the _fact_ of state intervention and an agreement around its _modalities_ (25). This difference may help to explain why so many political elites were unable to install appropriate institutions for disciplinary industrial policy (25) – Conflicts may have emerged between the state and industrialists.

 

_The Possibility of Conflict_

* Simple compulsion as a part of the disciplinary process ‘only amplifies the state’s intrusion into the domain of firms’ management’ (26) It may be consistent with capitalist’s interests, but it also brings costs (there is a trade off) – winners and losers are created, freedom is curtailed, red tape increased, risk of ideological shifts, etc.

* “If policy makers want to avoid letting the subsidization of industry turn into giveaways, they will have to build institutions that give them some power over firms (27)

* Upshot is that there is no reason to believe that state-led development will encompass both subsidizing and disciplinary activities, either at all, or to the required degree

 

_Why It Matters_

* Analytical focus needs to ‘shift from an exclusive focus on the state to a consideration of its relations with local classes’

 

=== Installing the Developmental State: Four Theses ===

* Thesis 1: State building in India was stunted because of a highly organized and concerted offensive launched by the business class against the idea of disciplinary planning, whereas it was successful in Korea because state managers were able to harness a leading segment of the business class to the developmental agenda (28)

** Bombay plan was a support from capital about the gov’s intention to create an industrial state

** Chibber argues that Indian capital did not support the state in the _relevant_ sense (30)

** The agreement was a mirage – capital wanted subsidization, planners wanted a regime of disciplinary planning – business offensive eventually managed to erode the position of the state

** In Korea there was an alliance between state and capital in the relevant sense

** _Thus, there is no necessary connection between a commitment to industrial planning and a commitment to disciplinary planning_

 

* Thesis 2: Indian capital opposed disciplinary planning because, in the import-substituting model that India was undertaking, it was rational for capital to do so; conversely, Korean capitalists offered greater support to it because Korea embarked on a very different development model – an export-led one – which made it in capital’s interest to support a developmental state.

**_The Incentive Structure of Import-Substituting Industrialization_

*** Domestic industrialists rightly saw ISI as a tremendous opportunity for growth and profits, because of the sectors being literally handed over to them free of international competition. But for this very reason, they also regarded the disciplinary component of ISI as an unacceptable encumbrance:  in order to exploit their own opportunities fully, firms would need maximum latitude (34)

*** ISI leads to the support of subsidization, but the rejection of disciplinary planning

**_The Incentive Structure of Export-Led Industrialization_

*** In ELI, state-managers have greater leverage against firms – the firms NEED the investment to compete, not to corner markets (36)

*** Firms have a greater incentive to comply with the state’s demands for increased productivity – as their own competition in the world stage requires it

*** Firms also have an interest in having a strong state – one with the capacity to coordinate and monitor investment, because in ELI, these firms benefit directly from it

 

* Thesis 3: Korea was able to switch from ISI to ELI because certain conditions virtually unique in the world economy were available to Korea, conditions that simply were not available to other LDCs. Absent such conditions, business classes throughout the developing world resisted such attempts by governments to turn to an export-led strategy, and this was true in India as well

** Incentive in the 1950s was towards ISI due to the international trade regime – this impacted all LDCs

** In the 1960s, there was a shift to exports – but only Korea and Taiwan managed to move to ELI

** Chibber suggests that Korea shifted to ELI because of Japan’s 1960s strategy of relinquishing US markets to Korean firms – this let Korean firms circumvent one of the biggest entry barriers to industrial world markets.

 

* Thesis 4: A full explanation for why the Indian National Congress was unsuccessful in installing a developmental state is that, in addition to facing a mobilized business class set against the project, Party leaders also demobilized a massive and quite organized labor movement – thus reducing the stat’s leverage against the capitalist class

-** Reduction of labour power strengthened industrial classes vis-a-vis the state, and ‘the congress slid more deeply into a strategy of making concession after concession to business demands in the hope of placating Indian industrialists, a strategy that failed spectacularly.” (44)

 

=== Conclusion: Bring Capital “Back In” ===

* Indian case demonstrates the importance of capitalist class interests and power – this is seen directly through the government’s constant acquiescence to their demands

* Evidence for Indian capital’s resistance to state regulation and discipline is overwhelming (224)’