DSA2016: Politics in Development
This panel will examine the politics of state-business relations in late developing countries in the 21st century. Empirical papers exploring specific case studies and theoretical papers surveying state-business relations are welcomed.
Successful industrial policy requires that reciprocal relationships be developed between governments and their capitalist partners. Ensuring reciprocal relationships are maintained are a constant challenge for governments, with a necessity for learning rents to be disciplined in line with industrial policy objectives. Alice Amsden (2009) is among scholars who have argued that the process of developing such relationships has become increasingly difficult given that late developers in the 21st century are increasingly reliant on foreign investors as lead actors in their economies.
This panel invites papers that explore how state-business relationships have developed in the 21st century. Theoretical papers, similar to Sen and Te Velde (2009), are welcomed. These papers could explore how state-business relationships have developed in line with industrial policy measures across a range of countries. Specific case studies will also be welcomed. For example, Booth and Golooba-Mutebi (2012) have previously highlighted how the Rwandan government has chosen to use party-owned enterprises to advance their industrial policy priorities. Thus, the panel will seek to explore the specific challenges associated with building effective business-state relationships in line with promoting effective industrial policy in the 21st century.
This panel is closed to new paper proposals.
Size matters? industrial policy and the political economy of small firm promotion in Tanzania
State-business relations in the metals sector and the political economy of small firm promotion in the 21st century.
This paper examines the political economy of industrial policy in Tanzania from the perspective of state-business relations in the metals sector. Industrial policy has regained prominence in Tanzania in recent years as part of the focus on economic transformation that has been espoused by both the Government of Tanzania and its donor partners. Most manufacturing activity in Tanzania occurs within small firms with less than 10 employees and the promotion of MSME manufacturing has been central to industrial policy initiatives since the early 1990s. Large firms receive little direct attention within industrial policies however, they have received forms of direct and indirect support from the state. While the production of iron and steel remains in the hand of some of Tanzania's largest firms, small and micro firms play a central role in many types of manufacturing related to metals and fabrication. The output and employment of large firms in metals has expanded quite dramatically in recent years. Promotion of metal-related manufacturing is a key element of industrial policy in Tanzania but despite policy commitments to support SMEs in the sector, significant support has been channelled to protecting the larger firms. This paper traces the support provided to firms of different sizes within the sector and examines the way that the political economy of industrial policy has affected the state's ability to follow through on its commitments to promote MSMEs within the manufacturing sector.
Sources of wealth inequality or agents of economic complexity? A study of business groups from a state-business relations perspective
Why do certain business groups become producers of complex products, whereas others survive on political rents? The paper argues that the persistent threats to survival lie the heart of the question, and are key to overcoming the problem of the middle-income trap.
The middle-income trap has been referred to as the "product trap" as countries that are trapped in the middle-income trap show an inability to shift from highly diversified to a more specialised structure to develop complex products that require advanced firm capabilities. At the heart of the is issue lies in understanding the strategies and behaviour of the dominant form of economic organisations in the middle-income countries; namely, the large, highly diversified, private (family-owned) business groups.
Hence, the paper draws on the state-business relations to examine why certain business groups undertake the risky and challenging task of re-investing their profits into building and upgrading capabilities through product and skills development - and thus, becoming the agents of diversification and producers of complex products - whereas others survive largely through political rents.
Through a comparative case study of the changing dynamics of state-business relations in an arrived case (South Korea) and a trapped case (the Philippines), the paper finds that the persistent threats to survival experienced by business groups to be the key in unpacking the question. Interestingly, the threat comes less from the state and its' power to discipline the private sector, but from the market in the form of oligopolistic competition in local, and international markets. The story of business groups and their role in building a complex market economy is one less told in development studies, but an important one for many middle-income countries.
The small island that could: the private sector as a source of Mauritius' high regulatory quality
I study the the country of Mauritius and the determinants of its well-designed regulatory regime. My analysis points to several influential factors with one of the most important ones being excellent state-business relations and a strong influence by the private sector on regulatory making.
Regulatory quality and state-business relations and their impact on economic development have been subject to much discussion in the past years. International organizations, policy makers and researchers alike agree that regulation matters and a well-designed regulatory regime can increase economic growth. There is less consensus, however, on how to improve regulation and especially developing countries suffer from serious shortcomings when it comes to their regulatory framework. Due to methodological and data issues it is difficult to determine the drivers of regulatory change and general conclusions from cross-country studies are hard to draw. Therefore I focus on the small island country of Mauritius that has exceptional regulatory quality, trying to identify the reasons for this high regulatory quality. I argue that the private sector and the state-business relations in the country play an important role in regulatory making. Empirically, I do not find a significant "Mauritius effect", but the qualitative analysis, founded on interviews with politicians, business leaders and others indeed points to a prominent role of the private sector and its intense collaboration with the government. The case study also shows that the determinants of good regulation are not limited to only one factor, but a wide array of influences and circumstances that make Mauritius the best regulated country in Sub-Sahara Africa and also put it among the best regulated countries in the world.
This panel is closed to new paper proposals.