States and Industrial Transformation

A PERENNIALLY popular Brazilian joke about two lions evokes one way of
seeing the state. Escapees from the zoo, the two lions take different paths.
One goes to a wooded park and is apprehended as soon as he gets hungry
and eats a passerby. The second remains at large for months. Finally cap-
tured, he returns to the zoo sleek and fat. His companion inquires with
great interest, "Where did you find such a great hiding place?" "In one of
the ministries" is the successful escapee's answer. "Every three days I ate
a bureaucrat and no one noticed." "So how did you get caught?" "I ate
the man who served coffee for the morning break," comes the sad reply.
The moral is clear: bureaucrats do nothing and are never missed; even
other bureaucrats care more about their morning coffee than about any-
. thing their colleagues do. The joke is popular because it affirms the con-
viction that Third World states deliver little of value. It is also popular
because it converts bureaucrats from predators to prey. Identifying with
the lion, listeners reverse their usual self-perception as victims of the state.
For those with less sense of humor, the quotidian power of the state
over their individual lives can take on disturbing proportions. As Anita
Desai (1991, 3-4) puts it, "In the present time, in which the laws and
whims of politicians and bureaucrats are as pervasive and powerful as.
those of the gods, not only must a minister be propitiated before he will
issue a license, allot a house, or award a pension, but so must every clerk
through whose hands the relevant file passes." This is not a lament about
dictatorship or authoritarian repression, it is a complaint about how the
Third World state conducts "business as usual" in relation to ordinary
citizens.
Identification with the escaped lion is natural, but until less hierarchi-
cal ways of avoiding a Hobbesian world are discovered, the state lies at
the center of solutions to the problem of order. Without the state, mar-
kets, the other master institution of modern society, cannot function. We
do not spend our valuable time standing in lines in front of the counters
of bureaucrats because we are masochists. We stand there because we
need what the state provides. We need predictable rules, and these in turn
must have a concrete organizational structure behind them. We need
some organizational reflection, however imperfect, of general as opposed

I:
 CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 5
4
to individual interests. We need something beyond caveat emptor to sus-
tain the process of exchange. We need "collective goods" like sewage States and Economic Transformation
systems, roads, and schools. . . . States remain, as.We.her defined them, "compulsory associations claiming
Attempts to dismantle the state or make 1t wither awa_r nsk perverse
control over terntones and the people within them,"2 but Weber's defini-
consequences. Communist revolutionaries who fought to mstall a syst~m
that would lead to the state's "withering away" ended up constructmg tion does not reduce the complexities of analyzing what states do. The
state apparatuses more powerfully repressive than those of the age ~f
first step in making analysis manageable is separating out the different
absolutism. Fervent calls for the dismantling of the state by late-t~enn­ roles that states perform. Making war and ensuring internal order are the
eth-century capitalist free-marketeers served to derail the state's. ab1hty to classic tasks. In the contemporary world, fostering economic transfor-
act as an instrument of distributive justice, but not to reduce its overall mation and guaranteeing minimal levels of welfare are not far behind.
"Realists" tell qs that, as sovereign entities in an anarchic world~
importance. . d ~ust co~ce~n themselves above all with the conditions of military sur-
From the poorest countries of the Third World ~o the m.ost adv~nce
v+v·~ Grlpm (1987, 85) puts it succinctly: "The modern nation-state is
exemplars of welfare capitalism, one of the few ~m~ersals m the history
of the twentieth century is the increasingly pervasive mfluence of the st~te first and foremost a war-making machine that is the product of the exi-
ge~cies of gro.up survival in the condition of international anarchy." His-
as an institution and social actor. 1 None of which is to say that th~ exist-
toncal analysis makes it clear that the task of war making, more than any
ing states give us what we need. Too often w.e stand in line. in vam. The
other, drove the construction of the modern state. 4 War making is also
contradiction between the ineradicable necessity of the state m contemp~­
rary social life and the grating imperfection with w~ich .s~ates perform is
the task that allows the state most easily to portray itself as the universal
a fundamental source of frustration. Dreams of canmbahzmg bur~aucrats agent of societal interests.
are one response. Analyzing what makes some states more effect1v~ than ~~r making is. one justification for the state's monopoly on violence;
avo~dmg. Hobbesian chaos internally is the other. Here again the state
others offers less immediate satisfaction but should be more useful m the
pro1ects itself as an a?~nt of the universal interests of society. What hap-
long run. . d' pens when a state d1smtegrates demonstrates that the claim is at least
Since analyzing states entails almost as much hubns as preten mg to
run them, it is important to place some boundaries on the endeavor. M,y partially valid, as the citizens of contemporary Somalia can bitterly attest.
boundaries are narrow and clear. l,_haye forn~~d QR only one 0 .f the. state S Yet the claim also masks other aspects of the state's role.
tasks-promoting industrial growth. The em irical discuss1 . ve .. When i~ defends sovereignty and internal order, the state is also, as
more speci c-t e growt of local information technolog~ (IT} mdus- Charles Tilly (1985) puts it, running a "protection racket" on its own
•tries. In a 1twn, m rimaril concerne wit a part1Cu ar .set .of behalf. Classic Marxist analysis reminds us that states are instruments for
states newly jndJJStrializing countri~ (NICs). Within this set'. the ei:u- dominating the societies they serve. State actions reflect and enforce dis-
pirical narrative draws primarily on the ex~eriences of-.Br~vl, Tndia,
parities of social power on behalf of the privileged. When the state exer-
and Korea during the 1970s and 1980s. Despite the boundanes, the hu- cises its monopoly on violence internally, its identification with the inter-
bris remains. The underlying aim is to understand state struct~res and ests of the nation is no longer automatic. All states would like to portray
roles, relations between state and society, and how states contnbute to themselves as carrying out a project that benefits society as a whole s but
sustaining this image requires continuous effort. 6 '
development. . . . . .
In this chapter I will try to do four thmgs. I will be~m with a bnef 1'.1~king war and enforcing internal order are classic roles, shared by

excursus on how r~ponsibility for economic tra.nsformatJQR ~:as hecom~ ancient and .mo~ern states. Ia.-modern times, a third role has increasingly
increasingly central to the state's role. Then I w1Hse~ e.c?nomlC transfor- sfolen the lm:~ehght. As political survival and internal peace :are more._
~ation at a national level in the context of a global d1v1s1on of labor. The oft~~ defined m economic terms, ~t:;i.tes haye become responsible for eco-

third section sets out a telegraphic sketch of the argument to be develop~d nomic tran~an:nat.i.o.n...xhere was always a connection between economic
over the course of the chapters that follow. Finally, I will t~y to ~xplam success and the ability to make war; economic failure meant eventual
the conceptual approach and strategies of investigation that he behmd the geopolitical decline. Now the state's economic rak.goes beyond being a
means to military ends. It is a source of legitimacy in itself as well as a
analysis.
 STATES AND INDUSTRIAL TRANSFORMATION 7
CHAPTER 1
6 eac_h nation:s plac_e_in production for global markets has powerful impli-
means to accomplishing the classic goals of military survival and internal cations for its politics and the welfare of its citizens.9
order. Like any kind_ of differentiation, the international divis~Q.f labo.LCan
Being involved in economic transformation has two different facets. be seen as a basis ~!_.:_~~need welfare or aSall!efafchi The_.ru:guments
First of all, it means becoming implicated in the process of capital accu- for enhanced ~eltar~ are enslinned m the theory of comp~rative advan-
mulation. Wealth creation is no longer considered just a function of na- tage: all countnes will be better off if each concentrates on what it does
ture and markets; effective statecraft is involved as well. Eliciting en- bes_t. ~o Compatibility with resource and factor endowments defines the
trepreneurship and facilitating the creation of new productive capacities activity most_ rewardin~ for each country. Trying to produce goods that
require a more complicated involvement in the affairs of the citize~ry other countnes can deliver more efficiently will only lower everybody's
than simply eliciting loyalty and enforcing good behavior. The capacity welfare.
required for what I will call the state's "transformative role" is corre- Poorer countr_ies have always been suspicious of this argument. From
spondingly greater. Alexander Hamilton 11 to Friedrich List 12 to Raul Prebisch 13 ther h
. . , e as
_gnce_ the_!..~~£i:__~~~yli~~!e~J~~ccumulation, been t he susp1c1on that position in the international division of labor was
r.esponsibifity for economic hardship is less e~jly_filllf.ted-..to....n~r a cause of development, not just a result.14
t.PJ!!:..kets. If the inegalitarian outcomes of market relations can~ot be dis- No one denies that an interdependent global economy is an improve-
missed as "natural," the state becomes responsible for deprivation as well n:ent over a system of autarky, even for those that occupy less desirable
as oppression. Its involvement in conflicts over distribution and welfare is ~iches. Nor does anyone deny that countries should do what they do best,
more explicit.7 JUSt a_s _the theory of comparativ~ advantage argues. Yet contemporary
Welfare and growth easily become entangled. Fostering growth is theonzm? offers support for persistent convictions that trying to get into
often portrayed as a substitute for addressing distributional issues. Equat- more desirable niches is an important part of the struggle to develop.
ing the overall accumulation of productive capacity with the national in- Recen~ developments in trade theory suggest that profit rates can differ
terest makes it easier to claim the role of universal agent. Better a smaller systematic.all;.' a:id persistently across sectors. As Paul Krugman (1987,J
share of an expanding pie than a larger piece of a shrinking one, the 230) puts it, ~1th imperfect competition sustained by economies of scale
argument goes. In reality, of course, pieces often shrink faster than pies and entry barners, some industries may be able to generate persistent
grow, and losers ask whose interests transformation serves. Nonetheless, ~xcess returns." Differential profit rates are, however, only part of what
growth remains a prerequisite to delivering welfare in the long term. 1s at stake.
Finding new ways to generate growth is a preoccupation even for welfare A~ Alb~rt Hir_schman_ (1977) has argued persuasively, filling a particu-
states. lar mche m th~ mternational division of labor has dynamic implications
As they become increasingly involved in economic transformation, as ';;'e_ll as static ones. Some sectors create a "multidimensional conspir-
states increasingly look at the international system not just as a system of acy. _m fav_or of development, inducing entrepreneurial energies, creating
8
sovereign political entities but also as a division of labor. The connection pos1t1ve sp1_llovers in the rest of the economy, and molding political inter-
between internal accomplishment and external context becomes intimate ~st gro~ps mt~ a deve_lo_r~ental coalition (Hirschman 1977, 96). Niches
and direct. T~ry passihilities and ci:iteria of ernnemK:---tt:ansformatiotL m the mt~rn~t1onal d1v1s1on of labor are desirable not just because they
d$Qend on the international division of labor. Tui.nsfo.rmatioo i~ inescap -- may entail higher p~~fits and more rapid accumulation of capital, but
ablµi~~ global terms. also ~ecause ~hey facilitate the achievement of the social and welfare goals
associated with "development" in the broadest sense of the term
Ability to g~nerate a "multidimensional conspiracy" in favor ~f devel-
The Global Context opn:ent is not mherent in a product itself. It depends on how the product
fits mto a global array of sectoral possibilities. As such theorists of the
Modern nations must fit their economic aspirations and activities into a "product cycle" as Vernon and Wells have shown, products also have
global division of labor. Some produce cotton, others weave cloth, others de~elop~ental tra!ectories. 15 The country that catches them on their up-
market high fashion. Some mine iron ore, others make automobiles, oth- swmg will reap different rewards from one that inherits them on their
ers sell insurance. As "world-system" theorists have hammered home,

i
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 CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 11
10
historical examination of particular states. I chose the set of states for
State involvement must be taken as one of the sociopolitical determinants
which the challenge of industrial transformation is most salient. This
of what niche a country ends up occupying in the international division of
s cl focuses on "new! industrializing countries" NI Cs), defined,~­
labor. narrowly as the four East Asia tigers, ut roadly to include those de-
States with transformative aspirations are, almost by definition, look-
veloping countries large enough or advanced enough to support a full
ing for ways to participate in "leading" sectors and shed "lagging" ones.
range of industrial production. NICs are particularly good cases because
Gilpin (1987, 99) argues that "every state, rightly or wrongly, "'.ants to b.e
they are less thoroughly constrained than peripheral raw materials ex-
as close as possible to the innovative end of 'the product cycle wher~, it
porters and more desperate to achieve transformation than advanced in-
is believed, the highest 'value-added' is located." These states are not 1ust
dustrial countries.
hoping to generate domestic sectors with higher profit rates. Th~y are a~so
.W'.ithin thi~ group I focused on Brazil. India, and Korea ....£\.t first glance
hoping to generate the occupational and social structures associat~~ with
this is an unlikely threesome. At the beginning of the 1970s, Brazil was
"high-technology industry." They are hoping to generate a mult1d1men-
t~e ~rch.etype of "dependent development," a country whose rapid indus-
sional conspiracy in favor of development. tnahzat1on was propelled by a combination of investment by transna-
Even if states are committed to changing their positions in the interna-
tional corporations and the demand for consumer durables that de-
tional division of labor as Gilpin suggests, desire and capability have to
pended on rising inequality. India was a "multinational subcontinent" of
be sharply separated. ~u.c.ting new kinds of compar~tive adyillfillge
three-quarters of a billion people, the vast majority of whom still de-
may be possible, but it is not likely to be ell· .l.Ln.QLlfillJl\ltable,..-the.___
20E 1· . pended on peasant agriculture, renowned for its penchant for autarky. In
structyi:e_of.tlli:_g)g_gfil_IJj,q~J.d.1~~..is..c.ert.fil!ili'. ob durate. xp ic1t attempts
Korea, peasants were no longer the majority, and export orientation was
t~~ve within it are likely to be ineffective or even counterproductive.
considered the only sound basis for industrial growth. Yet all three are
Aspiration without the requisite state capacity can lead to bungling that
countries where state involvement in industrial transformation is undeni-
undercuts even the existing bases of comparative advantage. Efforts to
able. For understanding why it is more important to ask "what kind" of
: I
reshape participation in the global economy are interesting.' ~ot just be-
'I state involvement rather than "how much," they are an excellent triplet.
cause they might succeed, but also because they reveal the limits of what
I Variations in state involvement must also be situated in specific arenas.
I states can do. ~.chose to look auhe evolution of the infurma.ti.Gn t€Khi:i.olog~' (IT) se~tor
If institutional endowments and the exercise of agency can reshape the
m each of these countries during the 1270s and 19!Ws 22 The IT sector
kinds of products a country produces, and if producing different kinds of
11
(also known as "informatics" or the computer industry) is of obvious
I products has broad implications for development, arguments about how
intere~t bec~use it is the sector most likely to spark a twenty-first-century
and whether states might facilitate the local ~mergence of new sectors
conspiracy m favor of development. It is a particularly good case because
become centrally important to understanding states, national develop-
it provides an exceptionally strong test of the proposition that state in-
ment, and ultimately the international division of labor itself. Laying out
volvement can affect a country's place in the international division of
one such argument is the purpose of this book.
labor.
The information technology sector is fascinating in itself, but the pur-
pose of a sectoral lens is to allow the concrete investigation of general
The Argument concepts. The aim of this project is not to theorize the IT sector but rather
to sharpen general ideas about state structures, state-society relations,
Sterile debates about "how much" states intervene have to be replaced
and how they shape possibilities for industrial transformation.
with arguments about different kinds of involvement and their effects.
My..startin.g..px.emis.e is thatva ri atio.n s in inYolv€m€nt d€pei:i.d on va ri a -
Contrasts between "dirigiste" and "liberal" or "interventionist" and
tiBH-s-.i+i. the. ~t.ates themselves States are not generic. They vary dramati~
"noninterventionist" states focus attention on degrees of departure from
cally m their mternal structures and relations to society. Different kinds
ideal-typical competitive markets. They confuse the basic issue. ~
of state structures create different capacities for action. Structures define
c.onwra~~-and.--in-v:@~.t-a.i;~~or :be al:;~
the range of roles that the state is capable of playing. Outcomes de-
tives. State invql~_giY.en...Ib.e...a.wropnate quest10n 1s not how
--""----:/ pend both on whether the roles fit the context and on how well they are
_,/ much" but "what kind." executed.
Ideas about variatio'ii"s in state involvement have to be built on the
 ~
I

12 CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 13

How sho.uld._:w:e...charn~1er.iz.e_y_qJ;:i_gJioJliin__statf__ muctqre__ and_~tflle=--· definitely intermediate cases, exhibiting partial and imperfect approxima-
?.9.£~!.:~~t~gn~L_Mx,"~.££~}~.fil'. ~~5- .. ts>. ~.!.~.rt.. QJ _rnm.tx_l!~ting. two hi~rnr.i­ tions of embedded autonomy. Their structures do not categorically pre-
call y grounded ideal types: predatory and develoQmental states,_The basic clude effective involvement, but they do not predict it either.
characteristics ortflese two types are laid out in chapter 3. Predatory__ Structures confer potential for involvement, but potential has to be
sta~§_gJracLa.t-thtHHCf>eRse-ekeciet-y,-1:maer-GUtting development even in translated into action for states to have an effect. ltalk abo!J.!__p.atterns of
the narrow sense of capital accumulation. Dt::Y.~lopmental s~~~_not only state involvement in terms of "roles." To convey what Brazil, Korea, and
h~~.2.!"~§jQ~_q ..gy~J..~DQ!:J:g[ial tr_allsfo.rmation..b.ut...can..he...plausibly__ aJ~ Illi!ia were doing in the information technology industry, I needed some
to..h.av_e_pla.y.ec!..u9~akigg it happen. new termillology. Traditional ways of labeling the state roles make it too
Associating different kinds of states with different outcomes is a start, easy to slip back into the comfortable feeling that the parameters of state
but if the two ideal types consisted only in attaching appropriate labels to involvement are known and we need only worry about "how much."
divergent outcomes, they would not get us very far. Th~k is to estab- New words are flags, recurring reminders that the question should be
lish a connection between developmental im~t and the structural char- "what kind." I ended up with four rubrics, which are explained in more
9cteris.tics_.Qf_g_ates-their mternaj_§iganization a~ relation ~4'· detail in chapter 4. The first two, "custodian" and "demi.urge," represent
Fortunately, there are clear structural differences between predatory and variations on the conventional roles of regulator and producer. The sec-
developmental states. ond pair, which I call "midwifery" and "husbandry," focus more on the
P,r.e.datocy. states lack the ability to prevent individual incnmheJ:lts f~mu relation between state agencies and private entrepreneurial groups.
pursuing their own go~Qrial ties are the anlµo11i:c~o.f..c.oh.e.~1~n,4 The role of custodian highlights one aspect of the conventional role of
and indlvidualmaxt.mization ~~k.<:5- ..2!.t:'.~~-9:.~!lce o~..12..ursl!!!_2f.collective regulator. All states fanHttlate and enforce rub; l:mt rbe thrust of rule-
goai~Ji;::~·-r;;-soilltyaie.tl'es-to individ11al incumbents,..n.()t-{:--GH~-tti-Ons__ __ making varies. Some rules are rimar · motional, aimed ~rcwldln.g--
.-beii.¥~ constituencies and the state as an organization. Predatory states _ s.ti_mulus an me~ Other regulatory schemas take the opposite tacK,
~-in.short, characterized by a dearth of bureaucracy as Weber defin~.Q.J!.,___ .. aiming to prevent or restrict the initiatives of private actors. The ru-
The internal organization of qeyelopmental states comes much closer bric '\;ustodjal" identities rngulatory effort!> tha4rivilege__pgli£i.ng_o~
to a.£Proximating a Weherian hmeaucracy Highly selective meritocratic p~ion.
rec~uitment and long-term career rewards create commitment and a sense Just--as!Jeing a custodian is one way of playing out the more generic
of corporate coherence. Corporate coherence gives these apparatuses a role of regulator, the demiurge 23 is a specific way of playing the more
certain kind of "autonomy." They are not, however, insulated fr..oII!__~_o:;.. generic role of producer. All states play the role of producer, taking direct
ciety as Web@+. s1aggested they shrn1ld be. Io the contrary, they are e.rQ: responsibility for delivering certain types of goods. At the very least,
bed~djn..a concrete set of social ties that hinds the state to society and_ states assume this role in relation to infrastructural goods assumed to
provid~jnstitutionalized ,h:mnels for the conrjmial negoriatiOJ:!,~~d,J~~ .. __ _ have a collective or public character, like roads, bridges, and communica-
neg_()ti~Q9_ILQigoals and policies. Either side of the combination by itself tions nets. The ,role of demi urge is based on a stronger assumption about
'would not work. A state that was only autonomous would lack both the limitations of private capital. It resumes that rivate ca ital is inca-
sources of intelligence and the ability to rely on decentralized private im- pable of successfully sustaining the developmentally necessary gamut o
plementation. Dense connecting networks without a robust internal commod_ity production. Consequently, the state becomes a "demi.urge,"
structure would leave the state incapable of resolving "collective action" establishing enterprises that compete in markets for normal "private"
problems, of transcending the individual interests of its private counter-· goods.
parts. Q.uly wheJ:l embeddedness and autonomy are joined together can a Taking on the role of midwife is also a response to doubts about the
state be called develoQP-en1a!:._ vitality of private capital, but it is a response of a different sort. The ca-
.-- This apparently contra ictory combination of corporate coherence pacities of the local entrepreneurial class are taken as malleable, not as
and connectedness, which I call "embedded autonomy," provides the un- given. I~ of substituting itself for private producers, the state tries to
derlying structural basis for successful state involvement in industrial assist in the emergence of new entrepreneurial roups or to induce exist- -
transformation. Unfortunately, few states can boast structures that ap- ing groups to venture into more challenging in so production. A vari-
proximate the ideal type. Korea can legitimately be considered a version ety of techniques and policies may be utilized. Erecting a "greenhouse" of
of embedded autonomy, but, as chapter 3 shows, Brazil and India are tariffs to protect infant sectors from external competition is one. Provid-

L
14 CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 15
ing subsidies and incentives is another. Helping local entrepreneurs bar- duction who managed to find positions of leverage within the state appa-
gain with transnational capital or even just signaling that a particular ratus. Their ideas were eventually turned into policies and institutions
sector is considered important are other possibilities. Regardless of the designed to bring forth local production. Initial state policies in all three
specific technique, promotion rather than policing is the dominant mode countries began with "greenhouses," which provided space for local en-
of relating to private capital. trepreneurs to experiment protected from transnational competition. The
Even if private entrepreneurial groups are induced to tackle promising greenhouses were a fundamental part of playing the role of midwife. Mid-
sectors, global chan es will continually challenge local firms. ~sbandry _ wifery bore fruits in all three. The local industrial panorama in the mid-to
consists o cajoling an assistingJ?rivate entrepnmetiria:l:--groups-iIT--h@pes late 1980s represented an impressive transformation of the scenery that
of meeting these challenges. Like midwifery, it can take a variety of forms, had been in place two decades earlier, as chapter 7 shows.
from.slffiPlesignalmg fOSOinething as complex as setting up state organi- By the end of the 1980s, Korea's industry was the largest and most
zations to take over risky complementary tasks, such as research and de- robust, but local producers could claim significant successes in all three
velopment. The techniques of husbandry overlap with those of mid- countries. Brazil had put together a new set of diversified informatics cor-
wifery. porations that were significant actors on the local industrial scene. They
Most states combine several roles in the same sector. Sectoral out- presided over what had become a multibillion-dollar local industry. Local
comes depend on how roles are combined. My expectations for the infor- entrepreneurs commanded experienced organizations that employed
matics sector are obvious from the descriptions of the roles themselves. thousands of technically trained professionals. Local tecnicos24 had dem-
Neither trying to replace private capital nor fixating on preventing it from onstrated theii; technological bravura and even managed to turn their tal-
doing undesirable things should work as well as trying to create synergis- ents into internationally competitive products in the financial automation
tic promotional relations with entrepreneurs or potential entrepreneurs. sector. India could boast early design successes by local hardware firms
Combining midwifery and husbandry should work better than combina- and the prospect of growing participation in international markets for
tions that rely more heavily on custodian or demiurge. certain kinds of software engineering. In Korea, production of informa-
The evolution of information technology sectors in Brazil, India, and tion technology products had become a cornerstone of the country's over-
Korea provides a nice illustrative confirmation of this basic contention. all industrial strategy. The chaebo/2 5 were going head to head with the
The blend of roles varied across countries. The variations grew, at least in world's leading firms in memory chips and had succeeded, at least for a
part, out of differences in state structure and state-society relations. Dif- time, in becoming a force in the world personal computer (PC) market.
ferent role combinations were associated with differential effectiveness in All three industries had serious weaknesses, but they did demonstrate
the expected way. that developing countries could be producers as well as consumers of
As chapters 5 and 6 show, the principal difference between Ko~ information technology goods. Overall, it was an impressive set of ac-
the other two countries was that Korea was able to build OA a base of complishments for three countries that conventional analysis at the end of
firms with a broad range of related industrial prowess, fostered by prior the 1960s would have categorically excluded from a chance at real partic- \
'iiiidwifery. This allowed the state to shift easily to the combination of ipation in the globe's leading sector.
prodding and supporting that I have called husbandry. Brazil and India If I had stopped following my three information technology sectors in
made less thorough-going use of midwifery, got bogged down in restric- 1986 or 1987, this would have been the story-complicated in its details,
tive rule-making, and invested heavily in direct production of informa- but still relatively straightforward in its overall lessons. Some states and
tion technology goods by state-owned enterprises. Their efforts to play some roles were definitely more effective than others, but states could
custodian and demiurge were politically costly and absorbed scarce state make a difference, even in what was universally judged an extremely diffi-
capacity, leaving them in a poor position to embark on a program of cult sector to crack.
husbandry that would help sustain the local industries they had helped Trends in the latter part ot" the 1980s gave the story a different twist,
create. which is related in chapter 8. If.nationalist industri~
The similarities among the three countries were as suggestive as the leitmotif in the 1970s, a new jateruationaljzation was clearly taking hold
differences. In each, the vision of a local information technology sector at the end of the 1980s. The hallmark of this new jarernatjonaljzation
began with individuals convinced of the value of local informatics pro- _was a new relation between transnational and local capital, epitomized-
 CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 17
16
by IBM's new joint venture in India. 26 This was accompanied by a new volvement would produce an economically stagnant, politically stable
emphasis on connectedness to the global economy, in terms of both in- symbiosis between officials with the capacity to create rents and private
creased openness to imports and increased concern with exports. actors anxious to take advantage of them. I had found the opposite. State
The easy interpretation would have been that this was a case of "the involvement was associated with economic dynamism, and the result was
empire strikes back," 2 7 of maverick nationalist aspirations being brought political contestation, not symbiosis.
back under the discipline of the global economy. In fact, the new interna- The argument at the sectoral level, which is summarized in chapter 9,
tiQnalization was not simply the negation of earlier nationa1ist policies....Ju.. ends up combining a vision of how state initiatives might produce indus-
some ways it was a vindication. IBM provides the emblematic case. Its trial transformation with ideas about how state-induced industrial trans-
expansion in the 1990s was increasingly based on alliances with locally formation redefines the political possibilittes for future state action. This
~ed firms. This was in part because the nature of the industry had sectoral argument in turn raises obvious questions for my societal-level
changed globally, but it was also because local greenhouses had produced analysis of state structures and state-society relations. If successfully fos-
Brazilian, Indian, and Korean firms whose organizational strength, tering new entrepreneurial groups in a particular sector generates a new
human capital, and experience made them legitimate partners. The new political relation between the state and the constituency it has helped cre-
internationalization was in part the product of successful midwifery. ate, should not the same logic hold more generally?
~at was most intere~tin.g aboHt this i;han.ge, from the point of view of Reexamination of the evolution of state-society relations in chapter 10
my argument l Iwas its contradictory implii;ations for relations_betwe.i::n suggests that the same basic dynamic does apply more generally. J:bere is
the state and the industrial con.~titneacy it had htlPed create. Local en- evidence to suggest that the transformative prnjeet advatteeel under the
ti=e'Pr"eneurial groups had been at first tempted entrants, then grateful cli- ~egis of embedded autonomy in Korea ma h ercut its own oliti-
ents, and eventually actors strong enough to attract transnational allies. cal foundations. t 1s 1s true, future state involvement will require some
It was the state's opposition. to foreig~ etttry that gave local capital its sort of reconstruction of state-society relations.
trump card in negotigting the initial a11ianceS, but once alliances had been In the original formulation, embedded autonomy implied dense links
·~relations between firms and states changed again. The st_ate's not with society in general but specifically with industrial capital. From
leverage was u irms had, in effect, traded the rents associated the point of view of other social groups, it was an exclusionary arrange-
wit state protection of the local market for those associated with their ment. Could embeddedness be built around ties to multiple social groups?
!.· Comparative evidence suggests that sometimes it can be .. One way of re-
transnational corporate allies' proprietary technology and global market
power. The new alliance of local entrepreneurs and transnational corpo- @nstructing state-society relations would be to include liuks with other.
rations make it harder to sustain the old alliance between local capital so.cial_gr.oups, like labor. Chapter 10 explores this pos~ibility by looking
at some quite different cases, namely, agrarian communism in Kerala and
and the state.
If shrinking political support for state action corresponded neatly to European social democracy in Austria. These cases suggest that a broadly
the increasing developmental irrelevance of state action, the equation defined embeddedness may offer a more robust basis for transformation
would be balanced, but that is not what analysis of the new international- in the long run. This suggestive evidence argues for further exploration of
ization suggested. New alliances were prone to devolve back into de facto potential variations in embedded autonomy.
ii
I
subsidiaries. New exports, like software from India or PC clones from The esseotial oHdiae of the argument can be recapitulated in three
Korea, opened avenues for mobility in the global division of labor, but P~.:.First, developmental outcomes depend on both the geueral ch-;;-
they also had the potential to turn into low-return dead ends. Continued act~Llt!_te structures and the roles that states pursHe. Second, state-

l
husbandry was crucial, but in a sector populated with firms more be- . t can be associated with transformation even in a sector like
holden to transnational allian~es than to state s_upport, the political via- in c nventional wisdom woul su est ittle . ~:----
bility of past patterns of state mvolvement was m doubt. chance of success. Finally, an analysis of states and indu;l:rial transfor-
I began my investigation of informatics industries trying to understand matiou canoot stop with the emergence of a new industrial laudscape.
how state initiative could reshape local industrial efforts. ~ Successful transformation changes the nature of the a ' · te cou;;--
trigued by the way in which_ the very_ success of state efforts could un- _ ter arts,.ma i ec 1ve uture state involvement de endent on the re-
d~..teHt the i)Olli!Car~ties for susraiuin.g state involvement. The construction of state-society ties.
neo-utilitarian perspective prevalent in the 1980s predicted that state in- Of course, there is no reason to believe any of this argument right now.

Ii
 r!

CHAPTER 1 STATES AND INDUSTRIAL TRANSFORMATION 19

18
Its eventual plausibility depends on how well it fits the details_ of th~ cases. A comparative institutional approadi implies a strategy of gathering
The way the cases are depicted depends in turn ~n. th~ way _m which the evidence. Obviously, one central aim is to collect evidence that will locate
research was conceived and conducted. An explicit d1scuss1on of how I specific state policies and societal responses in the larger institutional con-
went about my investigation is in order. text that produces them, showing how that context helps define interests,
aspirations, and strategies. At the same time, demonstrating variation
across cases requires delving into specifics. Whether the focus is on soci-
ety or within the state, the central methodological precept of a compara-
Research Strategy
tive institutional approach is to ground assertions of institutional effects
in the analysis of the actions of specific groups and organizations. Above
s ause it looks for ex s that o be all, a comparative institutional approach must avoid treating the state as
- · -- ~~ 1 · 0 the end · attern of relationshi a reified monolith.
I~ . f
within with such calculatiofil.__ar~immersed; comparative because 1t ~- This chapter is full of statements like "the state can" or "the state
~uses on concrete variations across historica!cases rather than on genenc wants." Other chapters share the same language. Such formulations have
to be taken as metaphorical shorthand. The purpose of doing research is
explanations. 28 . .
Taking a comparative institutional approach to the state ent~1ls re1ect:...... to figure out what lies behind them. In practice "the state wants" because
in reductionism. The state ca a regat10n o~~-~~e some group of individuals within the state apparatus has a project. This
interests of individ.aal eiffice hcl.ders. the vector sum of politica orces, or does not mean the project is merely a reflection of their personal biogra-
fhe condensed expression of some logic of economic necessity. States are phies or individual maximizing strategies. It does mean that their project
the historical products of their societies, but that does not make _them may well be opposed by others elsewhere in the state and that the defini-
pawns in the social games of other actors. They must ?e dealt with as tion of what the state "wants" is the result of internal political conflict
and flux. An investigation of state policy involves probing specific sources
institutions and social actors in their own right, influencmg the course of
29 and supports, not attributing results to some sort of unitary volition.
economic and social change even as they are shaped by it. In chapter 2
I try to set out the distinctive features of th~ comp~~ati~e ~?stitutional Taking the state seriously as an institution without reifying it requires
approach by contrasting it to what I call the neo-ut1htanan approach, putting together a variety of evidence. I began my research with "secon-
which dominated new work on the state in the late 1970s and the 1980s dary evidence," scholarly accounts of state and society in Brazil, India,
Korea, and other countries that offered comparative perspectives on these
but now seems on the wane.
In the comparative institutional approach, the state is se:n ~s ~ ~istori- three. Analyses by researchers working for organizations like the World
cally rooted institution, not simply a collection of s~rat_eg1~ md1~1duals. Bank were also valuable sources. The secondary literature was supple-
The interaction of state and society is constrained by mst1tut10nahzed sets mented by a variety of government documents and statistical evidence.
of relations. Economic outcomes are the products of social and political Most important, however, were what are known among specialists in
institutions, not just responses to prevailing market cond~tions. Unde~­ sociological methodology as "key informant interviews."
standing diverse outcomes is the aim, not forcing cases mto a genenc On the ground, "state structures" and "state-society relations" be-
mold or onto a one-dimensional scale. come relations among state agencies and organizations, relations between
Having become fashionable again, "institutionalism" has also become these agencies and individual firms, historical patterns of ties among indi-
a term with many meanings,30 but in the analysis of the state's role in the viduals-all things that can only be appreciated by talking to individual
economic development the "comparative institutional approach" can be state managers and private executives.
defined concretely. It is grounded in a long tradition of ~ork that runs Interviews with dozens of current and former government officials
from Weber through economic historians like Polany1 (1944), Ger- were the primary source of my understanding of what was going on in-
schenkron, (1962), and Hirschman (1958, 1973, 1977, 1981) to contem- side these states and the starting point for the description of state roles
porary work by political economists like Johnson (1982), Bardhan that is offered in chapters 5 and 6. Obviously, participants offer accounts
(1984), Bates (1989), Amsden (1989), and :Vade (1990) ~n~ sociolo-
31 that are biased and self-interested, but the biases and self-interest are im-
gists like Cardoso and Faletto (1979), Hamilton (1982), Ze1tlm (1984), portant evidence in themselves. In addition, higher-level officials offer
32 more than accounts of the events in which they have participated. They
Gold (1986), Stephens and Stephens (1986), and Seidman (1994).
 CHAPTER 2
A COMPARATIVE INSTITUTIONAL APPROACH 39
38 Wa_de's portrayal of the aggressiveness of the state's role is more
tween the state and peasant "strongmen" over whether there would _be restr,ai~ed but_ fundamentally similar. He argues (1990, 26-27) that Tai-
further transformation of agriculture, but initially it was a mutually rein- wan s industnal success lay in the "governed market , " a senes
· of po l-
· · h "
forcing relation. The state helped create a social group whose economic 20 icies t at enabled the government to guide-or govern-market pro-
project in turn contributed to the state's own developmental agenda. ~esses of resource allocation so as to produce different production and
The salience of shared projects depends on the historical moment, but inv~stment outcomes than would have occurred with either free market
it also depends on the analyst's agenda. For Migdal, African agriculture or simul~t:,d. free m~rket policies." He goes on to specify periods of "state
epitomizes state-society struggles over social control, but Bates manages l~adership in particular sectors, during which state initiatives were cru-
to discover possibilities for shared projects. 21 Comparing Migdal's take cial :o the transformatio~ of key sectors (111). Again, state policies do
on state-society relations in East Asia with other recent examples of com-
parative institutional analysis of East Asian development provides an
no: JUSt chan?e the behavi?r of existing actors, they also help bring into
?eing t~e societal actors without whom industrial development would be
even better illustration of the importance of the analyst's point of view. impossible.
When Migdal turns to East Asia, he sees "massive societal dislocations" Lo_oking at East Asia through the eyes of Amsden and Wade takes us
resulting in "strong states." States cannot be "strong," in Migdal's view ful~, cir~l~ from the neo-utilitarians back to the iconoclastic endorsement
(1988, 262), "without exogenous factors first creating catastrophic con- of_ activ~st government" by World Bank Vice President Karaosmanoglu
ditions." "Massive societal dislocation, which severely weakens social with which the chapter started. It is precisely analyses like those of
control," is a "necessary condition" for the emergence of a strong state Amsd;n and.~ade that provide the empirical grounding for Karaosma-
(269). nogl~ ~ convict10n that "a more activist positive governmental role can be
Without denying that "societal dislocations" helped set postwar pa- a decisive factor in rapid industrial growth."
rameters in East Asia, other analysts focus on the nature of the shared . Indeed.' by the beginning of the 1990s, the World Bank as an institu-
project that emerged subsequently. Two country studies, one by Alice tion felt it h~d to take the comparative institutionalist perspective seri-
Amsden (1989) on Korea and one by Robert Wade (1990) on Taiwan, ously. Its ma1or report on the "East Asian miracle" tried to locate the
22
are among the numerous studies that illustrate this point. Both authors bank somewhere between a neoclassical view and the "revisionist"
consider the construction and execution of projects based on a symbiotic A1:11sde~ade view. The report conceded (1993, vi) that "in some econo-
relation between the state and nascent industrial groups. The state's con- m_ies, mainly those in Northeast Asia, some selective interventions con-
tribution to such shared projects is crucial, but they also require develop- tnbuted to. growth." It also adamantly affirmed the value of Weberian
mentally engaged partners on the societal side. 23 bureaucracies (157-89).25
Amsden ar ues h " · · · · " e uires Does this mean that the co~parative institutional agenda has already
state intrusions -beyond Gerschenkron's "state as investment banker" or_ ~ee~ comp~eted?_Hardly. Despite neo-utilitarianism's theoretical difficul-
Hirschman s isegui i rating investments. ' · w 12..8.9-_, ties i_n dealing with the state, no alternative frame can claim the encom-
143 )..3~fu;t indastrial revoh1tiou was built on laissez-faire, the.se.c..Qnd_ passi~g el_egance that gives the neo-utilitarian model its charisma. Recent
on infant industry_protection. In late industrialization th09EP.d~!ion~_ co~tnbut10ns to the c~mparative institutional tradition validate the pur-
su~ which includes both protection and financia.L.irn:.:~ntiY.es. The smt of such an alternative, but they also highlight the challenges that must
allocation of subsidies has rendered the government not merely a banker, be confronted along the way.
as Gerschenkron (1962) conceived it, but an entrepreneur, using the sub-
sidy to decide what, when and how much to produce." In addition; the
state must "impose performance standards on the interest groups receiv- A Comparative Institution~! Agenda
ing public support .... [I]n direct exchange for subsidies, the state exacts
certain performance standards from firms" (145-46). The combination An co~ arative institutional olitical econom of the state must offer a
of incentives and performance does not just shape the behavior of existing cJ_ear vis~on of b~th the state's internal structure and the character 0
industrial operations; it enables the state to coax into being a set of en- st:ate-soc1ety
. relatwns Weber's "bureaucracy hypoth esis · " remains
· the
trepreneurial groups that can serve as the societal side of a joint project of point of departure for analyses of internal structure. The problem of
industrial transformation.
 CHAPTER 2 A COMPARATIVE INSTITUTIONAL APPROACH 41
40
state-society relations must be recast in a more dynamic form, along the
fogic o Phroving
o~es.f the connection empirically is not easy but at least the
t e argument is clear. ,
lines suggested by Bates's analysis, one that makes state policy an en- T..be l question
fl" ·of state-societvr relations is mar
-- ·- l"
___ e comp_1cated Tw
dogenous factor in the changing character of the state's societal counter- parent y con ictmg positions coexist On th h cl h . . . o ap-
lation" position For Weber i· l t. . f e one an t ere is the "insu-
parts. .. · , nsu a 10n rom society -
Weber's original assertion that bureaucratic state structures confer ad- cond1t10n for a functioning bur 26 was a necessary pre-
vantage is consistently supported by contemporary analysts. On this, between local "implementors" ea~~acyh. Migdal agrees, seeing the ties
" "d . wi m t e state apparatus and "st
Migdal concurs with Amsden and Wade. While stressing "dislocations" men outsi e it as undercutting the state's bT rong-
as the necessary condition of a "strong state," Migdal is careful to point mental projects. Bates (in his first book) a:; ~6' to carr~l?ut _its develop-
out (1988, 274) that an "independent bureaucracy" is one of the suffi-
cient conditions. Amsden and Wade both identify state bureaucrats as
t~et,, equating th: development of «ate-society t~e~:;~t'..~~;~=,~~/:-
s !:! e apparatus y rent seekers. - e
playing crucial roles in industrial transformation. Even the World Bank
concurs.
Logically the emphasis on insulati
rest of the state apparatus takes
other social groups the state .ll
so::; ::::d
f
k
e~/ense. ynless loyal:y to ~he
. prece ence over ties with
There is, however, one important caveat. Weber tended to see the
h . b , wi not unction The kind of h
growing sway of bureaucracy as inevitable. Analyses like Midgal's make co esive ureaucracy that is postulated in the W. b . h co_ erent,
bureaucratic forms look harder to attain and more vulnerable. ,Getting have a certain degree of autonom Y vis-a-vis. , . society
. e enan
T\...n
ypothesis
1...1 · must
effective bureaucratic or anization to take ho · · orld rating the benefits f · I · f · ri= proJ,l em is sepa-
. 0 u:irn.ation _ram the costs of isolatio
states is a dauntffig__ta.s.k...lf and when real administrative machinery is 1.]Je wbole idea of "joint proiects " h" h . n.
established, dissolution and decay are as likely as expansion and rein- Gerschenkron Hirschman
. I '
Ad ' wd 1C is central to the visions of
, ms en, an Wade makes close tie t k
forcement. If transformation demands an effective bureaucracy, there is soaa. ?ro~p_s fundam@ntal to developmental ~fficacTh" .s Q ley
no guarantee that supply will match demand. A comparative institutional makes mtmtive sense We ar f ll 1 . )'. is view a so
approach turns the neo-utilitarian image of the state on its head. It is the in which neither inve~tment :· a ter; , ~a kmg about capitalist societies
si;gcity of bureaucracy that undermines develo_p~!lhnQt its prevalen~ the cooperation of private act~;~=-~an be implemented without
Unfortunately, this consensus still finds little reflection in policy de- -t~hen
hle. h
their connections t . :~-- - -!!~te_~ operate most effec-
h .d o society are mmimize(Gs no more i;ila .. -
bates and popular accounts (such as those invoked in chapter 1). "Bu- ~~
~~er
t an_ t e I ea that markets operate in isolation from :
reaucracy" is still a pejorative term for citizens and policymakers alike. It Just as m reality markets work only if th " b social ties.
is the moribund, ineffectual antithesis of entrepreneurial initiative and forms of social relations it se J"k 1 h ey are em e ed" in other
effective governance. Or it is the self-serving collection of privileged in- ii;i order to be effective. ' ems I e y t_at states must be "embedded"
cumbents postulated by the neo-utilitarian image of the state. Or it may
combined is further complicatelby th:~ e : ness might be e~fectively
The question of how autonom and b dd d .
be thought of as a malignant combination of the two, R9rel~if ever,§it._
seen as the competence-e.uhancing set of srructures@~postula-ted--­ tures shape each other Th tct
t a: states and social struc-
something to gain from.tran:f~rese~ce o orgamzed social groups with
by Weber. "Bureaucracy" is used as a generic term, equivalent to "the
organizational apparatus of the state." States are not seen as varying sub- a transformative bureaucratic :t~t:·i~~f:~7:nces the pro~pect sustaining
stantially in the degree to which they are "bureaucratic." Underlying this prospects that would-be . d . 1., ". e _b~reaucracies enhance the
. d . m ustna ists or mcipient gentry" will be
conceptual problem is the surprising dearth of systematic comparative orgamze social groups C come
webs of local power holderso::;~se y, a ~~ciety dom_inated by loose-knit
1
evidence regarding variations in the degree to which existing state struc-
tures approximate the Weberian ideal-type "bureaucracy." make it harder for coherent c h ~ veste mterested m the status quo will
absence of h , o esive state apparatuses to survive, but the
To fulfill the potential of a comparative institutional approach, the
Weberian hypothesis must be explored across agencies and countries. will organi:ec~s:l~e~:ys~:t~ a)paratus bmakf els it less lik~ly that civil society
. a oose we o ocal loyalties.
Looking at the state agencies involved in particular industrial sectors, as
this study I have started -~hcut mto t is not of reciprocal relations. In
There are vanous ways t · h. k
this study does, is one way of putting more empirical meat on the idea
that it is scarcity rather than surfeit of bureaucracy that impedes develop- and looked at their imp wt i stabte structures and state-society relations
· ac on su sequent changes i ·
ment. The key is to identify differences in the way states are organized ically at their impact on ind t . 1 . . n society, more specif-
us na orgamzat10n. Others may choose to
and then connect these differences to variations in developmental out-
 CHAPTER 2
42
start with social structures, then try to explain the emergence of particular
forms of state organization and state-society ties.
Whatever tack is taken, the ultimate aim is the same. Capturing the
dynamics of state-society relations and putting them together with the
"Weberian hypothesis" on internal organization is the basic challenge
States
facing the comparative institutional approach. Analytic generalizations
must be grounded in the analysis of spe~ific historical evidence. We need
to look at the covariation of state structure, state-society relations, and
developmental outcomes. What separates states that embody the neo-util- IN LATE 1978, a government tax collector was killed in Bandundu Prov-
itarian nightmare from states that can legitimately claim to be develop- ince, Zaire. That people's resentment against tax collection in Zaire
mental? How do shared projects of transformation work? What kind of should reach lethal levels is hardly surprising. The rapaciousness of the
state roles are involved? How do successful shared projects change rela- Zairian officialdom is legendary, and the state's most visible representa-
tions between the state and its private collaborators? Using comparative tive, the army, "lives on the backs of the ordinary people" since "for some
historical evidence to answer these questions will exploit the opportunity unknown reasons, the Mobutu regime has always been unable regularly
opened up by neo-utilitarianism's retreat and forge a more satisfying vi- to pay its forces" (Kabwit 1979, 394, 399).
sion of the state's place in the process of development. Once Joseph Mobutu Sese Seko gained control over Zaire in 1965, he
and his coterie within the Zairian state apparatus systematically looted
Zaire's vast deposits of copper, cobalt, and diamonds, extracting vast
personal fortunes visibly manifested not only in luxuriant life-styles at
home but also in multiple European mansions and Swiss bank accounts
of undetermined magnitudes. In return for their taxes, Zairians could not
even count on their government to provide minimal infrastructure. After
fifteen years of Mobutu's rule, the road net, for example, had "simply
disintegrated" (Kabwit 1979, 402)-by one estimate there were only six
thousand miles left out of what was once a ninety-thousand-mile net
(New York Times, November 11, 1979). In the first twenty-five years
under Mobutu, Zaire's GNP per capita declined at a rate of 2 percent per
year (World Bank 1991, 204), gradually moving this resource-rich coun-
try toward the very bottom of the world hierarchy of nations and leaving
the country's population in misery as bad or worse than that which they
suffered under the Belgian colonial regime.
Unfortunately for the citizens of Bandundu Province, the government's
effectiveness at repression substantially exceeded its effectiveness at road
building. State response to the death of the tax collector took the form of
two detachments of soldiers who killed seven hundred of the local people.
Later fourteen men were hanged as "ringleaders" in the tax collector's
death (New York Times, Jun~ 3, 1978, 3).
The Zairian state represents a challenge, not just to its citizens, but also
to theories connecting variations in the structure and behavior of state
apparatuses to trajectories of national development. We need to under-
stand what kind of a state this is. Does its internal structure warrant being
called a bureaucracy? How should one characterize its relation to society?

',I
I 1

, I'
1 ..
 ----- - ----

CHAPTER 3 STATES 45
44 models of_the "developmen~al state"-Japan, Korea, and Taiwan. Using
Any general understanding of variation in the role of the state must take the ~nalyt1ca~ leverage provided by these polar types, I will then analyze
into account ili_is predatory polar type. . . th~ ~ntermed1ate cases-India and Brazil. My aim is not to explain the
Understanding the other pole is equally important. While states .like 0~1gm~ of predator~, developmental, and intermediate states, a task for
Mobutu's were providing practical demonstrations of the pervers10ns histoncal sch_olars~1p that goes well beyond the ;;imbitions of this study 2
predicted by neo-utilitarian models of the state, t.he "Fa:t ~ sia.i:i N.ICs" I11~tead, the idea 1s to take existing structural t es as startin oints
offer.e_d empirical foundations £~tending the comparative 1QS!1tut1onal usmg t em to s ow ow internal organization and relations to society
a~~~~__of Weber, Gerschenkron. and. Hi:sc~man and ?a~e analysts produce a distinctive developmental impact.
like Amsden and Wade a chance to offer mst1tut10nal descriptions of the
"deyelopmental state." 1
Juxtaposing "predatory" and "developmental" states focuses atten- Zaire as the Archetype of the Predatory State
tion on variation defined in terms of developmental outcomes. Some
sta extract such lar e amo · · vestable s 'Yithout question, ~s a textbook case of a "predatory state" in the
n__ ovidin so little in the wa of "coll~ctive oods" in re do s1mp~e, commonsens~ ?efiniti?n of the term. It preys on its citizenry, ter-
ig,deed impede economic transformat1012:_ Those who cont~~l these states ~orizmg them, des~01li?g their common patrimony, and providing little
plunder without any more regard for the welfare of the C1t1zenry than a m the way of ~erv1~es m retur?. 3 Condemning the Zairian state is easy.
predator has for the welfare of its p~ey.. Ot?er sta.tes fus~er ~ong-t~rm The c?allenge 1~ to mtegrate this perverse case into a more general under-
entre reneurial ers ectives a ate elites b mcreasm mcent1v s s~andmg of Third World states. Beyond its obvious penchant for preda-
a e in transformative investments and lowerin the ris These
tion, how would one characterize the internal structure of the Zairian
states may not be immune to using social surplus for the ends of incum- state or its relations with society?
bents and their friends rather than those of the citizenry as a whole, but Conventional dichotomies like "strong" versus "weak" mislabel this
on balance the consequences of their actions promote rather than impede st~te. _By some definitions, it is a "strong" state. It certainly has what
transformation. Michael Mann (1984, 188) would call "despotic power." It can under-
No one would contest the fact of such variation. The challenge is to
I' t~k.e any action it chooses without "institutionalized negotiation with
I link obvious variations in outcome to underlying differences in state Civil society groups." It also has a considerable amount of what Mann
structure and state-society relations. Success in connecting performa~ce "~189) calls '.'infra~t~uctural power," the ability to penetrate society and
and structure in these extreme cases offers in turn a start toward makmg implement its dec1s10ns. It has at least proven itself able to extract and
similar connections in other, more ambiguous cases-intermediate sta~es appropriate reso~rces. Yet it has little capability of transforming the
like Brazil and India that have enjoyed inconsistent but occasionally strik- economy and social structure over which it presides. In this sense, Migdal
ing success in promoting industrial transformation. . (1988) would call it a "weak" state.
Comparing concrete historical cases offers opportumty for fresh att~ck Is Zaire's state "a~tonomous"? If "autonomous" means not having its
on the conceptual issues confronted in chapter 2. Is ~~ed~tory behav10r
I
,I

goals shaped by societal forces, then it is very autonomous. No class or

associated with an excess of bureaucracy, as neo-utilitarians argue, or organized civil society constituency can be said to control it. If, on the
with a scarcity, as a comparative institutional approach would suggest? ?~her hand, "au_tonomy" implies the ability to formulate collective goals
Do developmental states reconfirm Weber's contention that bureaucr~cy ws~ead ?f allowmg officeholders to pursue their individual interests, then
and capitalism "belong intimately together"? How is the character of m- .~aire_ fails ~he test. Instead, it embodies the neo-utilitarian nightmare of;
teraction between the state and dominant elites different in predatory and state m which all incumbents are out for themselves. Certainly it bears no
developmental states? Are developmental bureaucracies more or less in- res~mblance to the "relatively autonomous" state of structural Marxism,
sulated than predatory ones? Does the possibility of "joint pro!ects" de- w~1ch fosters the accumulation of capital with greater effectiveness than
fine developmental states? If so, how does the internal organ~z~t1on o~ the private capitalists themselves (cf. Poulantzas 1973).
state interact with social structural opportunities to make 1omt projects C~l_laghy (198.4, 32.-79) emphasizes the Mobutu regime's patrimonial
possible? qualities-the mixture of traditionalism and arbitrariness that Weber ar-
A quick look at Zaire, an almost purely "pred~tory state," begins the gued was characteristic of precapitalist but not capitalist states. True to
discussion. Next, I will look at the three countries most often used as
 CHAPTER 3 STATES 47
46
Fhe patrimonial tradition, control of the state. app~ratus is vested_ in L c.._ucial. in a co?text where the marker has so thoroughly penetrated
small group of persanalistically interconnected mdw1duals. At the puiµa- the social consc10usness that "everything is for sale." When "marketiza-
cle of ~ower is the "presidential clique," which consists of" ~O-od~ tion" and personalism dominate instead of predictable, rule-governed
p;;;siCCnr's most trusted kinsmen, occupying the most sensitiv~ and luc~a­ bureaucratic behavior, the development of a bourgeoisie oriented toward
tive positions such as head of the Judiciary Council, Secret Police, Inten~r long-term productive investment is almost an impossibility. With a h1!::_
Ministry, President's office, and so on" (Gould 1979, 93). Next th_e~e is reaucracy whose maxim is "make the quest for wealth and money an
. " 6 anyone ns . k" I ·mvestment must be considered ..
the "Presidential Brotherhood," who are not kin, but whose positions 9bsess10n, mg aong-term
still depend on their personal ties with the president, his clique, and each ~ore a fool than an entrepreneur.
In add1t10n to supportmg basic Weberian contentions regarding the
other.
One of the most striking aspects of the Zairian state is the extent to virtues of bureaucratic state structures, the Zairian case sheds interesting
which the "invisible hand of the market" dominates administrative be- light on state-society relations. While the Zairian state's ability to pene-
havior, creating a caricature of the neo-utilitarian image of ho"": ~tate trate and reshape civil society is certainly imperfect, .the Mobutu regime
officials act. Jp Zaire, repressive violence and market relations are 1..omed ., h,as been quite effective at disorganizing civil society. It has systematically
4
to form the ultimate expression of neo-utilitarian rent-seeking. A Zairian _;yorked at weakening the cohesion of traditional collectivities. At the
~rchbishop (quoted in Callaghy 1984, 420) described i~ as foll?ws: "~hy same time, it has made sure that coherent interest groups organized at the
in our courts do people only obtain their rights by paymg the iudge liber- national level, which might be competitors for power, are disrupted be-
ally? Why do the prisoners live forgotten in prisons? They do no~ have fore they emerge. Lacking its own program of social and economic trans-
anyone who can pay the judge who has their dossiers at hand. ~hy m our formation, the predatory state is threatened by the potential agendas of
offices of administration, like public services, are people reqmred to re- civil society. It deliberately tries to produce the kind of loose-knit society
turn day after day to be able to obtain their due? If they do not pay the that, according to Migdal, undercuts a transformative agenda. The stag-
clerk, they will not be served." President Mobutu himself charact~rize_d nation and disarray that follow from the state's active disorganization of
the system in much the same way: "Everything is for sale, everythmg is civil society is not a disadvantage from the point of view of the predatory
bought in our country. In this traffic, holding any s_lice _of P1:1b_li~ pow~r state; it is an advantage. Transformation might give rise to organized so-
constitutes a veritable exchange instrument, convertible mto 1llic1t acqm- cial groups. "Departicipation" is the goal politically (cf. Callaghy 1984,
sition of money or other goods" (Lemarchand 1979, 248). 41 ), and there is no possibility of joint projects.
The prevalence of such a thorough-going market ethic might at first Zaire confirms our initial suspicion that it is not bureaucracy but its
seem inconsistent with what Callaghy (1984) characterizes as an "early abse~c~ that makes the state rapacious. At the same time, Zaire suggests
modern absolutist state," but it is in fact quite consistent . .£ersonalism that is it not so much "weakness" in re!atTcm-to civil society that prevents
11
and plundering at the top destroys any poss_ib_ilitX of _r~le govern~d ?eh~v­ the state frbm fostering ~ransformati2E;.}nstead the state's energies are
:I directed toward preventmg the emergence of social groups that migfit
ior in the lower levels of the bureaucracy, g1vmg md1v1dual max1m1zat10n
'! ' have an interest in transformation. It is not just poor developmental per-
free rein.
Even a q11ick look at Zaire suggests that it is not a s~ of hmeau- formance that defines the predatory state. Internal organization and the
c.racy but its absence that is central to Zaire's problemey. Rule-govern~d structure of its ties to society mark it just as clearly. On both of these
behavior immersed in a larger structure of careers that creates commit- dimensions, the predatory state can be sharply distinguished from states
ments to corporate goals is notable by its absence. The only semblance of whose performance has earned them the label "developmental."
corporate cohesion centers on the state's repressive capacity and even that
I I
totters at the edge of incoherence, leaving even the regime's survival as a
predator dependent on the sufferance of its powerful European and The Archetype of the Developmental State
American allies.5
In fact ' the Zairian case extends Weber's assertion of the "intimate In 1982, with little theoretical fanfare, Chalmers Johnson introduced
. . . what was to become a focal point in future debates over the role of the
connection" between bureaucracy and capitalism. ,Looking at Zaire, it is
clear that the usefulness of bureaucracy lies not just in transforming pre- state in industrialization. He argued that Japan's "developmental state"
c~ "traditional" social forms. Bureaucracy becomes even more was a central element in explaining the country's post-World War II
48 CHAPTER 3 STATES 49
"economic miracle." At the same time, Wade and his colleagues at the Weber felt was esseptial to a true bureaucracy. They follow long-term
Institute of Development Studies at Sussex University were describing career paths within the bureaucracy and operate generally in accordance
Taiwan and Korea as "developmental states." 7 In both cases, a compara- with rules and established norms. In general, individual maximizatioy
tive institutional perspective made it easier for the figure of the develop- must take place via conformity to bureaucratic rules rather than via ex-
mental state to emerge out of the background of startling economic ploitation of individual opportunities presented by the invisible hand.
growth, although even observers with a neoclassical bent had a hard time Furthermore, these characteristics vary across the Japanese bureaucracy.
ignoring the state's salience. 8 It is the less bureaucratic, more clientelistic agencies like the Ministry of
Johnson's (1982) account of the golden years of Japan's Ministry of Agriculture that are likely to be associated with "pockets of conspicuous
International Trade and Industry (MITI) provides the best starting point inefficiency" (Okimoto 1989, 4).
for trying to understand the structural features of the developmental Weberian pronouncements regardin the necessit of a coherent meri-
state. His description is particularly fascinating because it corresponds so tq>::ratic ureaucracy are confirmed, but the Japanese case also indicates-
neatly to what a sophisticated implementation of ideas from Gerschenk- the necessity of going be ond such rescri tions. All desc:J:iptionS-oLthe_
ron and Hirschman might look like in practice . .In the capital-scarce years _ Japanese state emp asize the indispensability of informal networks, both
following World War II, the Japanese state a~ted as a surrQgate ~­ internal and external, to the ' · ·n . Internal networE-are-
miss~pital market while at the same time helping to "inguce" trans- • crucia to t e ureaucracy's coherence. Johnson (1982, 57-59) empha-
f~ative investment decisions. State institutions from the postal saving sizes the c~ntrality of the gakubatsu, ties among classmates at the elite
;ysrem to the Japan Development Bank were crucial in getting the needed u..niversities from which officials are recruited, and particularly the "batsu
investment capital to industry. The willingness of state financial institu- - of all batsu," which brings together the alumni of Tokyo University Law
tion to bac industrial debt/e uit ratios at levels unheard of in the West School. 11
w t
Informal networks give the bureaucracy an internal coherence and cor-
The state's centrality to the provision of new capital also allowed it to porate identity that meritocracy alone could not provide, but the charac-
implement "industrial rationalization" and "industrial structure policy" ter and consequences of these networks de end fundamentall
(Johnson 1982, 27-28). MITI was the "pilot agency" that oversaw this ion rocess throu h which civil servants are chosen. The fact
process. Given its role in the approval of investment loans from the Japan that formal com ete ra · · tic ties or traditional loyal-
Development Bank, its authority over foreign currency allocations for ties, is the prime requirement for entry i!!!Q...1b..e network makes it much
industrial purposes and licenses to import foreign technology, its ability more likely that effective performance will be a valued attribute among
to provide tax breaks, and its capacity to articulate "administrative guid- loyal members of the various batsu. The overall result is a kind of "rein-
ance cartels" that would regulate competition in an industry, MITI was forced Weberianism," in which ~bureaucratic elements of bu-
in a perfect position to "maxim,ize induced decision-making. " 9 reaucracy" reinforce the formal organizational structure in the same way
Some might consider Johnson's characterization of MITI as "without that Durkheim's "noncontractual elements of contract" reinforce the
doubt the greatest concentration of brainpower in Japan" (26) an exag- market (cf. Rueschemeyer and Evans 1985).
geration, but few would deny the fact that Japan's startling postwar eco- r pcternal nerworks connecting the state and civil society are even more

nomic growth occurred in the presence of " a powerful, talented, and i~ortant.._As Chie Nakane puts it, "the administrative web is woven
prestige-laden economic bureaucracy." Nor was it controversial to assert more thoroughly into Japanese society than perhaps any other in the
that, at least in the period Johnson was describing, "official agencies at- world" (cited in Okimoto 1989, 170). Japanese industrial policy depends
tract the most talented graduates of the best universities in the country fundamentally on the maze of ties that connect ministries and major .ifl.-
and the positions of higher-level officials in these ministries have been and dustrialists. "Deliberation co,uncils," which join bureaucrats and busi-
still are the most prestigious in the society" (20).The ability of the higher nesspeople in rounds of data gathering and policy formation around an
civil service exam to weed out all but the top graduates of the top univer- ongoing series of specific issues, are only one example of the "administra-
sities is apparent in the failure rate. As few as 2 or 3 percent of those who tive web" (World Bank 1993, 181-82). Okimoto (1989, 157) estimates
take the exam in a given year pass. 10 that deputy directors of MITI sectoral bureaus may spend the majority of
The success of the Japanese developmental state is clearly consistent their time with key corporate personnel.
with the "Weberian hypothesis." Officials have the special status that Ties between the bureaucracy and private powerholders are reinforced
 50 CHAPTER 3 STATES 51
by the pervasive role of .MITI alumni, who ~h!:_ough ~kudari (th~ ~~
scent from heaven" of early r.e.tirement) end up in.key_p_g_s.itions__nor_onl:y:,-, Variations on the Developmental State
i ~al cor orations but also in the industry associations and uasi-
governmental organizations that comprise "the maze o intermediate or- The state's ability to facilitate industrial transformation in Korea and Tai-
~tions and informal policy ~etworks, wher:, muc? of the time-con- wan, like its ability in Japan, has been fundamentally rooted in coherent,
suming work of consensus formation takes place (Okimoto 1989, 155). competent bureaucratic organization. In each case, however, the nonbu-
Amakudari, like other aspects of embeddedness, is carefully institutional- reaucratic bases of internal solidarity and the nature of ties to the sur-
ized. According to the World Bank (1993, 178-79), "retiring bureaucrats rounding social structure are distinct. Jhe stare in barb of the East Asian
in Japan do not choose their sinecures, but are assigned them by a com- NICs looks more autonomous than the Japanese version, but Korea and
mittee within their ministry." Taiwan diverge in the way their states are embedded.
The centrality of external ties has led some to argue that the state's
effectiveness emerges "not from its own inherent capacity but from the
complexity and stability of its interactions with market players" (Samuels Korea
1987, 262).12 This perspective is a necessary complement to descriptions,
like Johnson's, that stress MITI's ability to act authoritatively rather than In comparing the Kgreari bureaucracy to Mexico's, Kim Byung Kook
emphasizing its ability to facilitate the exchange of information and build (1987, 100-102fPoints out that while Mexico has yet to institutionanze
consensus. The danger in this view is that it sets external networks and exam-based civil service recruitment, meritocratic civil service examina-
internal corporate coherence against each other, as opposing alternative tions have been used for recruiting incumbents into the Korean state for
explanations. Instead,..iruernal bureaucratic coherence should be seen as_ over a thousand years (since A.D. 788). This tradition is vital in providing
an essential precondition for the state's effective participation in external both legitimacy for state initiatives and nonmaterial incentives for the
tI"etworks. "best and the brightest" to consider bureaucratic careers. Despite Korea's
If MITI were not an exceptionally competent, cohesive organization, it chaotic twentieth centnry political history, the bureaucracy has managed
could not participate in external networks in the way that it does. If MITI tQ preserve itself as an el_ite_curp_~
were not "autonomous" in the sense of being capable of independently . 1!1 Korea, as in Japan, it is fair to say that the state has traditionally
formulating its own goals and able to count on those who work within it been able to pick it~ ~t:;iff from among the most talented members of the
to see implementing these goals as important to their individual careers, ;nost prestigious 1mjversities. Data on the selectivity of the Haengsi
then it would have little to offer the private sector. MITI's "relative au- (higher civil service exams) are almost identical to the data offered by
tonomy" is what allows it to address the "collective action" problems of Johnson for Japan. Despite a sevenfold increase in the annual number of
private capital, helping capital as a whole to reach solutions that would recruitees to the higher civil service between 1949 and 1980, only about
be hard to attain otherwise, even given the highly organized Japanese 2 percent of those who take the exam are accepted (B. K. Kim 1987, 101).
industrial system. Along with similar recruitment patterns comes a similar "corporate
This "embedded autonomy," which is precisely the mirror imag~ of culture." Choi's (1987) discussion of the Economic Planning Board, for
the incoherent despotism of the predatory state, is the key to the develop- example, notes the same kind of confidence and esprit de corps that char-
mental state's effectiveness. "Embedded autonomy" combines Weberian acterize MITI in Johnson's description. Finally, as in Japan, meritocratic
bureaucratic insulation with intense connection to the surrounding social recruitment via elite universities creates the potential for constructing
structure, offering a concrete resolution to the theoretical debate over batsu-like solidary interp~rsonal networks within the bureaucracy. Look-
state-society relations that was raised in chapter 2. Given a sufficiently ing at passees in 1972, B. K. Kim (1987, 101) found that 55 percent were
coherent, cohesive state apparatus, isolation is not necessary to preserve graduates of Seoul National University, and of these, 40 percent were
state capacity. Connectedness means increased competence instead of graduates of two prestigious Seoul high schools.
capture. How autonomy and embeddedness are combined depends,~£ a demonstrates the importanc
course, on both the historically determined character of the state appara- als erian conce n with the vulnerabilit of bure u-
t\isancfine-~~re of the social structure, as comparis~~illf ~racy. 1Jgder Rhee Syngman, the civil service exam was largely bypassed.
Taiwan will illustrate nicely. Only about 4 percent of those filling higher entry-level positions came in
'--
 CHAPTER 3 STATES 53
52
the ~ar~ regime's reconstruction of bureaucratic career paths nor its reor-
via the civil service exam. Nor were those who entered the higher civil
gamzat10n of the economic policy-making apparatus would have been
service able to count on making their way up through the ranks via a
possible. Without some powerful additional basis for cohesion in the
standard process of internal promotion. Instead, higher ranks were filled
upper ranks of the state, the bureaucratic tradition would have remained
primarily on the basis of "special appointments" (B. K. Kim 1987, 101-
ineffectual. Without both in combination, it would have been impossible
2). The character of bureaucratic appointment and promotion under
to transform the state's relationship to private capital.
Rhee was, of course, quite consistent with the character of his regime.
:x'hen ~he Park regime took power, its goal seemed to go beyond jnsu-
While it presided over a certain amount of import-substituting industrial-
latJo~ to mclnde dominance over private capital Criminal trials and con-
ization, Rhee's rngime was more predatory than developmentaLDespite
fiscat10n were threatened, and the leaders of industry were marched
massive U.S. aid, government deficits constituted a major drain on do-
throngh the street in ignominy. Ihis soon changed as Park realized that
mestic savings (see Stallings 1992). Rhee's dependence on private-sector
autonomy without e~beddedness was not going to produce transfor-
donations to finance his political dominance made him dependent on
matio~. ~e needed ~9 ha.0ess ~rivate entrepreneurship and managerial
clientelistic ties with individual businesspeople; not surprisingly, "rent-
expertis~ m order to ac?ieve his economic goals (see E. M. Kim 1987;
seeking activities were rampant and systematic" (Cheng 1987, 200).
M. S. Ku:i 1987). The ties between the regime and the largest conglom-
Only the ascension to power of a group with strong ideological convic-
emte busmess groups (chaebol) became so tight that visiting er;;onomists
tions and close personal and organizational ties "enabled the state to re-
conc~wfo~ th~t "Karea Inc." was "undoubtedly a more apt description of
gain its autonomy" (Cheng 1987, 203). The junior officers involved in
the situat10n m Korea than is 'Japan, Inc.'" (Mason et al., cited in Cum-
the coup led by Park Chung Hee were united by both reformist convic-
ings 1987, 73).
tions and close interpersonal ties based on service experience and close
13 As in the case of Japan, the symbiotic relationship between the state
batsu-like network ties originating in the military academy. The super-
an~ the cha_ebol was foun_ded on the fact that the state.had access to capi-
imposition of this new brand of organizational solidarity sometimes un-
tal ma capital scarce environment. 1 ~ Through its ability to allocate capi-
dercut the civilian state bureaucracy as military men were put in top
tal, the state promoted the concentrntilln of ecouowic power in the hands
posts, but in general the military used the leverage provided by their own
..of the chaebol. It "aggressively orchestrated" their activities (Wade 1990
320), sometimes assigning them specific projects to carry out, as whe~
corporate solidarity to strengthen that of the bureaucracy rather than to
weaken it. Under Park, the proportion of higher entry-level positions
Park told _Daewoo to take over a state-owned heavy machinery company
filled with Haengsi examinees quintupled, and internal promotion be-
I
that was m trouble (Cheng 1987, 239-40). At the same time the Park
came the principal means of filling the ranks above them (B. K. Kim 1987,
I r ·me was de endent on the chaebol to impieffient mdustnaJ transfor-
I j
101-8). 14 mation · · · · ··
One of the features of the revitalized state bureaucracy was the rela-
. Embeddedness under Park was a much more "to down" affair than
I' tively. rivileged position held b " ilot a enc " the ~
J:> Headed by a deputy prime minister, the EPB was t?e Japanese prototype, ac ing the well-developed intermedi ry associa-
tions an ocuse on a sma n The size and
chosen by Park to be a "superagwcy""in the,,ecouomic area (B. K. Kim
i diversi cation of the largest chaebol did give them interests that were
1987, 115). Its power to coordinate economic policy through control of
relatively "encompassing" (cf. Olson 1982) in sectoral terms so that the
the budgetary process is enhanced by mechanisms like the Economic
small nurn_ber of actors did not limit the sectoral scope of industrial
Ministers Consultation Committee and by the fact that its managers are
15 gr~wth. Still, the Korean state could not claim the same generalized insti-
Qften promottd inro leadership positions in other miuistries. As in the
tut10_nal relation with the private sector that the MITI system provided,
Japanese case, the existence of a "pilot agency"..Qges not mean that poli-
~n~ ...1: never fully escaped the danger that the particularistic interests of
cies are 1mcantested within the bnreat1ccraey. Tue EPB and the Min.i.str_y_of
iuch~idual firms might lead back in the direction of nnproductive rent-=- /- ._,__
Trade and IndustryJMD}...are-Ofu11,_a.t]Qg~_rhead~ over industrial pol- seeking. - '-..
icy.16 Nonetheless, the existence of a given agency with generally ac-
.. Korea pushed the limit to which embeddedness could be concentrated
knowledged leadership in the economic area allows for the concentration
ma_ few_ties without degeneratin into articularistic redation. The op-
of talent and expertise and gives economic policy a coherence that it lacks
posite kmd of divergence rom the Japanese model can be found in the
in a less clearly organized state apparatus. region's second prominent pupil of the Japanese model-Taiwan. In this
Without a deep, thoroughly elaborated, bureaucratic tradition, neither
 CHAPTER 3 STATES 55
54
case the relative absence of links to private capital might seem to threaten similar in scope and expertise to Japan's MITI or Korea's EPB.19 The
the ;tate's ability to secure full information and count on the private sec- ~ncil on Economic Planning and DeveloQ!!lent lCEPD) is the current

tor for effective implementation. iirnation of the planning side of the "economic general staff." ~
an executive agency but "in Japanese terms it is somewhere b~ween
1'.{ITI and the Economic Planning Agency" (Wadel990, 198). The Indus-
trial Development Bureau of the Ministry of Economic Affairs (IDB) is
Taiwan
staffed primarily by engineers and takes a more direct role in sectoral
The state has been just as central to the process of industrial accumulation policies. Both of these agencies, like their counterparts in Korea and
in Taiwan as it has in Korea, channeling capital into transformative risky Japan, have traditionally been successful in attracting the "best and the
investments, inducing entrepreneurial decisions, and enhancing the ca- brightest." The staff tend to be KMT members and graduates of Taiwan
pacity of private firms to confront international markets. In Taiwan, as .in National, the country's most elite university (Wade 1990, 217).
Korea, the ability of the state to play this role depe~ded o~ a class1_s Without negating the fundamental transformation in the character of
meritocratically recruited, Weberian bureaucra<:J, crucially remforced by the Kuomintang apparatus, it is also important to keep in mind that, as in
extrabureaucratic organizational forms. As in the case of the Korean the case of Korea, the existence of a long bureaucratic tradition gave the
state, the.Kuomintang (KMT) regime is built gn a combination of l9ng.~ regime a foundation on which to build. Not only was there a party orga-
standing ~dition and dramatic transformation, but differences in the nization that could be reformed, but there were also some economic bu-
historical exp@rieH:ce ef the t·.vo state~ led to very different patterns of_ reaucracies with considerable managerial experience. For example, the
r;lations :with the privats ~ector :;rnd, in consequence, very different pat- National Resources Commission (NRC), founded in 1932, had a staff of
terns of state entrepreneurili,ip. twelve thousand by 1944 and managed over one hundred public enter-
The transformation of the Kuomintang state subsequent to its arrival prises whose combined capital accounted for half of the paid-up capital
on Taiwan is more striking than the changes in Korea between the 1950s of all Chinese enterprises. It was an island of relatively meritocratic re-
and 1960s. On the mainland the KMT regime had been largely predatory, cruitment within the mainland regime, and its alumni eventually came to
riddled with rent-seeking and unable to prevent the particular interests of play a major role in managing industrial policy on Taiwan.20
private speculators from undermining its economic projects. Do the is~ __ Tbe p1mishing experience of being undercut by the particularistic inter-
laIJd it was able to remake itself. Not only was the power of the regime$. ests of private speculators on the mainland led the political leadership of
;wblematic landlord constituency wiped out, but ties with the priva~ the KMT as well as the alumni of the NRC to harbor a fundamental
capitalists that had been most powerful on the mainland were severed as di_strust of private capital and to take seriously the anticapitalist elements
~EL As Gold states (1986, 59), "the most egregiously corrupt and harm- 9f Sun Yat-sen's ideological pronouncements. } hese predilections were
ful persons by and large did not go to Taiwan at all." reinforced by the pragmatic fact that strengthening private capitalists on
Using this space, the KMT transformed its corrupt and faction-ridden Taiwan involved increasing the power of an ethnically distinct, politically
party organization into more of an approximation of the Leninist party- h.Qstile private elite. It is therefore hardly surprising that instead of turn-
state that it had aspired to be from the beginning (Cheng 1987, 97), thus ing Japanese properties over to the private sector as its American advisers
i. providing the state bureaucracy with a reinforcing source of ?rg~niza­ recommended, the KMT retained control, gel).erating one of the larg~
tional cohesion and coherence .. Internal disciplitl€Hlfl:el the a13phcat19P RL '·state-owned sectors in the non-Communist world (see Cheng 1987, 107;
sanctions against the pursnit of individual intHests a:t too expense of cot> Wade 1990, 302).
p_orate g~rtainly reached levels that hclneyer been achieved on the. l@_tead of eschewing direct state ownership like the postwar Japanese
mainland. For example, K. Y. Yin, characterized by Gold (1986, 68) as did, the KMT has used state-owned enterprises (SO Es) as key instruments
rte "one man [who] dominated and forged the broad lines of Taiwan's oL_industrial development. In addition to the banking sector, which was
economic path in the 1950s," was actually forced from office for a year state-owned as in post-Rhee Korea, the state controlled a for;;,idable set
18 ~strial corporations. Taiwan's state-owned enterprises accounted
on grounds of his involvement with a dubious loan to a private firm.
Within the reinforced governmental apparatus, the KMT was able to for over half of all fixed industrial production in the 1950s, and, after
put together a small set of elite economic policy organizations roughly falling off a bit in the 1960s, their share expanded again in the 1970s
 CHAPTER 3 STATES
56 57
(Wade 1990, 78, 97).21 SOEs are particularly important in basic and in- strates how autonomy can enhance the effects of embeddedness. The
termediary industries. China Steel, for example, has enabled Taiwan suc- early evolution of the textile industry offers the best" illustration (cf. Evans
cessfully to outcompete all Organization for Economic Cooperation and and Pang 1987). In the early 1950s K. Y. Yin, going against the wisdom]
Development (OECD) steel exporters in the Japanese market (Wade of the ~merican-trained economists advising his government, decided
1990, 99). The state enterprise sector not only makes a direct entrepre- that Taiwan should develop a textile industry. Yin's conviction that there
neurial contribution but is also a training ground for economic leadership was a developmentally valuable, potential comparative advantage in
in the central state bureaucracy. 22 local textile p:oduct~o? _ca~e well before local entrepreneurs were willing
What is strikiug to observers whose implieit basis of comp:;iri:.~ to take the ns~ of m1t1atmg production. Instead of setting up a state-
Korea and Japan is the extent to which the Iaiw:;iu€se privat€ sector has._ own:d enterpnse to fill the gap, 23 Yin's t~xtile "entrustment scheme"
been absent from economic p.olicy networks Even though the current ~rded a set of supports and incentives that made textiles tgo attractive
trend is to "expand and institutionalize decision-making inputs from in- t_Q._!g[lore. wade (1990, 79\ sums up the state's rgle under the scheme as
dustrialists, financiers, and others" (Wade 1990, 293) relations between follows: "It supplied raw cotton dire the s innin mills advanced
the KMT state and private (mainly Taiwanese) entrepreneurs are distant al wor ing ca ital re ui n addi-
compared to the tight "Korea Inc." ties that bind the state and the chaebol tion, it restricted local entry and restricted imports, both quantitatively
together in Korea. and by _means of tariffs. The result was a spectacular growth of local
The Taiwanese state unquestionably operates with a less dense set oi product~o?, 200 percent in three years according to Wade (1990, 79).24
public-private network ties than the Korean or JaQanese versio~ t~ By provrdmg an assured market and raw materials, it minimized the en-
developmental state. Nonetheless, its lack of embeddedness should not be trepreneurial risk in~olved in. entering the industry and successfully in-
.exaggerated. It is hardly isolated from the private sector. }he World Bank duce_d t~e entry ~f p~rvate cap~tal. In this initial phase, the state was sup-
(1993, 184-85) suggests that Taiwan's extensive set of state-owned enter- p~rtrve I~ a classic Hrrschmaman way, inducing investment decisions and
prises, each of which has its own set of relations with private firms, helps strmulatmg the supply of entrepreneurship.
compensate for less-developed ties between the central state apparatus The "entrustment" scheme was unusual in the lengths to which the
and the private sector. Networks may be less apparent, but economic state_ was willing to go in order to ensure that entrepreneurship was forth-
.policy formation in Taiwan still grows out of "a little understood but commg; otherwise it was very similar to the policies of most Latin Ameri-
apparently vigorous policy network [that] links the central economic bu- can cou~t~ies in the initial phas:s of ind_ustrializ~tion. What dig!nguishes
[ reaus with public enterprises [and] public banks" (Wade 1990, 295). K. Y._ Ym s . ro ra~ _fro1? t real n Amencan support for import-
Wade notes, for example, that IDB officials spend a substantial portion subst1tut1?g mdustnahzatron (ISi) is that it was not capture y the entre-·-
of their time visiting firms and are engaged in something very much like ~- ?reneurs rt had created. Instead, the KMT re ime progressively exposed
MITI's "administrative guidance" (1990, 284). He provides (281) a rts green ouse capita rsts" to the rigors of the market, ma ing export
revealing example of the state's close interaction with private capital in q!!.Q!g§_ dependent on the quality and price of goods and diminishlng pro-
.
tectron .
over time. 2s Th us, the state was able to enforce the emergence of
his discussion of negotiations between raw materials producers and tex-
tile companies in the synthetic fiber industry. While the formal negotia- a '.'free market" rather than allowing the creation of "rental havens."
tions involved the downstream industry association (Man-made Fibers Wrt~out the autonomy made possible by a powerful bureaucratic appara-
Association) and the upstream domestic monopolist (a state-TNC joint· tus, It would have been impossible to impose the unpleasantness of free
venture), state managers were continuously involved, making sure that competition on such a comfortable set of entrepreneurs.
neither the country's efforts at backward integration into intermediary The example reinforces the point made earlier in relation to embedded-
products nor the export competitiveness of its textile producers ~as ness ~nd a_uton~my in _Japan. Private capital, especially private capital
threatened by the outcome. Informal public-private networks may be less o~gamzed mto tight oligopolistic networks, is unlikely to provide itself
dense than in the other two cases, but they are clearly essential to Tai- with a ~ompe~it~ve_ market. Nor can a state that is a passive register of
wan's industrial policy. these ohgopohstrc mterests give them what they are unwilling to provide
Despite the greater distance between private capital and the state, Tai- for t~emse~ves. Only a state that is capable of acting autonomously can
:ii provide this essential "collective good." Embeddedness is necessary for
wan not only offers useful examples of embeddedness, it also demon-
 CHAPTER 3 STATES 59
58
tween Singapore (where bureaucratic salaries are 110 percent of wages in
information and implementation, but without autonomy, embedd~dn~ss
comparable private-sector positions) and Somalia (where they are 11 per-
will degenerate into a super-cartel, aimed, like all cartels, at protecting its
cent}. The report also notes that the efforts of developmental states to
members from changes in the status quo. . gain the cooperation of big business would be "hamstrung without an
A final, equally important characteristic of the developmental state_ is
efficient and reputable civil service" (187).
also well illustrated by the Taiwanese case. '1fhile it has been deeply m-
At the same time, descriptions of developmental states support "neo-
v,g!ved in ~ge of sectors, the Taiwan~se state ,is very selective in its
Weberian" arguments that the "nonbureaucratic elements of bureau-
interventions. The bureaucracy operates, m Wades (1990, 226) wo,rds,
cracy" may be just as important as the "noncontractual elements of
afi "filtering mechanism," focusing the attention of policymakers (and
contract" (cf. Rueschemeyer and Evans 1985). Informal networks or
the private sector) on sectors, products, and processes crucial to fut~re
tight-knit party organizations enhance the coherence of the bureaucracy.
industrial growth. Like most of the KMT's Taiwan strategy, selectiv-
W~ether these ties are based on commitment to a parallel corporate insti-
ity was in part a response to previous experience on the mainland. Hav-
tut10n or performance in the educational system, they reinforce the bind-
ing experienced the disasters of an overextende~ state appa_rat_us, the
ing character of participation in the formal organization structure rather
KMT was determined to conserve its bureaucratic capaoty m its new
than unde:cutting it in_ the way that informal networks based on kinship
environment. or parochial geographic loyalties would.
S_clectivity is not unique to Taiwan. It seems a general feature of de-
Ha''.ii:J.g snccessfolly bom:id the behavior of incumbents to its pursuit of
velopmental states. While benefiting from extraordi~ary administ~ative
collective ends, the state can act with some independence in relation to
capacities, these states have restricted their intervent10ns to st~ategic n~­
partic_ularistic societal pressures. The "autonomy" of the developmental
I:!
cessities. Johnson (1982) describes how the Japanese state, havmg experi-
~tate 1s, however, of a completely different character from the incoher-
. 'I 1
mented with direct and detailed intervention in the pre-World War II
ent despotism of the predatory statwt is not just "relative autonomy" in
period, limited itself to strategically selected economic involveme~t after
! 11

',' tke structural Marxist sense of being constrained by the generic reqmre-
the war. Okimoto (1989, 2) notes that in terms of its overall size the
m~nts of capital accumulation. It is an autonomy embedded in a concrete
Japanese state could be considered a "minimalist state." Obviously, selec-
~~t of social ties that bind the state to society and provide institutional-
tivity reduces the demands on the state bureaucracy and makes effica-
i.u:d channels for the continual negotiation and renegotiation of goals and -
cious performance easier. . . policies. 27
Looking at Korea and Taiwan makes it clear that the histoncal embo_d-
""" "Embeddedness" is as important as autonomy. The embeddedness of
iments of the developmental state are likely to display a range of vana-
the developmental state represents something more specific than the fact
tion,26 but the fundamental features of "embedded autonomy" are visible
that the state grows out of its social milieu. It is also more specific than the
underneath the variation. organic interpenetration of state and society that Gramsci called hege-
Corporate coherence gives these states the ability to resist incu~sions by
mony.28 EJll...beddedness, as it is used here, implies a concre.te set of con-
the invisible hand of individual maximization. Internally, Webenan char-
n · ns that link the state intimate! a art r social
acteristics predominate. Highly selective meritocratic recruitment and
rou s with whom the state shares a oint project of transformatio .
long-term career rewards create commitment and a sense of corporate
Finally, it is worth underlining t at autonom or embe ness
coherence. The sharp contrast between the Weberian character of the de-
~a~ pr?duce perverse results without the other. Without autonomy, the
velopmental state and the prebureaucratic, patrimonial charact~r of the
~1stmct10n between embeddedness and capture disappears. Autonomy by
predatory state reinforces the proposition that scarcity, not surfeit, of bu-
itself does not necessarily predict an interest in development, either in the
reaucracy underlies ineffectiveness. narrow sense of economic growth or in the broader sense of improved
By the beginning of the 1990s even the World Bank acknowledged the
welfare. The secret of the developmental state lies in the amalgam.29
importance of having a well-trained, well-paid stat~ bureaucrac~. !he
The appearance of this peculiarly effective amalgam in the develop-
Bank's East Asian Miracle report (1993, 176-77) pomts out that high-
mental states of East Asia depended, of course, on a very unusual set of
i I performing" East Asian economies (in contrast to the Philippines, for ~x­
historical circumstances, but this does not detract from the usefulness of
ample) have all made conscious efforts to provide their bureaucrats with
the concept of embedded autonomy as an analytical point of reference.
wages comparable to those in the private sector, noting the contrast be-
 CHAPTER 3 STATES 61
60
Having seen how the amalgam works in archetypal cases makes it easier roce-
to spot the partial appearance of its features in other states and to appre- :;.:::::....,.:;:..::.:::.::;:::::.:-.;_:.~=~~?'o~w~e::!r2-s...loo~f~.u..u~~~l.l.l.LLLUU&JU.L:CbllJl!!l'~le;amm:en!ltL_6,..- 4 2/
ciate their implications. The analytical features of developmental states lack of meritocratic recru· xtending Johnson's (1982, 52) com-
provide benchmarks for assessing the confused and contradictory reality parison of Japan and t nited States, Ben Schneider (1987a , 5 , 212 '
· while Japanese prime ministers appoint only dozens
of intermediate states.
of ?fficials and U.S. presidents appoint hundreds, Brazilian presidents ap-
point thousands (15,000 to 100,000 by Schneider's estimate). It is little
ULillJder that the Brazilian state is lowwn as a massi'i'e sottfce of jobs (Gbi'
Intermediate States bide de emprego) populated on the basis ofcounectioi:t rather than com-
Most developing states offer combinations of Zairian predation n:1d. East petence and correspondingly inept in its developmental efforts.
A-;ian "embedded autonomy:: The balance varies over time and from Unable to transform the bureaucracy as a whole, political leaders try to
...-organization to organization within the state. Brazil and India are good create "pockets of efficiency" (bolsoes de eficiencia) within the bureau-
examples. Neither can be simply dismissed as predatory. There is no rec- cracy (Geddes 1986, 105), thus modernizing the state apparatus by addi-
ord of decades of consistently declining GNP as in Mobutu's case. India tion rather than transformation (see Schmitter 1971; Schneider 1987a,
amassed a remarkable record of industrial growth in the 1950s and early 4_5). The Nati?nal Economic Development Bank (BNDE), favored espe-
1960s while Brazil was considered a state-led "economic miracle" in the cially by Kubitschek as an instrument of his developmentalism in the
late 1960s and early 1970s. Their internal structures and relations to so- 1950s, was, at least until recently, a good example of a pocket of effi-
ciety are, like their performance, hard to describe in unambiguous terms. ciency.31 Unlike most of Brazil's bureaucracy, the BNDE offered "a clear
They have been described as "strong" and as "weak." Depending on the career path, developmental duties, and an ethic of public service" (Schnei-
analyst's prism, they may appear as "autonomous" or "captured." der 1987a, 633). Early in its institutional life (1956), the BNDE started a
After looking at the internal structures and state-society relations that system of public examinations for recruitment. Norms grew up against
characterize predatory and developmental states, what would we expect arbitrary reversal of the judgments of the bank's technical personnel
(opiniao do tecnico) by higher-ups. A solid majority of the directors were
to find in Brazil and India? Presumabl there
p bureaucratic organization but not the de ree of cor orate_coherence recruited internally, and a clear esprit de corps developed within the bank
~njoyed by deve opmental states. Consequently, the contradictory bal- (Willis 1986, 96-126).
ance of embeMed autonomy will be hard to maintain .. Imbalance could Agencies like the BNDE32 were, not surprisingly, more developmen-
take the form of either excessive clientelism or an inability to construct _ tally effective than the more traditional parts of the Brazilian bureau-
joint ro"ects with potential industrial elites. Inconsistency is aac!J..UJ_._...._ cracy. According to Geddes (1986, 116) those projects in Kubitschek's
~oint pro1ects may e possi e in certain sector~ or certain Target Plan that were both under the jurisdiction of Executive Groups or
periods but degenerate into clientelism or isolated autonomy in other sec- Work Groups and under the financial wing of the BNDE fulfilled 102
tors or other periods. Analyzing internal organization and state-society percent of their targets, whereas those projects that were the responsibil-
relations in these cases will almost certainly require a more complicated ity of the traditional bureaucracy achieved only 32 percent. Because the
diagnosis, one whose contours will have to be constructed from the his- BNDE was a major source of long-term investment loans,33 its profes-
sionalism was an impetus to better performance in other sectors. Tendler
torical specifics of the two countries.
(1968) notes, for example, that the necessity of competing for loan funds
was an important stimulus to the improvement of proposals by Brazil's
electrical power generating companies (see Schneider 1987a, 143 ).
Brazil U.ufortunately, the pockets of efficiency strategy has a number of dis-
Brazil's state apparatus has been described in a series of detailed field advantages. As long as pockets of efficiency are surrounded by a sea of
studies and telling interpretive analyses, both historical and contempo- t~.adition_al ~li_entelistic n_orms, they are dependent on the personal protec~
rary.30 The differences between the apparatus that they describe and the t.~~ of indlVldual presidents. Geddes (1986, 97) looks at the way in -
whi~~ the Department of Public Administration (DASP)34 (created by
ideal typical "developmental state" begin with the simple question of
how people get state jobs. Barbara Geddes (1986) chronicles the diffirnlty Getuho Vargas to oversee professionalization of the civil service) declined
62 CHAPTER 3 STATES 63
once Vargas's presidential protection was gone. Willis (1986) emphasizes contrary, the traditional symbiosis that connected traditional oligarchs to
the dependence of the BNDE on presidential support, both in terms of the the state has been reinforced by a perverse "modernization."
definition of its mission and in terms of its ability to maintain its institu- As Hagopian (1986, 1994) has carefully documented for the state of
tional integrity. Minas Gerais, the traditional exchange in which landowning families de-
Reform by addition makes strategic selectivity harder. 1Jncoordinat@d_ livered political support in return for the fruits of state patronage has
expansion is the more likely result. Having entered power in 1964 with become tighter rather than looser over time. As the state expanded its
the hope of shrmkmg the state by as much as 200,000 positions, 35 the · role, descendants of Minas's old "governing families" moved into direct
Brazilian military ended up creating "hundreds of new, often redundant, control of leading political positions and came to rely more and more on
agencies and enterprises" and watching the federal bureaucracy grow access to state resources as their principal source of power and wealth. 38
from 700,000 to 1.6 million (Schneider 1987a, 44, 109, 575). Trying to The fusion of traditional oligarchic power with the modern state appa-
modernize by piecemeal addition also undercuts the organizational co- ratus distorts any possible joint project between the state and industrial
herence of the state apparatus as a whole. As the pieces are added, an ever capital. Projects of industrial transformation become additional opportu-
more baroque structure emerges. The resulting apparatus has been char- nities for the traditional oligarchy, now encapsulated within the state, to
acterized as "segmented" (Barzelay 1986), "divided" (Abranches 1978), pursue its own clientelistic agenda. At the same time, relations with in-
or "fragmented" (Schneider 1987a). It is a structure that makes policy dustrial capital have been complicated by the early and massive presence
coordination difficult and encourages resort to personalistic solutions. As of transnational manufacturing capital in the domestic market. 39 Disci-
Schneider (1987a, 27) puts it, "personalism ... is now made indispensa- plining domestic capital, as K. Y. Yin did in the Taiwanese textile indus-
ble by bureaucratic fragmentation." try or as Amsden sees the Korean state as doing, becomes very difficult
The £ragmeatatioa of th@ stntbtHr@ is WAlplemeured by the character of when transnational capital is the probable beneficiary of any "gale of
the careers that take pl?b@ within it fosread of being tuned to long-term creative destruction."
gains via a series of promotions based on organizationally relevant per- Problems of internal organization and problems of state-society rela-
formance,. Brazilian bureaucrats face staccato careers, punctuated by the tions are mutually reinforcing. The lack of a stable bureaucratic structure
rhythms of changmg political leadership and periodic spawning of new makes it harder to establish regularized ties with the private sector of the
organizations. Every four or five years they shift agencies.3 6 Since the top- "administrative guidance" sort and pushes public-private interaction into
four or five layers of most organizations are appointed from outside the individualized channels. The persistent political power of the traditional
agency itself, long-term commitment to agency-relevant expertise has oligarchy not only distorts attempts at transformation but also undercuts
only a limited return. Construction of an ethos that can act effectively attempts at internal reform. Both internal and state-society problems
to restrain strategies oriented toward individual gain is correspondingly have proven remarkably invariant across changes in political regimes.
difficult. 37 The military regime, which had, at least initially, greater internal cor-
Just as the internal structure of the Brazilian state apparatus limits its porate coherence, 40 proved unable to construct an "administrative guid-
capacity to replicate the performance of the East Asian developmental ance" kind of relationship with the local industrial elite. The regime was
states, the character of its "embeddedness" makes it harder to construct "highly legitimate in the eyes of the local bourgeoisie, yet unconnected to
a project of industrial transformation jointly with industrial elites. As in it by any well-institutionalized system of linkages" (Evans 1982, 221).
the case of the East Asian developmental states, embeddedness must be Instead of becomin institutio · · dividuql-
understood in historical terms. ize , ta ing the form of what Cardoso (1975) called "bureaucratic
While the Brazilian state has been an uninterruptedly powerful pres- rings," that is, small sets of individual industrialists connected to individ-
ence in the country's social and economic development since colonial ual bureaucrats. As Schneider (19876, 230-31) pomts out, the ad hoc,
times, it is important to keep in mind what Fernando Uricoechea (1980), personalized character of these linkages makes them both undependable
Jose Murilo de Carvalho (1974), and others have emphasized: "The effi- from the point of view of industrialists and arbitrary in terms of their
ciency of government ... was dependent ... on the cooperation of the outcomes. They are, in short, quite the opposite of the sort of state-society
landed oligarchy" (Uricoechea 1980, 52). Reactionary rural elites were ties that are described by Samuels (1987) and others in their discussions
never dramatically swept from the stage as in the East Asian cases. To the of the developmental state.
64 CHAPTER 3 STATES 65
The Collor regime, democratically elected at the end of the 1980s, is tions, bureaucracy in the Weberian sense can still be found in a wide
perhaps the best single monument to the obdurate internal and external spectrum of state agencies. Brazil is not Mobutu's Zaire.
problems that plague the Brazilian state. Hailed by Washington and the Second, it must be remembered that while pockets of efficiency have
Brazilian media as a representative of "modernity," Collor was in fact an failed as seeds for a more general renovation of the state apparatus, they
archetypal representative of the kind of symbiosis of traditional oligar- have still provided the basis for a number of successful projects of sectoral
chic privilege and state power that is described by Hagopian. Scion of a transformation. In certain sectors during certain periods something close
leading landowning family in one of Brazil's most backward states, Col- to embedded autonomy has been achieved. Each of these cases has to be
lor adeptly combined a "typical oligarchic career" (Schneider 1991, 323) understood by looking at the characteristics of the sector and the specific
with media flair and convincing neoliberal affectations. role that the state tried to play within it, a task better left for the next
Collor's program provided a brilliant, if brief, demonstration of how chapter. Nonetheless, it is worth noting here that the elements that come
the neoliberal attack on the state could be combined with the preservation together in these sectoral scenarios evoke strong echoes of the patterns
of traditional oligarchic rule. Schneider (1991, 329) sums up his impact found in developmental states.
on internal state structures as follows: A few illustrations will suffice. The creation of electricity-generating
Collar's across-the-board cuts were indiscriminate, affecting the best and the
capacity in the 1950s and 1960s was a state project that spoke to the
worst of agencies alike. Consequently, Collar alienated productive bureau-
needs of a burgeoning industrial sector whose growth was being choked
crats-many of whom are responsible for implementing other modernizing
by lack of reliable electric power. Tendler (1968) shows how this "joint
policies-without visibly improving efficiency. By the end of 1990, although
project" of the state and industrialists was accomplished by surprisingly
the government had eliminated less than a third of the 360,000 jobs it promised
efficient state organizations. 44 The implantation of the auto industry,
to cut, it had nonetheless managed to lower morale, motivation, and productiv-
which eventually became one of Brazil's major exporters, was a joint
ity throughout the executive branch.
project of the state and the TNCs. Shapiro (1988, 1994) describes how
the interagency organization set up to oversee the industry's implanta-
At the same time, the Collor regime disdained the other side of embedded tion, the Grupo Executivo para Industria Automobilfstica (GEIA), served
autonomy, evincing "a liberal aversion to organized capitalism" and tak- as a sectorally specific "mini pilot agency," providing the predictability
ing pride in "verbal abuse of business leaders" (Schneider 1991, 332). and coordination necessary to reassure risk-shy TNCs. In the 1970s con-
Finally, of course, Collor's apparent passion for neoliberal reform was struction of a local petrochemical industry was also made possible by a
combined with a level of corruption unprecedented even in Brazil, thus sectorally specific version of embedded autonomy. Petrobras, the state-
undercutting the state's legitimacy along with its effectiveness. 41 owned oil company universally acknowledged as one of the most compe-
Overall, it is easy to understand Schneider's (1987a, 4) lament that tent and coherent organizations within the ambit of the state sector, pro-
"the structure and operation of the Brazilian state should prevent it from vided the anchoring point for a dense network of ties that bound local
fulfilling even minimal government functions." What is surprising is that, capital and TNCs together around a remarkable joint project of sectoral
despite its manifold problems, the Brazilian state has managed histori- transformation (see Evans 1979, 1981, 1982, 1987).
cally to play a major role in fostering both growth and industrializa- None of these sectoral successes should be taken as an excuse for play-
tion. From its aggressive provisions of financing for railways and other ing Pollyanna. In a changing global division of labor, temporary suc-
infrastructure at the end of the nineteenth century 42 through its direct cesses in a selected set of modern sectors are not laurels on which to rest.
involvement in high-technology ventures like aircraft manufacture in the Built primarily around the goal of replacing imports, Brazil's industrial
postwar period, the Brazilian state has played a central role in what has successes are not necessarily competitive in the current global context. At
overall been an impressive record of industrialization. 43 How is this pos- the same time, the decay and dismantling of state institutions insures that
sible given the problems I have just finished describing? examples of embedded autonomy will be harder to find in the future.
First of all, Brazil's experience is testimony to the fact that it takes only The public passion with which Brazil rejected Collor's corruption in
a very rough approximation of the Weberian ideal type to confer advan- 1993 was a strong signal that Brazilians will fight to avoid becoming a
tage. Even developmental states are only approximations of the ideal replica of Zaire, but the four years of Collor's combination of neoliberal
type, but intermediate states show that the basic bureaucratic model can attack and traditional corruption left deep wounds in the already
be stretched further and still deliver. Despite pervasive flaws and distor- problematic Brazilian state. If a coherent, effective state apparatus is a
 66 CHAPTER 3 STATES 67
necessary element in responding to the challenge of the global economy, IAS exams still had three parts: English, English essay, and general
Brazilians have little cause to be sanguine. At the same time, Brazil's knowledge, and even the last was slanted toward knowledge of "Western
deeply divided social structure makes the pursuit of any collective agenda civilization" rather than Indian political economy or relevant technical
extremely difficult. Still, Brazilian state managers can be grateful that they skills. 47 Thus, the exam has traditionally been very attractive to humanis-
do not face the level of social structural complexity and contentiousness tically oriented members of the "literary castes" (Lal 1988, 314 ).
that their counterparts in India have confronted since independence. Unfortunately, there is a discrepancy between the kind of generalist
education rewarded by the exams and the technical jobs that passees are
increasingly expected to do. An intelligent generalist might perform well,
India if career patterns provided the opportunity for the gradual acquisition of
relevant skills on the job. Careers seem, however, to be characterized by
The vast and sprawling state apparatus of India is even more ambigu- the same kind of rapid rotation that characterizes the Brazilian bureau-
ously situated in the space between predatory and developmental states cracy. Rudolph and Rudolph (1987, 34) report, for example, that chief
than is Brazil. The Indian state's harsher critics (e.g., Lal 1988) see it as executive officers in the petrochemical industry have an average tenure in
clearly predatory and view its expansion as perhaps the single most im- office of about fifteen months. 48
portant cause of India's stagnation. Others, like Pranab Bardhan (1984), In addition to problems of the IAS tradition itself, the Indian state, like
take almost the reverse point of view, arguing that state investment was Brazil's, has experienced difficulty in sustaining its institutional integrity.
essential to India's industrial growth in the 1950s and early 1960s and While none of the advocates of neoliberal dismantling has had the cha-
that the state's retreat from a more aggressively developmental posture risma of Brazil's Collor, the IAS can no longer claim to be the preeminent
has been an important factor in India's relatively slow growth in the institution that it once was. Rudolph and Rudolph (1987, chap. 2) argue
1960s and 1970s. Still others, like Rudolph and Rudolph (1987), talk of that there has been an "erosion of state institutions" at least since the
the "weak-strong" Indian state and argue that economic policies have death of Nehru. The cultural stigma attached to private-sector jobs has
ceased to be oriented around a project of transformation, becoming in- dissipated, making it harder for the state to count on attracting the "best
stead simply responses to pressure from mobilized "demand groups." and brightest." Contemporary field studies, like Wade's (1985) study of
No one denies that India has a venerable bureaucratic tradition. At the irrigation, have found corruption endemic. The "steel frame" has defi-
time of independence, the Indian Civil Service (JCS) represented the cul- nitely corroded over the course of the last thirty years. As one former
mination of a tradition that stretched back at least to the Mughal empire member of the IAS put it, "There was a time when we were proud to say
(see Rudolph and Rudolph 1987). Its 1,100 members formed a presti- that there is corruption in the country but the IAS is incorruptible. You
gious elite, and it was considered "the best possible career for a nice mid- can't say that any more" (Gargan 1993).
dle class Brahman boy" (Taub 1969, 11). For two hundred years it had Despite all this, India's bureaucratic apparatus still seems a better
provided "the steel frame of empire," serving as a model not just for other rough approximation of the Weberian ideal type than Brazil's, and not a
colonial administrations but for England's own civil service as well (Taub qualitatively worse one than the bureaucracies of the developmental
1969, 3). Its successor, the IAS (Indian Administrative Service), carried on states. If a historically deep tradition of solid state bureaucracy is an im-
the tradition. Entry is primarily via a nationwide examination that is at portant element in producing a developmental state, why is the Indian
least as competitive as its East Asian counterparts. Of twelve thousand state so often characterized as predatory and so rarely as developmental?
candidates who take the exam, only eighty will be given places in the The principal answers to this conundrum lie in state-society relations.
IAS. 45 While educational training is not concentrated in a single national They begin with the recalcitrant challenges of India's social structure and
university in the way that it is in East Asia, solidary networks are en- are exacerbated by the way the bureaucracy has defined its relation to
hanced by the fact that each class of recruits spends a year together at the society.
National Academy of Administration. 4 6 In India, problems internal to the bureaucracy are dwarfed by those
This is not to say that India's bureaucracy is without defects. First, the generated by the societal context. In a "subcontinental, multinational
British traditions that the IAS inherited were by no means unambiguous state" (Rudolph and Rudolph 1987), state-society relations are qualita-
assets. Assimilation of the culture of the imperial power was an important tively more complex than in the East Asian cases. Ethnic, religious, and
criteria of acceptance into the JCS. Even after the English had departed, regional divisions add to the administrative nightmare of trying to govern

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