DSA2018: Global inequalities
This panel will examine the politics of industrial policy and state-business relations in late developing countries in the 21st century. Both empirical and theoretical papers are welcomed.
Successful industrial policy requires that reciprocal relationships be developed between governments and their capitalist partners. Ensuring their emergence and maintenance is a constant challenge for governments, with a necessity for learning rents to be disciplined in line with industrial policy objectives. Past research indicates that these reciprocal relations appear to result only under relatively rare alignments of interests among state, business, and other interest groups, often forged through a common threat to their survival. Considering widespread political transformation, increased significance of global value chains and foreign investors, as well as the arguable reduction in industrial policy space, many scholars, however, argue that the likelihood of such alignments has become rarer in the 21st century.
This panel invites both theoretical and empirical papers that explore new perspectives on how state-business relationships have developed in the 21st century. These papers could explore how state-business relationships have developed across a range of countries, and look for new approaches to the study of business-state relationships, exploring for example issues of informality. They might also analyze how different interest group configurations, varying threats to rulers' political survival, significant institutional change such as democratization, or the propensity of business communities to act as constituencies for regime support or as a power base for oppositional movements influences the emergence of developmental state-business relationships. Finally, papers that shed more light on how foreign actors and transnational politics shape the motivation and capacity of policy makers to introduce and implement effective industrial policies are likewise welcomed.
This panel is closed to new paper proposals.
Business-State Relations in Colombia: Elite Politics and Economic Policy Challenges for the Post-Conflict Era
While elite interests for deepening the neoliberal accumulation strategy continue to dominate in post-conflict Colombia, the Peace Deal with the FARC-EP opens windows of opportunities to overcome the country's dependence on low productivity growth in commodities, services and extractive industries.
Throughout much of the twentieth century Colombia's economic model focused on achieving industrial growth in light manufacturing sectors. However, the lack of internal competition, the dominance of landed elite factions, and the country's neoliberal shift during the 1990s hindered or slowed down attempts to achieve considerable levels of economic catching up to the technology and productivity frontiers. Tackling static comparative advantages in low productivity and low wage sectors remains a major challenge for the Colombian economy, particularly following the implementation of the Peace Accord between the Colombian Government and the FARC-EP. While class interests for deepening Colombia's neoliberal accumulation strategy continue to dominate in the post-conflict era, the Peace Deal opens windows of opportunities to overcome the country's dependence on low productivity growth in commodities, services and extractive industries. The main policy challenges are to identify potential productivity-enhancing sectors and to setup institutional mechanisms supporting firms in their technological learning. These mechanisms include the creation of monetary incentives and compulsions for firms to engage in efforts to achieve higher productivity outcomes, performance monitoring of benefit-receiving firms, and the establishment of credible sanctioning instruments. While these institutional efforts can help to overcome Colombia's productivity and inequality problems, the successful implementation and enforcement also depends on broader state-business relations (e.g. state capacities, elite commitment class interests) as well as on state-society relations, including the the organizational capabilities of labor and other social groups.
Join hands or walk alone? Evidence on lobbying for trade policy in India
Using primary evidence for 146 Indian manufacturing firms, I examine the types of lobbying strategies for trade policy influence and what drives firm choice for these strategies.
Using primary evidence for 146 Indian manufacturing firms, I examine the types of lobbying strategies for trade policy influence and what drives firm choice for these strategies. Firms can lobby collectively in a group (Join Hands), lobby individually as a single firm (Walk Alone), or adopt a dual lobbying strategy that is a unique combination of collective and individual lobbying. The findings are a first for India, and suggest the following: First, Indian manufacturing firms join hands (lobby using a collective strategy) when targeting sector-wide outcomes in the nature of public goods; firms join hands while walking alone (dual strategy) when targeting product- specific outcomes. Second, the likelihood of adopting a dual lobbying strategy is higher in sectors that are characterised by low concentration (dispersion is higher) such that firms increase their chances of trade policy influence. This suggests a strong competition effect (driving cooperation and individual lobbying) over any free-riding that drives firm strategy to lobby for trade policy influence in India. Finally, availability of resources and lobbying time are significant drivers for the type of strategy undertaken.
The Politics of Big Business in Kenya
This paper examines the politics behind the varied trajectories of the development of Kenyan conglomerates since independence. It highlights how the state's relationships with local businesses have impacted the trajectories of their development. Fieldwork was undertaken in February 2018.
The subject of why African countries have failed to catch up to the same extent that East Asian countries did continues to be a central question for those working in international development. One reason for this has been the failure of African governments to nurture a domestic capitalist class, which works as a partner in national projects for economic transformation. Some (Boone 1994) argue that this is a legacy of decolonization where political classes came to power, which were largely out of touch with existing agricultural capitalists. This led to private economic interests co-opted by government officials, which was associated with unproductive rent-seeking and a lack of attention to investments towards structural transformation. Other studies have also examined the 'missing' African capitalist classes and the consequences it has had for structural transformation on the continent (Handley 1993, Whitfield et al. 2015).
Despite very little protection for domestic businesses, Kenya's private sector presents an array of examples of large local conglomerates - both Asian-Kenyans and African-Kenyans. During the 20th century, there has also been a great deal of literature studying the emergence of Kenyan capitalism and Kenyan capitalists (Kitching, Leys, Himbara, Chege). Though some scholarship (Himbara 1994) emphasised how a large portion of Kenyan capitalists were of Asian descent, this has changed. This paper highlights how politics has impacted the variation in historical trajectories of the expansion of Kenyan conglomerates.
The Small Island That Could: The Private Sector as a Source of Mauritius' High Regulatory Quality
The qualitative analysis in this paper points to a prominent role of the private
sector and its collaboration with the government in regulatory making. I also show that the determinants of good regulation are not limited to only one factor, but a wide array of
influences and circumstances.
Regulatory quality and its impact on economic development has been subject to much
discussion in the past years. International organizations, policy makers and researchers alike
agree that regulation matters and a well-designed regulatory regime can increase economic
growth. There is less consensus, however, on how to improve regulation and especially
developing countries suffer from serious shortcomings when it comes to their regulatory
framework. Due to methodological and data issues it is difficult to determine the drivers of
regulatory change and general conclusions from cross-country studies are hard to draw.
Therefore I focus on the small island country of Mauritius that has exceptional regulatory
quality, trying to identify the reasons for this high regulatory quality. I argue that the private
sector plays an important role in regulatory making. A qualitative analysis indeed points to a prominent role of the private
sector and its collaboration with the government. The case study also shows that the
determinants of good regulation are not limited to only one factor, but a wide array of
influences and circumstances that make Mauritius the best regulated country in Sub-Sahara
Africa and also put it among the best regulated countries in the world.
Industrial policy and structural change in Brazil after the Washington Consensus (2003 - 2014)
This paper focuses on the contradictions and erratic concerns of the return of industrial to Brazil under between 2003 and 2014. It is argued that industrial policy during this period reflected the uneasy modus vivendi of neo-developmentalism and neo-extractivism in the Brazilian political economy.
This paper contributes to the debates on the return of industrial policy and the emergence of 'new developmentalisms' by focusing on the case of Brazil between 2003 and 2014. The political trajectory of Brazil during this period is portrayed in the literature as a partial and progressive shift away from the Washington Consensus and towards neo- developmentalism, typified by the return of industrial policy. Nonetheless, contrary to the aspirations of neo-developmentalism, the revival of industrial policy in Brazil witnessed the continuation, and even acceleration, of deindustrialisation and export re-primarisation.
A comparative analysis of the industrial policy plans announced by the Brazilian governments during this period is performed to shed some light on the apparent paradox of the return of industrial policy in Brazil. The findings suggest that the Brazilian governments' concern over deindustrialisation and re-primarisation was erratic and very sensitive to the changing economic environment. Therefore, it is argued that the nature of Brazilian industrial policy cannot be thoroughly explained by the representation of the Brazilian policy regime as a liberal/neo-developmental binary where industrial policy typifies the latter. Alternatively, the hypothesis advanced in this paper is that industrial policy during this period reflected the uneasy modus vivendi of neo-developmentalism and neo-extractivism in the Brazilian political economy.
Beyond the neoliberal-statist divide: a political settlements reading of Kenya's M-Pesa success story
Challenging the polarisation in the literature between advocates of competitive markets and strong states, this paper uses Kenya's M-Pesa success story to demonstrate that innovation can occur within highly-particularistic, patronage-based contexts that conform to neither of these polar opposites
While there is consensus that innovation is a key driver of long-run productivity growth, debates about the state's role in promoting innovation remain polarised between two analytical and ideological paradigms. The first is neoliberalism, which confines the state to correcting market failures, ensuring competition and supporting the innovative force of the private-sector. Referring to the developmental states, the second calls for a strong and visionary state to drive innovation by targeting industries for investment and protecting firms until they are ready for competition. The existing literature broadly falls within these camps, identifying innovation as a market- or state-driven process. This paper challenges both, arguing it can occur within a context that does not conform to either. To make this argument, it uses the example of Kenya's mobile money product M-Pesa, which has become a poster child for financial inclusion. Rather than competitive markets or a strong state, this paper argues that the M-Pesa success story has played out within a highly-particularistic and patronage-based political context, whereby the interests of key actors within Kenya's political settlement crystallised in such a way as to shield M-Pesa's parent company Safaricom, whose ownership structure - following two rounds of a politically-compromised privatisation process - comprises elites from across the political spectrum, from competition. This has afforded the company space to innovate with M-Pesa, engendering a form of 'developmental patrimonialism' since Safaricom has become a vehicle for centralising rents and deploying them per a long-term vision, parcelling profits back to elites through generous dividend payouts
The Political Economy of Commodity Processing Promotion: A Comparison of Export Restrictions on Raw Materials in Africa
This paper tests the argument that due to a perceived or actual increased risk to their political survival, policy makers are less likely to severely tax or ban the export of commodities, the larger the share of the population that gains significant income from working in producing that commodity.
Since the early 2000s, the totality of African countries has increasingly reverted to high export taxes and bans on raw commodities to promote processing industries. Notably, however, the employment of heavy export taxes and bans varies significantly across commodity sectors within the same country, as well as between the same commodity sectors across countries. Several theories and arguments in the economics, international political economy (IPE), and domestic politics literature might explain why governments severely tax and ban certain commodity exports but not others. Based on a critical discussion of these approaches, this paper makes the argument that due to a perceived or actual increased risk to their political survival, policy makers are less likely to severely tax or ban the export of commodities, the larger the share of the population that gains significant income from working in producing that commodity. Employing a mix of methods - specifically a large-N cross-sectional OLS analysis of 150 country-commodities as well as in-depth case study analyses of nine distinct commodities based on field research in Ghana, Kenya, and Tanzania from March to December 2017 - it finds compelling evidence for the proposed argument and demonstrates that in African democracies the increased political threat of large producer groups appears to be particularly channeled through their electoral weight.
This panel is closed to new paper proposals.