Studying State & Capitalist Development

— Raghu Krishnan

Locked in Place:
State-Building and Late Industrialization in India
by Vivek Chibber
Princeton, NJ: Princeton University Press, 2003, $39.50 cloth.

GIVEN THE DOMINANT neoliberal ideology of our times, it is assumed in most quarters that state intervention in the economies of the post-World War II era was an utter fiasco. This argument is taken as even more self-evident in the case of the countries of the capitalist periphery or “Third World.”

States and their labyrinthine bureaucracies held back dynamic entrepreneurs (actual or aspiring capitalists), we are told, leading to the failure of these countries’ “socialist” development projects.

India is regularly cited as a classic example of this kind of failure. It is quite common to refer to these countries as “emerging markets” or “emerging economies,” suggesting that they are all finally “emerging” from darkness into the holy light of neoliberalism, capitalism and civilization itself.

In response to these arguments about failed state-led development projects on the capitalist periphery, many on the Left have pointed to the example of South Korea, whose development record is unquestionably superior to that of India and most Third World countries.

Their point hasn’t been to make excuses for or romanticize the repressive, pro-American regime in Seoul. They have argued, however, that far from being a neoliberal success story, South Korea is a good example of successful state-led development, where the state was able to dominate the local capitalist class and steer it in the direction of industrialization and related investments in infrastructure and technology.

They have attempted thereby to “resurrect the state” in the face of the neoliberal anti-statist onslaught.

Questioning the “Developmental” State

Vivek Chibber thinks this is wrongheaded, and not because he has any sympathy for neoliberal dogmas. On the one hand, he argues, India did not fail to develop because the country was too “socialist” and therefore held back the country’s dynamic entrepreneurial elite. On the contrary.

Similarly, though, while South Korea did not have a free-wheeling capitalist class operating in perfect conditions of competition and free trade, he says it is equally wrong to attribute its success to the existence of an obedient capitalist class at the mercy of an all-powerful developmentalist state.

In both cases, he argues, it is essential to examine actual capitalist behavior, and the precise circumstances of this behavior, to understand how the “developmental state” could succeed in one instance and fail in another.

Chibber uses a detailed examination of South Korea’s more successful experience as a springboard for understanding the options available (and unavailable) to India. He begins by extracting discussion on the South Korean “model” from the polarization between its neoliberal and “statist” admirers. This enables him to turn to India within a more general framework of the options open to what he calls “late developers.”

His key argument is that, while the South Korean state did indeed play a critical role in Korea’s industrialization, it did not do so by imposing a command economy on local capital, but rather, by entering into an alliance with it.

By the mid-1960s a lucrative path of “export-led industrialization” (ELI) opened up to the South Korean capitalist class, thanks to the regional strategy adopted by Japanese capital, and thanks also to the preferential treatment accorded both countries by the United States in the context of the Cold War.

The South Korean capitalist class was prepared to accept what Chibber calls “disciplinary planning” from the state, because it needed such discipline and coordination in order to take full advantage of the opportunities created under ELI.

Why Was India Different?

On the other hand, no such option of ELI existed for India following Independence in 1947. Indeed, India did not figure prominently in the economic or political strategy of any big imperialist power.

Insofar as foreign multinational corporations (MNCs, largely British and American) did enter India, they did so on entirely different terms than those of the Japanese in South Korea — interested only in carving out shares of the domestic Indian market, and specifically excluding technology transfers and export schemes through Indian tie- ups and local suppliers. Nor were Western markets open to India in the same way that American and Japanese markets were open to the South Koreans.

India therefore had little option but to adopt some form of “industrialization through import-substitution” (ISI), which local capitalists exploited to the full to secure subsidies and special treatment from the state — while resisting interventionist efforts aimed at improving their productivity and steering their activities in the direction of overall development plans.

In one stroke, this argument undermines the widespread view on both countries’ divergent paths.

Capitalist Resistance

In the face of the neoliberal onslaught, “statists” often point to South Korea as an example of what progress can be made when the state gives itself the necessary tools to impose a path of growth and development on the bourgeoisie.

Yet even after the Park coup in 1961 and subsequent moves towards greater efficiency in the administration, the state was unable to secure better economic results from an uncooperative capitalist class, as all concerned continued to be mired in the ISI model common to most of the developing world at the time. Only when the option of ELI opened up later in the decade were the state and capitalists able to work out a mutually satisfactory arrangement.

In the case of India, the neoliberals have a field day pointing to the abject failure of a rigid and corrupt bureaucracy to produce results in an economy where, moreover, the principal capitalist firms were reputed to be all in favor of state planning in the interests of the nation.

In reality, it was capitalist intransigence (and the complicity of their supporters on the right wing of the Congress and in the bureaucracy) that prevented left-wing elements of the Nehru-led Congress Party from setting up more interventionist and disciplinary mechanisms.

Indeed, Chibber argues, the ISI model made it rational for capitalists to strike such a defiant posture. While they had an interest in securing maximum resources from the state, they had no interest in abiding by any kind of disciplinary regime aimed at improving their productivity and directing their activities into specific areas.

After all, Indian capitalists were shielded from the rigors of competition in foreign markets, and did not require a disciplinary state of the South Korean variety. They wanted full freedom to capture sectors and markets abandoned by British firms, and to enter new areas of their choosing.

It was therefore not a matter, in one instance, of a more effective and streamlined Korean state imposing a successful path of development on a “paper tiger” local capitalist class and, in the other, of a bureaucratic and corrupt Indian state holding back a dynamic entrepreneurial elite.

Debunking "Developmental Bourgeoisie"

In this way, Chibber punctures what he calls “the myth of the developmental bourgeoisie.” Indeed, Chibber’s work is free of the schematic approach that takes the existence of a “progressive national bourgeoisie” (or wing thereof) as its starting point.

He examines in detail the actual choices and internal dynamics of the capitalist classes of these two countries, and is able to relate them to general observations about capitalist behavior. He lays out in great detail the jockeying of the leading lights of the Indian bourgeoisie in the final days of the freedom struggle against the British and in the years immediately following Independence.

Chibber gives particular attention to the “Bombay Plan,” put out by representatives of the leading industrial houses and often provided as proof of their openness to state planning and intervention. Such an interpretation is sorely misguided, Chibber argues.

From the start the Plan was hostile to disciplinary planning and State involvement in profitable sectors of the economy. The official positive approach to “planning” was a crafty political maneuver made during the heady days of mass mobilization, from the Quit India campaign (1942) through the post-War labor upsurge, to head off any further radicalization propelled by labor, the Congress Left (Congress Socialists) and the Communist Party (CPI).

Proof of this is the bourgeoisie’s rapid backtracking from even the tepid talk of “planning” immediately following Independence, the demobilization of labor and marginalization of the Congress Left.(1)

Repression and Labor

While the book is about India, not Korea — so one cannot be too demanding of Chibber on this score — it is nonetheless striking that Chibber has nothing to say about the extremely repressive nature of the South Korean dictatorship. Indeed, in contrast to his study of the Indian case, labor is entirely absent from his analysis of South Korea.

This is understandable up to a certain point, insofar as Chibber examines South Korea primarily to describe the emerging conditions for an alliance between the state and the bourgeoisie around ELI. After all, it was the South Korean state’s ability to “discipline” capitalists that stands out; whereas repression of labor, regrettably far from being unique to South Korea, was a common feature of countless examples of failed development projects throughout Asia, Africa and Latin America.

Still, the reader must presume that before ELI South Korean workers were restive but unable to present and impose their own alternative; and that after ELI, they were won over through ongoing improvements in their standard of living and patriotic appeals, with any significant manifestations of discontent put down severely by the dictatorship.

Similarly, the downside of ELI as a “model” is not examined. For one thing, in such a game, surely there can only be a few winners, and it is no surprise that South Korea is primarily a striking exception to the rule in the history of “late developers” in the post-WWII era.

Indeed, just across the border in North Korea (also never mentioned throughout the book), one finds another (failed) variant of the path to development. (To what extent can one speak of North Korea’s tragedy as the flipside of the South’s Cold War “success”?)

Finally, distancing himself from economic determinism, Chibber argues that South Korea’s success was also rooted in Park’s “assiduous” efforts to ensure that ELI served as a bridge to genuine domestic development. But he doesn’t expand on this point. What drove Park down this path? Cold War pressures? Labor mobilization? His own temperament?

The answer(s) to these questions are important for those trying to understand South Korea’s advances and other countries’ failures.

Capital’s Advantage

Chibber’s research has led him to pay almost exclusive attention to the industrial bourgeoisie. Based on the available empirical evidence, he has concluded that its choices and reactions are vital to understanding the policy options available to developmental states.

Symmetrically, in relation to the Indian case, he has shown that it is the corresponding action and reaction of the industrial working class that ultimately determines what can or will happen to a given state’s development project. This is quite a remarkable reconfirmation of the classical approach for “late developers” laid out by Trotsky in his famous “theory of permanent revolution.”

As in Russia in 1905 and 1917, due to combined and uneven development, the outcome of the clash between the industrial capitalists and proletariat, although both small in relative terms, is critical to the overall political and social dynamic in these countries on the periphery of the main capitalist centers.

Although Chibber doesn’t explicitly refer to the need for outright social revolution, it emerges that short of such a revolution that overthrows the existing state and replaces it with institutions and mechanisms rooted in the ongoing mobilization and politicization of labor and its allies, capital will always enjoy what Chibber (borrowing from Erik Wright) calls a “situational advantage.”

This advantage is capital’s ability to use its social and personal influence within ruling parties and state institutions, and its “structural power in the political economy” as ultimate arbiter over whether or not inestment and production take place.

Among other things, this places the debate around state control of finance in a new light. Quoting Keynes, Chibber points out that when business confidence is dropping, “trying to use finance as a lever [...] is like pushing on a string.”

While Indian capital clearly emerged victorious from its clash with labor in the 1940s (whose drama and uncertain outcome Chibber captures in chapter 5), capital was still handicapped in public eyes by its disastrous performance during the War (hoarding, skyrocketing prices, etc.) and its ongoing reliance after Independence on state protection, supports and intelligence.

State “planning” bodies were therefore trapped between an inability to impose any kind of policy direction on capitalists, and the ongoing need to play a significant role within the economy.

While there is nothing sentimental about the book, a tragic flavor nonetheless surrounds the fate of individuals (such as Nehru himself) and state bodies caught in this trap — the more tragic since it was in many respects a trap of their own making. Chibber uses the sorry fate of the Planning Commission to capture this untenable state of affairs.

What Can We Learn?

While South Korea is an exception to the rule of postwar economic development in peripheral countries, India too has always been an anomaly of its own kind, with its larger domestic bourgeoisie and greater margin for maneuver in relation to the imperialist centers than the vast majority of Third World countries.

Since India’s decisive turn to liberalization in the early 1990s and the crisis that hit South Korea and much of East and Southeast Asia in 1997, it is worth examining whether the age of both South Korean and Indian “exceptionalism” is now behind us. Whatever their many respective faults, both countries were able to carve out some autonomy for development within a world order much more tolerant than the present one for such experiments in the countries of the periphery.

That being the case, Chibber is vague about what specific lessons can be drawn for the present from this important study of post-War India and South Korea. In both cases, while the capitalist classes have studiously avoided freeing themselves from state supports, in the era of neoliberal globalization they have even less inclination and need to submit to any kind of disciplinary regime aimed at achieving economic development with social justice.

Chibber ends on a rather upbeat note, pointing to the southern Indian state of Kerala as a possible model. Yet given ever more entrenched imperialist opposition to technology transfer and protectionism in the countries of the periphery, it is not clear at all that labor mobilization in favor of a regime of disciplinary planning, carried out by a capitalist state within a capitalist economic framework, could lead to a durable alliance between state planners and capitalists. Nor could such an alliance post the kind of miraculous results seen in South Korea from the mid-1960s onwards.

In an essay that has appeared since the book’s release, Chibber extrapolates from his book’s core arguments and warns the Left against returning to a schematic vision in which it would once again pin its hopes for development and empowerment on a strategy oriented towards a hypothetical “progressive national bourgeoisie.”(2)

In recent years, the crude and failed neoliberal prescriptions of the “Washington Consensus” have fallen out of favor in a number of Third World countries, and masses of people are looking for alternatives, most notably in Latin America. In this context, Chibber’s book can also be seen as a compass for understanding some of the major political questions of today’s world, as well as a fascinating look into the key debates of the immediate postwar period.

Notes

  1. In his excellent review of Chibber’s book, Achin Vanaik doubts that fear of working-class and Left radicalization played such an important role in the bourgeoisie’s calculations. Achin Vanaik, “Myths of the Permit Raj,” New Left Review 29 (September-October 2004).
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  2. Vivek Chibber, “Reviving the Developmental State? The Myth of the ‘National Bourgeoisie’,” Socialist Register 2005, Merlin Press.
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ATC 117, July-August 2005