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Resources as Constraints? Natural Resource Wealth and the Possibility of Developmental States in the Former Soviet Union

Abstract and Keywords

The experience of the Soviet successor states to date calls into question the notion that resource abundance is necessarily a detriment to the emergence of a developmental state, while resource scarcity is necessarily an advantage. First, the dearth of developmental states in the region should not be attributed to these countries’ access to resource wealth, but rather to their shared Soviet legacy and the timing of their independence from Soviet rule. Second, these states also face similar impediments to adopting the new twenty-first-century model of the developmental state, impediments that are unrelated to resource wealth: namely, autocratic rule and weak civil society. Finally, the resource rich states may actually have an advantage vis-à-vis their resource poor counterparts when it comes to building a developmental state in the twenty-first century.

Keywords: Soviet Union, state transformation, state development, natural resources, resource wealth, Russia

The rise of developmental states in East Asia in the second half of the twentieth century has elicited a rich body of literature seeking to identify what factors contributed to their success and whether their experience can be replicated (e.g. Johnson 1982; Amsden 1989; Wade 1990; Woo-Cumings 1999). And yet, there is no clear consensus concerning the factors that contributed to their emergence. For example, although scholars have commonly invoked a threat to regime or state survival as a key driving force behind the adoption of successful state-led growth strategies in Japan and the so-called “Asian Tigers” (i.e. Hong Kong, Singapore, South Korea, and Taiwan), the nature of this threat and its source remain largely unspecified.1

Where scholars do tend to agree, however, is in identifying the main impediment to the emergence of developmental states—namely resource wealth (e.g. Ranis and Schultz 1988; Ranis 1991; Auty 1997, 2000, 2001; Booth 1999; Sachs 1999; Ross 2001). In short, they argue that resource-rich states are at a critical disadvantage vis-à-vis their resource-poor counterparts, not merely because they tend to be predatory, but because they are governed by elites who are corrupt, rent-seeking, and myopic, rather than by elites who are benevolent, value-producing, and forward-looking. Thus, they are antithetical to fostering the kind of (p. 619) institutions that are needed to successfully promote long-term economic growth aimed at an equitable distribution of gains across society.

Yet, the experience of the Soviet successor states to date calls into question the notion that resource abundance is necessarily a detriment to the emergence of a developmental state, while resource scarcity is necessarily an advantage. First, the main impediments to emulating the twentieth-century model of a development state across these countries are ideological and structural, whether resource rich or resource poor. In other words, the dearth of developmental states in the region should not be attributed to these countries’ access to resource wealth, but rather to their shared Soviet legacy and the timing of their independence from Soviet rule. Second, these states also face similar impediments to adopting the new twenty-first-century model of the developmental state, impediments that are unrelated to resource wealth: namely, autocratic rule and weak civil society. In short, since the late 1990s, there has been a fundamental shift in thinking regarding the goals of development that emphasizes the need for a democratic state with close ties to civil society rather than a technocratic state with close ties to industrial elites (for details, see Evans and Heller, Chapter 37, this volume). Finally, the resource-rich states may actually have an advantage vis-à-vis their resource-poor counterparts when it comes to confronting the obstacles to building a twentieth-century developmental state, and they may suggest an alternative path whereby the twenty-first-century developmental state might emerge.

This chapter adopts a “conditional approach,” which rejects the deterministic view that resource wealth necessarily fosters authoritarian regimes, unbalanced economic growth, weak states, and civil war, and instead specifies the conditions under which resource wealth can facilitate or undermine more desirable political and economic outcomes (e.g. Dunning 2008; Jones Luong and Weinthal 2010).2 As such, it contributes to ongoing debates among scholars of both the developmental state and the so-called “resource curse.”

1 The Twentieth-Century Developmental State

While there is certainly no prototype of the “developmental state,” there is nonetheless a set of widely recognized shared characteristics that set such states apart from others, and, hence, warrant this classification (e.g. Johnson 1982; Amsden 1989; Wade 1990). First and foremost, these states are governed by elites who are committed to development as their highest priority; indeed, development becomes the ideological motivation and justification for the regime. Thus, in sharp contrast to predatory states, they place achieving long-term economic development over both short-term political gains and their own personal enrichment (e.g. Leftwich 2000).

Second, these states possess an autonomous, well-trained, and ideologically coherent bureaucracy capable of implementing this development strategy. While this is most (p. 620) often equated with a Weberian bureaucracy (e.g. Evans 1995; Evans and Rauch 1999), it can also come in the form of a single “pilot agency” that orchestrates development from above (Johnson 1982: 320). In either case, the crucial element is meritocratic recruitment such that those who staff government agencies are more able to avoid “capture” by particularistic interests.

Third, developmental states are characterized by “good” relations with industry; that is, government elites have the ability to work positively with industrial elites, whether in the private or public sector,3 in order to design and adapt an appropriate development strategy, that is, identify and support the winning industries. More importantly, bureaucrats are able to channel state resources most effectively when they have achieved a high degree of “embeddedness” with key social groups—here, industrial elites; in other words, when they are linked closely to those groups with whom they share a joint project of transformation via institutionalized channels through which they can constantly (re-)negotiate objectives and policies (Evans 1995).

A final feature of the developmental state that is crucial to all three of the aforementioned components, and yet not always made explicit, is a prostrate civil society. This helps to ensure both that the particular developmental vision of the governing elite goes unchallenged and that societal pressures do not impede the implementation of this vision. Given that the twentieth-century model of the developmental state is based on an industrial policy that systematically discriminates against labor, for example, it is most likely to emerge where labor unions are weak.

2 Common Constraints to the Twentieth-Century Developmental State in the Former Soviet Union

As I have argued elsewhere, the five petroleum-rich Soviet successor states—Azerbaijan, Kazakhstan, Russia, Turkmenistan, and Uzbekistan4—demonstrate all too well that weak institutions are not endogenous to mineral wealth (Jones Luong and Weinthal 2010). The experience of all the Soviet successor states over the past two decades also strongly suggests that the emergence of a particular set of institutions—those associated with the twentieth-century developmental state—is neither primarily nor solely dependent on a country’s access to natural resource wealth. The dearth of developmental states in the region should instead be attributed to the common obstacles they face due to a combination of their shared Soviet past and the timing of their emergence onto the international scene. This suggests that, at least in the former Soviet Union (FSU), there is no discernable disadvantage to being petroleum rich when it comes to the emergence of a twentieth-century developmental state.

(p. 621) Ideological Constraints

The key obstacle to the emergence of a twentieth-century developmental state in the FSU is the lack of an elite with a developmental vision. The root of the problem is not that post-Soviet elites prioritize short-term political gains and their own personal enrichment over long-term economic goals; rather, it is that they suffer from an ideological deficit that has fostered both their myopia and their predatory behavior. This deficit is twofold. On the one hand, the Soviet system promoted the need for an ideology5 to inspire elites and masses alike. On the other, both the Soviet legacy and the timing of independence have limited the basis for new ideologies to form. It is thus shared—more or less—equally across the FSU. Resource-poor countries are thus no more likely than are resource-rich countries to emphasize economic growth promotion because the elite “align[s] its interests with the low-income majority” (Auty 2000: 350). In fact, the two countries in which leaders claim explicitly to base their economic policy on doing what is best for the disadvantaged masses are resource-poor Belarus and resource-rich Uzbekistan.

The preponderance of evidence gathered after the Soviet collapse suggests that ideology played a significant role in both motivating leaders and mobilizing society, even toward the last decades of the regime (e.g. Hanson 1996; Yurchak 2005). As several scholars have argued, the inability of Mikhail Gorbachev to produce a viable alternative to Marxist-Leninist ideology after exposing the communist system’s gross deficiencies precipitated the collapse of the Soviet Union (e.g. Hanson 1991; Brown 1996).

This same failure has plagued his successors, so to speak, throughout the former Soviet Union. Like Gorbachev, their departure from and thus rejection of the Soviet system made it nearly impossible for them to continue to rely on communist ideology.6 Moreover, unlike leaders of developmental states, the Soviet legacy also made it difficult to derive legitimacy “from devotion to a widely believed-in revolutionary project” centered on short-term sacrifice in order to achieve long-term economic growth (Woo-Cumings 1999: 20). Instead, post-Soviet governing elites have relied on nationalist or ethno-nationalist appeals as the basis for creating a unifying ideology, often consciously converting Soviet slogans into national ones (e.g. Dave 2007).7 Achieving independence and securing sovereignty in the name of the nation—narrowly or broadly defined—became the primary basis for justifying the new economic and political order.

The content of this new political and economic order, moreover, was primarily a product of both unrepresentative elites focused on short-term gains (Grzymała-Busse and Jones Luong 2002) and the dominant model of economic development at the time, that is, the “Washington Consensus.” In effect, these elites were presented with two polarized paths: 1) dismantle the communist state apparatus and build a market economy, beginning with price liberalization and voucher privatization; or 2) adopt a “revised” Soviet (p. 622) model of cradle-to-grave welfare at a minimum level of subsistence.8 Not surprisingly, most embarked down the former path, moving from Chalmers Johnson’s (1982: 18) extreme of “plan-ideological” economic system to the other extreme of a “market economy” without even considering the middle option of a “plan-rational” system that characterized Japan and, later, the East Asian tigers. This path, in turn, served the interests of a myopic elite who could seize financial assets for themselves and use their initial political status to lock in their dual advantage; all the more so where the transition to markets remained incomplete (Hellman 1998).

But some—namely, Belarus, Turkmenistan, and Uzbekistan—have held steadfastly to the latter path, albeit with varying degrees of emphasis on the “plan” versus the “ideology.” Among the three, Uzbekistan has achieved the greatest balance, managing to construct an ideology that justifies continued state control over most of the economy but stresses economic security and political stability over growth and democracy (e.g. March 2003). In contrast, Belarus and Turkmenistan have emphasized plan and ideology, respectively. Importantly, in no case has the continuation of a Soviet style economic and political system precluded well-positioned elites from enriching themselves and their closest allies.

The international context into which the Soviet successor states emerged also hindered the emergence of an elite with a developmental vision because of the absence of an external threat. One well-recognized commonality across the developmental states of East Asia is that they faced some kind of a severe crisis—economic, security, or both—that compelled states’ leaders to prioritize economic growth in general and industrial transformation in particular (e.g. Johnson 1982; Wade 1990; Woo-Cumings 1999). In the clearest and most convincing rendition of this argument to date, Richard F. Doner, Bryan K. Ritchie, and Dan Slater (2005) attribute the rise of developmental states to “systemic vulnerability,” or when elites confront the simultaneous threats of mass unrest due to deteriorating living standards and a foreign invasion with a paucity of resources to counter these threats. The implication is that, even facing a severe economic and/or military crisis, leaders of resource-rich states are far less likely to prioritize development than leaders of resource-poor states, because they can essentially buy their way out. In the absence of such a crisis, it is impossible to assess the validity of this claim. However, this may serve as a powerful alternative explanation for why we have not yet seen the emergence of a developmental elite anywhere in the former Soviet Union. At the same time, the lack of a crisis magnifies the problem of an ideological deficit among post-Soviet elites, because it makes the need to generate an internal demand for development all the more essential.

Bureaucratic Constraints

Although secondary to the need for an elite committed to development, the lack of a competent, coherent, and meritocratic (i.e. Weberian) bureaucracy has also hindered the emergence of a developmental state across the FSU.9 This, too, is due to the combined effects (p. 623) of the Soviet institutional legacy and the timing of independence. The post-Soviet elites inherited states with varying degrees of administrative capacity but all were more capable than most developing countries. For example, in 1996 the Soviet successor states scored higher across all of the World Bank’s (2012 ff.) Governance Indicators, including effectiveness and control of corruption, than did the ten African states with the largest GDP in 2010.10 However, none possessed anything closely resembling a Weberian bureaucracy.

Despite moderate degrees of competence and even meritocratic recruitment, the key deficiency was coherence, defined here as the ability of bureaucrats to implement policies strictly according to the law. In the late 1990s, for example, all former Soviet republics, with the exception of Belarus and the Baltic States (Estonia, Latvia, and Lithuania), had either medium or high levels of administrative corruption, according to the widely used EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS; for details, see Hellman et al. 2003).11 It is noteworthy that among these, the only countries that had medium levels, and thus fell within ranges more comparable to countries in Central and Eastern Europe, were the two most well endowed with mineral resources—Russia and Kazakhstan.

A more recent survey conducted by the Quality of Government Institute at the University of Gothenburg seems to confirm these results. According to this survey, the FSU countries score close to more developed countries such as Brazil and Indonesia and even some OECD countries when it comes to indicators of bureaucratic professionalism, and yet they score much lower when it comes to indicators of bureaucratic impartiality (for details, see Teorell et al. 2011). And here, too, the resource-rich states actually perform slightly better—not worse—than their resource-poor counterparts: resource-rich Azerbaijan, Uzbekistan, and Kazakhstan receive the three highest scores on professionalism, followed by resource-poor Armenia.12

Resources as Constraints? Natural Resource Wealth and the Possibility of Developmental States in the Former Soviet UnionClick to view larger

Fig. 33.1 Evolution of the Human Development Index (HDI) by country, 1993–2009.

Note: Data for 2010 are not included because it uses indicators that are previously absent, thus making comparison to other years difficult.

Source: Compiled and calculated by the author from UN (1993–2010).

Nonetheless, in the context of an international system that emphasized state-dismantling over state-building, priority was placed not on increasing administrative capacity but rather on decreasing the reach of the state. More specifically, because markets, not states, were still being touted as the key to development, the mandate was to vastly reduce the state’s role in the economy, limiting its involvement to promoting markets. In most of the Soviet successor states, elites attempted to fulfill this mandate largely via the privatization of state property and the elimination of some of its basic welfare functions. By some estimates, real government expenditures fell by 50 percent or more in the first several years following independence across the FSU (Popov 2000). Only a handful of states—Belarus, Estonia, and Uzbekistan—resisted pressures to dramatically reduce the size of the state, and instead sought to maintain spending as close to pre-independence levels as possible (Popov 2000). Spending on health and education, for example, declined precipitously during the first decade of independence, and the human development index (HDI) plummeted—at least partly, if not mostly—as a result (see Figure 33.1). These spending patterns (p. 624) were reversed in some countries in the 2000s, but the majority still had not maintained or recovered the level of HDI recorded in the early 1990s by the end of the next decade. Among those countries that did manage to do so, two are resource rich (Kazakhstan and Uzbekistan), and two are resource poor (Kyrgyzstan and Tajikistan).

Economic Constraints

Finally, the Soviet successor states—resource rich and resource poor alike—shared significant economic constraints with the emergence of twentieth-century developmental states. These took primarily two forms: structural and ideational.

Structural constraints can be traced directly to the Soviet industrial legacy. Because each former republic was part of an integrated economy, industry was deliberately designed to supply particular goods and services to other parts of the Soviet empire. Not only were these industrial linkages severely disrupted after the Soviet Union’s collapse, leaving factories without critical inputs and diminishing “demand” for their outputs, but the newly independent states were left with misallocated human and physical capital. Thus, industrialization policy required more than coordinating investment and even restructuring inefficient state enterprises; it also required “recasting the human and physical capital frozen in socialist-era factories and skill profiles into forms and structures that can produce goods and offer services that are competitive on the world market” (Slay 2010: 2–3).

In this regard, producers of raw commodities actually had a short-term advantage, because they could more easily tap into pre-existing markets outside the boundaries of the Soviet empire. Uzbekistan’s capacity to both sustain social spending and finance import (p. 625) substitution industrialization (ISI) in the 1990s, for example, can be attributed to its ability to begin exporting cotton abroad immediately after independence. The resource-rich successor states could also attract higher levels of foreign direct investment, which both Azerbaijan and Kazakhstan capitalized on to a much greater degree in the mid-1990s than did Russia, Turkmenistan, and Uzbekistan.

Ideational constraints are tied to the timing of independence. The Soviet successor states emerged onto the international scene a decade before conventional understandings of what constitutes “development” had changed dramatically among international financial institutions, the IFIs (e.g. World Bank 2005: 1–23; Rodrik 2008). By the early 2000s, Amartya Sen’s path-breaking work had shifted the debate away from economic growth as the primary goal and indicator of development and towards a more comprehensive emphasis on the “expansion of capabilities of persons to lead the kind of lives they value—and have reason to value” (Sen 2000). This change in ideas was accompanied by a new model of development that, in contrast to earlier models, valued human development as an end in itself.13 One of its core requirements, therefore, is building human capital, for example, by directing state investment toward healthcare and education—two areas in which the FSU had an advantage at the beginning of the 1990s, but which it lost via the dismantling of the state functions discussed previously.

At the same time, shifts in international markets reinforced the growing recognition that human development was both the underpinning of sustained economic growth and intrinsically valuable. As world demand declined due to shrinking economies in the West (and growing protectionism), IFIs also began questioning the viability of industrial policy aimed at export-led growth and emphasized instead the need to boost domestic demand, which sharpens the need to invest in education and job creation at home (e.g. Rodrik 2008). The Soviet successor states had thus attempted to restructure their economies according to ideas that were already outdated.

3 Common Constraints to the Twenty-First-Century Developmental State in the FSU

Perhaps the greatest irony of IFIs’ recent conversion to Sen’s “capabilities” approach to development is that it suggests that an interventionist state is needed now more than ever. In essence, the emphasis on individual empowerment places the impetus on the state to expand its role beyond even what was required of the twentieth-century developmental state. Alongside a viable industrial policy,14 the state must implement a comprehensive social policy aimed at creating equity among its citizens—that is, “equal opportunities (p. 626) to pursue a life of their choosing and [to] be spared from extreme deprivation and outcomes” (World Bank 2005: 2). More specifically, the mandate for state-led development has changed to include an emphasis on providing equal access to public goods and social services, such as healthcare and education, while also alleviating poverty and reducing, if not eliminating, inequality.

In order to achieve these lofty goals, moreover, the twenty-first-century model of development requires that the state pursue a different kind of embeddedness. In order to successfully implement a comprehensive social policy, governments must establish broader linkages with their citizenry; specifically, they must reach beyond industrial elites and private capital to embrace civil society (e.g. Evans 2008; Rodrik 2008). The obvious implication is that authoritarian regimes will be less conducive to fostering a developmental state because they are far less likely not only to accept a role for civil society but also to empower civil society such that it can serve as a genuine “co-producer” in the delivery of public goods and social services (Heller 2001).

In sum, while the twenty-first-century developmental state must be strong in ways similar to its twentieth-century predecessor, it requires a certain type of state capacity. Specifically, advocates of this approach to development argue that it necessitates a democratic state with close ties to a robust civil society rather than a technocratic state with close ties to powerful industrial elites (e.g. Evans and Heller, Chapter 37, this volume). The Soviet successor states thus also face similar impediments to adopting the new twenty-first-century model of the developmental state that are unrelated to resource wealth: namely, autocratic rule and weak civil society.

One of the two main political deficits in the FSU is democracy. The CIS average for two of the most widely used indicators of the level of democracy (Freedom House 2012)15 and Voice and Accountability (World Bank 2012 ff.)16 is woefully low, and only a handful of countries, including Russia, scored above the CIS average between 1991 and 2010. It is worth noting that this average declined in nearly every FSU country during the first half of the 2000s. Also noteworthy is the fact that, contra the resource curse literature that links resource wealth to authoritarian regimes, according to these indicators, the petroleum-rich Soviet successor states are no less democratic than their resource-poor counterparts (Jones Luong and Weinthal 2010: ch. 10).17 The third of these indicators, Polity scores, are arguably more accurate, both because they rate countries using a 21-point scale from -10 (most authoritarian) to +10 (most democratic), and because they provide consistent indicators over time rather than a snapshot view of regime type. Here, the Soviet successor states receive slightly higher marks on the level of democracy. Nonetheless, this indicator also suggests that there is no discernable relationship between petroleum wealth and level of democracy (Jones Luong and Weinthal 2010: ch. 10).

Resources as Constraints? Natural Resource Wealth and the Possibility of Developmental States in the Former Soviet UnionClick to view larger

Fig. 33.2 Freedom House civil society scores, 1997–2010.

Note: Data unavailable for 2000.

Source: Freedom House (2011 ff.).

(p. 627) The other political deficit across the FSU is a robust civil society. This, of course, is directly related to the prominence of authoritarian and semi-authoritarian regimes in the region. When it comes to granting associational rights to non-governmental organizations (including unions), for example, the CIS average has not dipped below 5 since 1993, only two states (Armenia and Moldova) have maintained scores of 4 or below throughout both the first and second decades of independence, only one (Ukraine) has consistently improved its score in the second decade, and none has received a score better than 2.75 (see Figure 33.2).18

4 Alternative Paths to the Emergence of a Developmental State in the FSU

Given the obstacles to the emergence of both the twentieth- and twenty-first-century developmental state in the FSU, we might conclude that no such possibility exists. Such a view, however, neglects both the historical origins of the mandate for state-led development and the diversity of strategies and trajectories among those states we now describe as “developmental.” It thus also overlooks the potential advantage that resource-rich states may have in promoting developmental outcomes in the twenty-first century.

(p. 628) The impetus behind calls for state-led development was the plight of late developers that, without state intervention, would remain hopelessly backward vis-à-vis early developers (Hirschman 1958; Gerschenkron 1962). State intervention was not viewed simply as desirable but as essential, because the state was considered uniquely capable of providing the two fundamental ingredients for fueling rapid and successful industrialization—beyond its access to surplus capital: the technocratic capacity to design and coordinate an industrial strategy, and the ideological capacity to amass broad societal support. Not coincidentally, these are two of the twentieth-century developmental state’s core features, and yet, oddly, both are de-emphasized in the new model of the twenty-first-century developmental state. As a result, its advocates have also downplayed the crucial role of visionary elites committed to expanding the economic pie for collective benefit as the precursor to the developmental state.

The irony is that each of these three elements is also crucial to the emergence of a twenty-first-century developmental state.19 Putting capabilities expansion at the forefront of development does not preclude the need for economic growth, and in fact necessitates a certain amount of growth in order to finance education, healthcare, and poverty reduction. This, in turn, requires a viable industrial policy. In other words, even as its mandate shifts to social policy, the developmental state’s main role remains the “co-design and coordination of industrial development” in the classical sense (Breznitz 2005: 6). The current international context, moreover, warrants a different kind of industrial strategy that relies even more on the state’s assuming a leading organizational role as both chief technocrat and motivator. In short, domestic firms in developing countries face strong incentives to become multinational corporations, MNCs (Contractor et al. 2011), and yet they require significant state support in order to exploit these advantages (e.g. Hausmann and Rodrik 2003; Sabel 2009). By addressing these challenges, then, the state is in a unique position to convince entrepreneurs to adopt what they might consider to be a risky strategy (e.g. Rodrik 2008).

Effective social service delivery also requires technocratic capacity. Technocrats have been crucial, for example, in the design and implementation of conditional cash transfer (CCT) programs across various municipalities and states in Brazil, including Bolsa Escola and later Bolsa Família (e.g. Lindert et al. 2007; Melo 2008). The policy shift toward capabilities expansion, moreover, must be preceded by a fundamental ideological shift that can be realized only via the emergence of a developmental elite. In the case of Brazil, for example, this policy shift was embodied in the 1988 Constitution, which emphasized social rights and the need to rectify the plight of the poor. Importantly, it was innovative and altruistic politicians—at both the subnational and federal levels of government—that made the implementation of such lofty goals possible (e.g. Lindert et al. 2007; Melo 2008). This is not to diminish the role that civil society has played, for example, in improving the quality of social service delivery (de Castro and Bursztyn 2008: 4), but rather to clarify that its role is secondary in terms of both timing and substance to that of both technocrats and developmental elites.

And yet, despite these similar core features, both twentieth- and twenty-first-century developmental states have had distinct origins and followed diverse trajectories. As already mentioned, the elite that launched developmental projects in Japan and the Asian Tigers, (p. 629) for example, emerged from very different kinds of national-level crises. The source of such an elite in subsequent developmental states, including Brazil as well as China,20 in contrast, seems to have been both more evolutionary and primarily local (e.g. Segal and Thun 2001; Tsai 2007). Developmental states have also adopted different policies to promote the growth of domestic industry. Those among the first wave (i.e. 1950s–1980s), for example, opted to rely on the public versus the private sector to varying degrees, while those among the second wave (i.e. 1990s–2000s) have provided varying levels of state financial and diplomatic support to encourage domestic firms to expand abroad.21

Much of this diversity across twentieth- and twenty-first-century developmental states can be attributed to geography and timing. As others have acknowledged, the phenomenon of the twentieth-century developmental state was regionally concentrated; that is, largely peculiar to East Asia. It also occurred within a particular geopolitical context in which a large subset of the countries within this region pursued a similar industrialization strategy, because they faced similar external threats combined with similar internal constraints to respond to these threats (Doner et al. 2005). Chief among these constraints was a paucity of natural resource wealth. Simply put: resource scarcity made it imperative that these countries did not merely promote export-led growth but that they did so via “upgrading” or elevating their status “from lower-value to higher-value economic activities within global commodity chains” (Doner et al. 2005: 328).

Outside East Asia, the emergence of developmental states has not only been rare but also limited to a single country within a larger geographical region. The link between external threats and resource scarcity as the primary internal constraint also does not seem to hold outside East Asia. Consider, for example, the fact that in Africa, resource-rich Botswana is the sole exemplar of a twentieth-century developmental state, and resource-rich South Africa is the sole contender for a twenty-first-century developmental state (e.g. Meyns and Musamba 2010). It is also worth noting that for developmental states among the second wave, including Brazil and Malaysia, the national oil company (NOC) has provided a ready-made “international champion” to launch the government’s highly effective industrial policy aimed at achieving internationalization across sectors (Jones Luong and Sierra 2011).

In sum, the emergence of twentieth-century developmental states was geographically and historically bounded. Within this particular place and time, moreover, access to resource wealth played a distinctive role. Thus, there is no a priori reason for us to expect either the same set of conditions to foster developmental states in other regions and time periods or for the paucity of resources to play a pivotal role in their emergence. There is very good reason, however, to expect that twenty-first-century developmental states will emerge along multiple paths (Evans and Heller, Chapter 37 this volume). In our search for likely candidates, then, perhaps we should consider what conditions are likely to be most conducive to fostering the three aforementioned core features of a developmental state in a particular regional and international context.

In the former Soviet Union, these conditions appear to be political stability combined with sustained economic growth. Consider the prospects for the emergence of a developmental elite. In a region dominated by authoritarian regimes and weak civil society, elites are more (p. 630) likely to pursue an expansion of the economic pie for collective benefit when their position is secure. In other words, only when the incumbent elites expect that they will be in power long enough to reap the benefits of economic expansion will they become developmental. Given the immense amount of rent-seeking that has occurred throughout the FSU (see Grzymała-Busse and Jones Luong, Chapter 31, this volume), this is understandably difficult to imagine.

We should remind ourselves, however, that to be considered “developmental” elites do not have to be “immune to rent-seeking,” but rather have to provide some collective goods and “on balance” to promote rather than impede economic growth (Evans 1992: 148). We should also entertain the plausibility of Mancur Olson’s (1993) alternative scenario of “stationary bandits,” whereby incumbent security rather than insecurity can induce elites to both provide public goods and promote prosperity for society as a whole. When the country has already experienced some level of continued growth, moreover, such elites are more likely to feel secure in linking the regime’s domestic legitimacy to its economic performance.

Political stability combined with economic growth can also promote the emergence of a developmental elite by fostering aspirations for regional and global leadership. Confident in their ability to sustain both power and growth, this elite may seek recognition outside of its own country for its—real and perceived—accomplishments. The elite’s own ambitions can thus act as a constraint on its desire for rent-seeking. Because they often lack international legitimacy, moreover, authoritarian regimes may actually be more likely to foster such ambitions.

Political stability and economic growth are also essential ingredients when it comes to developing technocratic capacity. Given the massive decline in state expenditures and consequent loss of administrative capacity in most of the Soviet successor states in the 1990s, as well as the absence of domestic savings, economic growth may provide the only means for governments to finance the dual policy objectives of the twenty-first-century developmental state. Political stability helps to ensure that incumbents capture a sizeable share of revenue from growth, enabling them to build human capital and invest in industrialization simultaneously and thus to avoid the conundrum of which goal to prioritize (e.g. Koeberle et al. 2006). The demand for an industrial policy that facilitates the expansion of domestic firms into MNCs, moreover, makes state financing an essential ingredient. Where economic growth fuels higher standards of living, states also have a much greater chance of retaining and attracting bureaucrats who either have or are willing to acquire the necessary knowledge and skills to become technocrats. In this regard, growth also contributes more directly to a viable industrial policy in the current international environment of global recession, which necessitates stimulating internal demand for domestic goods. Growth also appears to have an independent effect on poverty reduction (Dollar and Kraay 2002).

The states in which these two conditions have prevailed in the FSU are resource rich. Although many regimes have consolidated their power (Grzymała-Busse and Jones Luong, Chapter 31, this volume), the resource-rich states have benefitted from continued economic growth since the 1990s and much higher levels of growth since the 2000s than their resource-poor counterparts (Jones Luong 2011). As incomes have increased, leaders of some resource-rich states have not only witnessed increasing degrees of popular legitimacy but also been increasingly willing to link their legitimacy to economic performance.22 This is particularly the case in Kazakhstan, where rapid resource-led growth (p. 631) since 2000 has contributed to more favorable attitudes toward both the political regime and its market-oriented economic policies (e.g. Junisbai 2010). Part of the reason for this is that growth has contributed to improvements in human development in two separate but mutually reinforcing ways: first, it has had a direct impact on reducing poverty rates (e.g. Agrawal 2007); and second, it has helped finance increased spending on education, healthcare, and social assistance (including pensions).23 While Kazakhstan’s ruling elite has long held ambitions to be a regional and global leader, continued economic growth has bolstered this drive, because its own success is viewed as a model for other Central Asian countries (Simon 2009: 78) and because its economic strategy continues to rely on attracting foreign direct investment (FDI) beyond its petroleum sector.

Table 33.1 Government effectiveness

Average Score, 1996–2010

Score 1996

Percentile Rank 1996

Score 2010

Percentile Rank 2010

Change in Score, 1996–2010

Armenia

-0.25

-0.41

39.5

-0.15

49.8

+0.26

Azerbaijan

-0.81

-0.94

16.6

-0.84

22

+0.10

Belarus

-0.97

-0.41

39.5

-1.13

12

-0.72

Georgia

-0.30

-0.67

27.8

+0.29

64.1

+0.96

Kazakhstan

-0.61

-1.07

13.2

-0.27

44.5

+0.80

Kyrgyzstan

-0.65

-0.41

39.5

-0.63

30.6

-0.22

Moldova

-0.65

-0.37

41.5

-0.63

31.1

-0.26

Russian Federation

-0.46

-0.55

32.7

-0.39

41.6

+0.16

Tajikistan

-1.15

-1.46

5.4

-0.91

18.2

+0.55

Turkmenistan

-1.46

-1.20

11.2

-1.58

3.3

-0.38

Ukraine

-0.71

-0.78

23.4

-0.77

24.9

0.01

Uzbekistan

-1.00

-1.15

11.7

-0.80

23.9

+0.35

Note: Does not include 1997, 1999, or 2001.

Source: World Bank (2012 ff.).

Growth has also enabled the petroleum-rich Soviet successor states to rebound from the decline in state capacity, which occurred as a result of huge budget cuts in the 1990s. While all of the Soviet successor states received persistently low scores throughout the 1990s and 2000s according to the widely deployed World Bank Government Effectiveness indicator,24 as Table 33.1 (p. 632) illustrates, the countries with the greatest improvement over time are all petroleum-rich (except for Armenia and Georgia), whereas the sharpest drop in government effectiveness occurs among petroleum-poor countries (except for Turkmenistan). There is clearly still much room for improvement. And yet, two of the five petroleum-rich countries (Kazakhstan and Russia) and two of the petroleum-poor countries (Armenia and Georgia) have reached levels of government effectiveness that are comparable to Brazil’s when it launched its successful development strategy.

5 Conclusion

In sum, the experience of the Soviet successor states to date calls into question the notion that resource abundance is necessarily a detriment to the emergence of a developmental state, while resource scarcity is necessarily an advantage. First, the dearth of developmental states in the region should not be attributed to these countries’ access to resource wealth, but rather to their shared Soviet legacy and the timing of their independence from Soviet rule. Second, these states also face similar impediments to adopting the new twenty-first-century model of the developmental state that are unrelated to resource wealth: namely, autocratic rule and weak civil society. Finally, the resource-rich states may actually have an advantage vis-à-vis their resource-poor counterparts when it comes to building a developmental state in the twenty-first century.

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                                                                                                                                Notes:

                                                                                                                                (1) The threat can take the form of multiple economic crises, which Chalmers Johnson (1982: 307) claims propelled Japan’s state-led growth; or the lack of political legitimacy, which Robert Wade (1990: 296) argues inspired Taiwan’s developmental elite; or military insecurity (e.g. Woo-Cumings 1999: 322). Richard Doner et al. (2005) is an important exception from this threat approach.

                                                                                                                                (2) This is consistent with what David Waldner and Ben Smith (Chapter 38, this volume) describe as a “heterodox position.”

                                                                                                                                (3) Early models emphasized government relations with the private sector (e.g. Johnson 1982), whereas later models have incorporated the public sector (e.g. Wade 1990).

                                                                                                                                (4) The seven petroleum-poor Soviet successor states are: Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, and Ukraine.

                                                                                                                                (5) I am defining ideology here as a belief system that justifies a preferred economic and political order.

                                                                                                                                (6) The contrast is China, where elites embarked on economic reform without questioning the legitimacy of Communist Party rule, and indeed, made successful economic growth a pillar of the regime’s ideology (e.g. Solnick 1996).

                                                                                                                                (7) As others have argued, the reliance on ethno-nationalism was also a legacy of the Soviet system, which promoted ethnic identity and eroded class identity over time (e.g. Roeder 1993; Slezkine 1994).

                                                                                                                                (8) This polarized choice was reinforced by the common notion that these were states in need of “transition” from a failed economic system rather than in need of economic “development.”

                                                                                                                                (9) As Chalmers Johnson (1982: 306) emphasizes, a developmental elite is a prerequisite for the emergence of a developmental state. Moreover, in several cases, including South Korea and Taiwan, a Weberian bureaucracy had to be created over an extended period of time, and this was one of the key contributions of the developmental elite.

                                                                                                                                (10) I use 1996 as the comparator because this is the first year for which these data are available for the FSU.

                                                                                                                                (11) Administrative corruption refers to unofficial payments to public officials in exchange for preferential treatment.

                                                                                                                                (12) Interestingly, resource-poor Moldova receives the lowest score for both professionalism and impartiality.

                                                                                                                                (13) It would be erroneous to claim that earlier models did not value human capital formation. Its reputed worth, however, was entirely instrumental rather than intrinsic (see e.g. Evans and Heller, Chapter 37, this volume).

                                                                                                                                (14) As we will see later, scholars and practitioners have emphasized the twenty-first-century developmental state’s role in orchestrating industrial policy to different degrees.

                                                                                                                                (15) Scores range from 1 (highest) to 7 (lowest).

                                                                                                                                (16) Scores range from -2.5 (lowest) to 2.5 (highest). Average does not include data for years 1997, 1999, and 2001 because they are not available.

                                                                                                                                (17) According to the 2011 Freedom House report, for example, more than half (8/15) are classified as “consolidated authoritarian regimes.” While the remainder—outside the three Baltic countries—are classified as “semi-authoritarian” (1) and “transitional government/hybrid regime” (3). For details, see Freedom House (2011).

                                                                                                                                (18) As is the case with the level of democracy, scores range from 1 (highest) to 7 (lowest).

                                                                                                                                (19) Indeed, this is why the most successful twenty-first-century developmental states—South Korea and Taiwan—were also highly successful twentieth-century developmental states (Evans and Heller, Chapter 37, this volume).

                                                                                                                                (20) Scholars disagree over whether China can be classified as a “developmental state” (see, e.g., Pei 2006).

                                                                                                                                (21) Directed lending to domestic firms pursuing internationalization via state-owned banks or development funds, for example, has been a fundamental component of Brazil and Malaysia’s industrial strategy, but not South Africa’s.

                                                                                                                                (22) See, for example, President Nursultan Nazarbayev’s “State of the Nation” addresses since 2005, available at: http://kazakhstanun.org/press-releases/annual-state-of-the-nation-address-of-the-president-of-kazakhstan.html (last consulted 9 February 2014).

                                                                                                                                (23) Welfare spending in Kazakhstan more than doubled from 2000 to 2010 (McCullaugh 2011). Spending across these categories over this same period was slightly higher in Russia and much lower in Azerbaijan (McCullaugh 2011). Concerning healthcare in particular, since 2000 the petroleum-rich countries have spent far more—both as a percentage of GDP and per capita—than their petroleum-poor counterparts. For details see: World Bank Development Database and World Health Statistics 2011, available at: http://www.who.int/whosis/whostat/2011/en/index.html (last consulted 9 February 2014).

                                                                                                                                (24) Each country is assigned a score between -2.5 to 2.5 and a percentile rank that “rang[es] from 0 (lowest) to 100 (highest) among all countries worldwide” based on perceptions of the quality of public services, the civil service, and the government’s ability to formulate and implement policies (Kaufmann et al. 2010: 12).