How can a developmental state emerge? What are its characteristics and functions? Is the model recommended for all African countries? Did the concept evolve into solid development theory so far? Who determines public interests? How are they articulated and aggregated? How do we ensure it can effectively guide economic transformation and development? How can we ensure that it is accountable and that it acts in the interest of its citizens?

1. Managing Developmental States:
Policy and Institutional
Reforms in Africa
An Ethiopian case
BT Costantinos, PhD
School of Graduate Studies, Department of Public
Management and Policy, College of Management, Information
and Economic Sciences, Addis Ababa University
National Conference on
Management for Effectiveness,
Efficiency and Ethics
Ethiopian Management Institute
June 30-July 1, 2011

2. Contents
• Introduction
• Research questions
• The Developmental State:
– Definition: tautology, redundancy or pleonasm
– Ideological forces behind developmentalist dirigisme
• Rise and fall of developmental states:
– The Japanese Miracle and the East Asian Tigers
• African Developmental States:
– Analytical disconnects , good practices - wrong lessons, government and
market failure, neo-patrimonialism and rent seeking
• A Global Order emerging:
– Self-fulfilling predicaments, rolling back the state
• New public management
– NPM, The Washington Consensus, The New Structural
Economics, Trade and Investment Policy Priorities
• Can Ethiopia nurture a developmental state
• Conclusion and recommendations

3. PART I
Africa‟s
Experiments,
Prescriptions and
Global Good
Practices

4. Research Questions
• How can a developmental state emerge? What
are its characteristics and functions?
• Is the model recommended for all African
countries?
• Did the concept evolve into solid development
theory so far?
• Who determines public interests? How are
they articulated and aggregated?
• How do we ensure it can effectively guide
economic transformation and development?
• How can we ensure that it is accountable and
that it acts in the interest of its citizens?

5. Ideological forces: Developmentalist Dirigisme
• Nationalism, catch up with other developed nations
• The centrality of ideology: naïveté of the de-politicised
quest for technocratic governance,
• French dirigisme:
– Commissariat général du plan
– development of meritocratic technocracy: the École
Nationale d'Administration , École Polytechnique
• The Japanese and East Asian Miracle
– The claim of developmental states as a success is
contentious, but supported by the historical record.
– East Asian Tigers’ place as a bulwark against
communist expansion in East Asia meant that they
received favourable treatment from the US
– depicted as centres of self-serving „crony capitalism’

6. Ideological forces: Developmentalist dirigisme
• Nationalism, catch up with other developed nations
• The centrality of ideology: naïveté of the de-
politicised quest for technocratic governance,
• French dirigisme:
– Commissariat général du plan
– development of meritocratic technocracy: the École
Nationale d'Administration , École Polytechnique
• The Japanese and East Asian Miracle
– The claim of DSs as a success is contentious, but
supported by the historical record.
– East Asian Tigers’ place as a bulwark against
communist expansion meant that it received
especially favourable treatment from the US
– depicted as centres of self-serving „crony capitalism’.

7. Problem Statement
• One remarkable feature of the discourse on the state and
development in Africa is the disjuncture between an
analytical tradition that insists on the impossibility of DSs in
Africa and a prescriptive literature that presupposes
their existence
• The African state is today the most demonised social
institution, vilified for its weaknesses, its over-extension, its
interference with the smooth functioning of the markets, its
repressive character, its dependence on foreign powers, its
simultaneous ubiquity & its absence, etc.
• The state, once the cornerstone of development, is now
the millstone around otherwise efficient markets.
• Early criticism of the state in Africa came from the neo-Marxists
– Petty bourgeois state, the neo-colonial state and the dependent state.
– the state become dysfunctional in terms of the larger societal issues, but
also a real nuisance in la vie quotidienne of its citizens, as evidenced by

8. Africa‟s track record
• 1960–1972, 26 countries had growth in excess of 2%, 13 countries achieved
3.5%. 16 countries had <2 %. 10 countries negative growth
• During 1973–2000, economic growth faltered. 13 countries saw growth in
excess of 2%. Negative growth almost doubled to 18 nations. 22 countries
recorded growth rates of less than 2%, and 16 less than 1 %.
• 2000–2007, 25 countries grew in excess of 2%, 14 countries recorded
negative growth rates; 14 countries recorded positive growth rates of less
than 2 %, and six of them less than 1 %
• 1960–2007, 16 African countries had growth rates in excess of 2 %; 11
countries recorded negative growth rates; and 26 countries recorded positive
growth rates of less than 2 %, and 12 of them less than 1%
• Among the major features of the African growth processes, especially those
of sub-Saharan Africa, is their relatively high volatility
Growth rate
Year negative <2 % ≥ 2%
1960 - 1972 10 16 period 26 [13 more than 3.5%]
1973 - 2000 18 22 [16 less than 1%] 13
2000 - 2007 14 14 [6 less than 1%] 25
1960 - 2007 11 26 [12 less than 1%] 16

9. Democracy, governance and development
• AU commitment to strengthening governance for
development through many instruments
• Policy orientation is situated within a wider
commitment to sustainable development, rooted in
democratic governance: fundamental to development.

10. The Africa experiment – so far
• Planning development processes: “encouraging
signs”
– Development frameworks: developing countries
need development “frameworks” rather than narrow
“models”:
– Development strategies
• “Comprehensive Development Framework”;
• “framework for rethinking development” or
• “new structural economic framework” interdependence
of
social, structural, human, governance, environmental, ec
onomic and financial…
• 1999 WB and IMF :Poverty Reduction Strategy Papers
• Specific, measurable and inclusive strategies: “shared
growth in Africa”
– Development plans:
• UN Millennium Summit: MDGs on global partnership for

11. Africa‟s Efforts … Problem Statement
• In reality, state-led development model often
failed to construct DSs
Why?
 the rise of dictatorships lacking strategic
partnership with the indigenous private and
business sector;
 The state played multiple roles as
investor, banker, trader and primary
employer, rather than carefully nurturing a
local entrepreneurial class;
 Low savings and investment rates, flawed
industrialization strategies, poor performance
of the agricultural sector, low investment in
research and technology;
 Extreme dependence and consequent shocks,

12. Asian comparative performance…
• Reasons behind the Asian economic “miracle”
• Large investments in physical and human
capital,
• A market friendly environment and appropriate
macroeconomic policy frameworks
• Strong institutions: efficient resource allocation
and infrastructure, and an efficient school
system
• profitable investments: credit/ interest rate
policy
• State policy interventions: subsidized
credits, public investments in research and
technology, and development of export-
marketing institutions.
• Surrogate „workshops‟ for corporate
America and Europe

13. The case of Malaysia:
• Has been compared to African countries in terms of
initial conditions and growth performance
– In 1960, it had a real per capita income of $2,195 in 2005 PPP dollars;
by 2007, its real per capita income had reached $17,891, an average
annual rate of increase over the period of 4.6 %, characterized by very
low volatility (coefficient of variation of 0.8)
– Structural transformation of a predominant agricultural economy
to a more industrialized economy, and then a knowledge-based
economy
• Lesson to be drawn:
– Successful economic transformation was achieved by deliberate state
involvement, based as it was on a disciplined planning process
– Involvement included formulation of relevant development
policies, creation of institutions and provision of investment
– It involved three successive “outline perspective plans” drafted under an
overall “2020 Vision”.

14. PART TWO
Governing
Development
in Ethiopia:
Needs and Responses

15. The Developmental State
1. A DS is defined as “a state that puts development as
the top priority and is able to design effective
instruments to promote such a goal”.
2. The instruments should include
– forging of new formal institutions,
– the weaving of formal and informal networks of
collaboration amongst citizens and officials and
– the utilization of new opportunities for trade and profitable
production”
3. A DS is thus understood as:
– an interventionist state, which can identify
priorities, set targets, develop strategies, coordination
among various sectors and stakeholders, and establish
systems for achieving short & long-term goals.
– A DS can establish clear economic and social objectives,
and influence the direction and pace of development.

16. Concepts and Features of DSs…
1. Ideology “ Software” and agency “Hardware” :
– a developmentalist ideology;
– the requisite institutions, norms and standards and
meritocratic civil service
2. Vision setting, leadership, capacity and ideology
– Leadership can articulate DS ideology and vision
– Building an elite coalition for support
– Building technical capacity and popular support
– Strong sense of nationalism and commitment
3. It is about building constituency and halting a
rent seeking epidemic
4. Relative state autonomy in formulating and
implementing policy
5. National Development Planning

17. Governing development
Governing development focuses on three axes:
1) Urgent need for economic diversification &
structural transformation,
2) The state in structural transformation,
3) How the construction of DS might enhance and
speed up the economic transformation process.
Structural transformation can be seen as:
• Change in sectoral composition of output (or GDP)
• The sectoral pattern of labour employment
• Sustained increase in real per capita incomes
• Transforming agrarian to industrial economies
remains a major development challenge.
• Key lessons from the recent global crisis is to diversify
the economy that can create jobs and wealth and
enable countries to withstand external shocks

18. Constructing DS in Ethiopia:
• Characterization: An effective DS should
have the following characteristics:
– Political will and capacity to articulate and
implement policies
• to expand human capabilities,
• enhance equity and
• promote economic and social transformation.
– It should have the political will and mandate ,
– Policies must be derived from a consultative process not
manipulated by technocratic/ socio-political elite,
– existence of competent and neutral bureaucracy,
– Establish complementarities among social and
economic policies, governance system that ensure
focus, context, contents and implementation modalities

19. 1. Unchecked intervention, which is beyond the
The potential pitfalls level needed to correct market failure that
of state intervention
risks efficient resource allocation,
2. The entire state apparatus may be captured
by elites or powerful special interest groups so
that the course no longer reflects those goals
derived from democratically organized public
deliberations.
3. At a lower level, weak integrity and
professionalism may lead to rent
seeking, breeding waste and inefficiency.
4. Inappropriate behavior of regulatory agencies:
corrupt regulators may be caught by those
which are meant to be regulated,
5. Both public and private producers may also
find it more profitable to invest resources in
rent seeking rather than actual production,
6. Similarly, consumers who receive subsidies
may also resell their allocations for gain

20. Policy Recommendations
1) Enhancing the state‟s role in transformation:
The role of the state in achieving rapid and sustained
economic growth and development combined with
deep structural transformation must be channeled
through a disciplined planning approach…
2) Building African DSs: The above role is best
performed by states that are both developmental and
democratic:
– A good constitution, the rule of law, independent
judiciary, representative political institutions, effective
regulatory institutions and property rights enforcement,
– A competent and professional bureaucracy whose
recruitment and advancement are based strictly on
merit,
– An agency charged with the responsibility of overall
development planning and implementation
– A developmentalist coalition among committed political
leadership, the bureaucracy, private sector and civil society .

21. Policy Recommendations
3) Ensuring the effectiveness of African
DSs
4) Avoiding the pitfalls of state
intervention: carrot and stick approach to
rent distribution
5) Enhancing stakeholder participation
– Establish democratic deliberative institutions.
– Empower these institutions to promote stakeholder
ownership of development, enhanced citizen
oversight over government activities...
– Use the market to motivating economic agents,

22. Policy Recommendations
– Establish and empower regulatory agencies to set and
enforce product quality standards for all producers,
– Establish competition policy and enforce competition
law against anti-competitive behavior by public and
private producers.
– Empower the bureaucracy to transparently determine
the extent and allocation of rents, and the terms and
conditions for their allocation and elimination,
– Ensure that the bureaucracy has both the autonomy and
capacity to respond quickly to changing local and global
situations
– Forge close, interactive and synergic relations between
the bureaucracy and the private sector

23. Mainstreaming
Policy , Strategy, Structure and Process in
Developmental States
Evaluation Situation Analysis
Response Analysis
Monitoring, Strategic
The elite Coalition
Information Management
Policy & Institutional
Sustained arrangements
Implementation of
Activities National and regional
operational Plans
Divestiture of state enterprises and decentralised management of
businesses and public works
Entry points: national and regional
frameworks, advocacy, partnership and
internal and external domains

24. Acknowledgements:
The 2011 PhD candidates, Dept. of Public Management and Policy , AAU and
The John Hopkins University MARCH Research Team
1. Abeba Beyene PhD GSR/6318/03;
2. Alazar Amare, PhD GSR; 6313/03
3. Ayenachew Aseffa PhD GSR/6319/03;
4. Berhanu Temesgen PhD GSR/6316/03;
5. Bikila Hurissa PhD GSR/6314/03;
6. Girmaw Assemie PhD GSR/6320/03;
7. Nega Wubie PhD GSR/6312/03;
8. Sewagegne Delele PhD GSR/6321/03;
9. Tamrat Getachew PhD GSR/6317/03;
10. Yetnayet Ayele PhD GSR/6315/03
Thank You BT Costantinos, PhD
School of Graduate Studies, Department of Management and Public Policy, College of
Management, Information and Economic Sciences, Addis Ababa University