What could Soviet Union have learnt from developmental South Korea?

By Camelia Vasilov

Kohli (2004) argues that the pattern of state authority – and particularly the institutionalization of the relationship state-private sector – is crucial in explaining why essentially the same developmental challenge resulted in different outcomes for South Korea, Brazil, India and Nigeria. I think that we can gain useful insight from this theory into the success and failure of the Soviet Union.

Indeed, the efficacy of the government in imposing growth-inducing economic decisions, at the expense of much human suffering, was the key to the miraculous Soviet industrialization and urbanization achieved in only 15 years. But the Soviet system carried the seeds of its own destruction.

As Olson (2000) shows, it wasn’t just the state appropriation of all capital, but rather the peculiar system of taxation that squeezed the maximum worth of people’s work and gave the Soviet Union “more resources for the purposes of leadership that any society in history” (p.120).

Soviet taxation was nearly total on regular working hours, as only the state was entitled to the benefits of people’s work, whose wages were kept below subsistence level. However, there was no taxation on working extra hours – Stakanovist practices were actually monetarily rewarded – or engaging in little trades on the side, unrecognized by the state, as long as one was not caught. Basically, people had to work outside the planned economy as well if they wanted to survive.

But eventually these tiny markets that emerged within the cracks of totalitarian power became essential for fixing the mistakes of planned economy – and the state lost more and more transactional information and thus control over the emerging entrepreneurs.

Wouldn’t it have better if the SSSR took these entrepreneurs under its wings and aligning its goals with them? An agent with the same preferences as the principal is no longer a problem. In South Korea - a cohesive-capitalist state in Kohli’s framework – this is exactly the case: the two horses of business and state are pulling in the same direction (p.21). Could the Soviet Union have become a cohesive-capitalist state? Is China undergoing this transition now? 

The Malawian experience

By Casper Gelderblom

In his book about state-directed development, Atul Kohli distinguishes three different state types: cohesive-capitalist states, fragmented multiclass states and neo-patrimonial states. While the relatively strong organizational underpinning of the first two types renders growth-stimulating industrialization possible, neo-patrimonial states’ interventions in their economies have led to “disastrous results,” Kohli claims. Illustrating this argument with the case of Nigeria, he shows that neo-patrimonial regimes’ treatment of resources and companies as their own patrimony keep the country from achieving economic development. Convincing as the Nigerian illustration may be, not all historical evidence supports Kohli’s presentation of neo-patrimonialism as necessarily destructive.

In the first 15 years after independence, the neo-patrimonial state of Malawi, for example, achieved a rate of economic development which the World Bank at the time lauded as “impressive”. Despite president Banda’s personal ownership of more than half of the shares of an enormous corporation that largely controlled the country’s largest chains of supermarkets and shops, hardware stores, the tobacco industry and its two banks, his neo-patrimonial rule was characterised by truly impressive growth numbers. Between 1964 and 1979, Malawi’ average annual GDP growth rate was 5.9%, the annual increase of real GDP per worker about 3%, the growth of manufactured output averaged 5.6% p.a. in the 1970s and, most telling in relation to industrialization, the share of the manufacturing sector in the country’s GDP increased from 7% in 1964 to 13% in 1980.  

The early post-colonial Malawian experience indicates that neo-patrimonialism is not necessarily destructive - it might even lead to strong economic performance. This raises interesting questions for political economy scholars: what characteristics of neo-patrimonial states stimulate or hinder economic development? Given the obvious differences between Nigeria and Malawi, does the presence/absence of resources matter for the economic impact of neo-patrimonialism? And what role does regime type play? Whatever the answer to these questions, one thing is certain: the case of Malawi calls for a more differentiated consideration of the nature and impact of neo-patrimonialism than the one Kohli presents.

Colonialism

By Geerte Verduijn

In 1911, Agnes Ferguson decided to leave her life in Scotland and headed to the United States of America. Dating back over a million years, migration is no new phenomenon. Yet media reports of citizen’s animosity against migrants intensify in frequency. With David Cameron referring to ‘a swarm’ of refugees, and foreign secretary Philip Hammond predicting ‘a threat to the EU’s standard of living and social structure,’ explicit opinions now have reached the United Kingdom’s government. When expressing such worries however, there are several things the British might want to take into account. 

First of all, the country’s fairly recent past. It is interesting to see how easily is spoken in generalized terms – ‘the swarm’, ‘Africans’ - when addressing great groups of migrants, as if all that is foreign is homogenous. Meanwhile, when referring to ‘our country’, the outspoken Britain’s seem to conveniently forget ‘’their’’ ancestors who massively migrated to the furthest corners of the world. Those journeys moreover showed that migration is not a priori negative. It has even been argued that the presence of refugees can supply a country with labor and stimulate economic growth. Is the British standard of living really as threatened as its people fear?

On the other hand, even comparing current affairs with past migrations of the British would not suffice. While Ms. Ferguson was ‘enticed by alluring pictures of the Canadian prairies,’ and economic migration is still happening, the motives of many refugees anno 2015 have exceeded such luxuries. People are fleeing from ‘apocalyptic’ civil wars, willing to risk their lives trying to reach safer ground.

How long does it take before people get used to a certain standard of living? Before having Maslow’s first needs fulfilled and owning the most powerful passport in the world starts to weaken their empathy for the less-lucky or unknown? Perhaps the British should reconsider the treasured but ‘threatened’ social and institutional structures that allow them to make such impassive statements when human lives are at stake.