In developmental state theories (of post-war Japan, S. Korea, Taiwan and Singapore), industrial policies took an important role in generating rapid economic growth. Good industrial policies are, at most, guiding a national economy in a good direction for development. Yet, would they be really successful without the visible hand's steering of financial resources in the market towards them?
I understand that it was important for the development of countries and regions that name it was or social planning, the draft country that shares most of the community. Social cohesion is a key ls for these financial resources can be exploited to achieve a common (national and / or regional) macro objective.
Yes, I agree with you that the end of the day, we see social cohesion achieved with national developmental projects. And my doubt is, where is the focus and what are the administrative processes necessary to ensure such cohesion, to guarantee success of such projects?
Justin, I invite you to examine two questions that have comments that may contain some examples of processes that may be required. Also, do I add a document I have written about it.
https://www.researchgate.net/post/Can_there_be_local_development_without_social_cohesion
https://www.researchgate.net/post/How_does_local_government_fiscal_autonomy_affect_service_delivery
https://www.researchgate.net/publication/236012176_Cohesin_social_clave_de_los_entornos_innovadores_ciudadanos_para_el_desarrollo_local_evolucionado?ev=prf_pub
Tight policies not always generate rapid economic growth. East-asian (Japan, Korea, singapore etc) are positive examples but many negative examples like Pakistan, Venezuela, Argentina etc are also there.
Although each country has its own unique developmental trajectory, the historical record suggests there is indeed an appropriate time and place for temporary periods of financial repression. Restrictions and controls on capital flows (esp. outflows) can help countries preserve scarce foreign exchange and use it only for needed capital inputs (machinery, technology, etc.) for priority sectors in the course of early industrialization stages. Restrictions and controls on inward FDI can steer investment capital to priority sectors. And technology-transfer requirements on FDI can facilitate industrial development in developing countries. There is a long and rich tradition of the strategic use of such policies over time by almost every country that has successfully industrialized. Unfortunately, in the last 30 years, the dominant logic of free markets has deemed such policies as bad state intervention. The new idea is that consumers ought to be free to use their foreign exchange on whatever they and whenever (in the course of a country's national economic development) despite all other considerations. Additionally, although research shows what actually attracts FDI (skilled, healthy and literate workforce, good infrastructure) the myth persist that requirements on technology transfer from foreign investors would scare away potential FDI. The term "financial repression" was the derogatory rallying cry for those who favoured financial deregulation and liberalization, and who supported Reagan and Thatcher and IMF loan conditions to enforce this in borrowing countries. With growing income and wealth inequality and increased frequency of financial crises in the last 30 years (compared to the previous 30-year period under financial repression), it ought to be self-evident that there is an important role for adequately regulating finance. As inequality and financial crises continue to become more acute and damaging, this ought to become even more self-evident (as it did both in pre-French Revolution and across Europe in the 1840s - when financial liberalization ultimately crashed and burned). If that means "repression" of financiers then so be it. Finance is supposed to serve the real economy, not the other way around as we have now, yet under financial liberalization finance has become an end in itself, divorced from the health of the real sector, in which speculative activity is incentivized over investing in actual jobs, goods and services. This used to be considered a bad thing, but alas it appears we will need even worse financial crises than we had in 2008 before we are forced to re-learn these lessons again -- the hard way.
So, countering my own argument, are there any examples of developmental states that have achieved expected level of development (as GDP growth, before having a more generalizable index) without significant financial repression? M. Friedman would have happily quoted Hong Kong, but the fact is its fast growth in 1970s-90s could never be de-linked with financilally-repressive developmental states it rapidly traded with like Japan.
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