Developmental State in Economics Essay

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The concept of developmental state can be understood as a union between economic and political policies whereby each one them operates hand in hand to drive economies forward. Concurrently, policies that are aligned to developmental state cannot be executed or implemented without taking into account political objectives and interests of regime in power (Verena & Rocha, 2007, p. 531).

This implies that it is impossible to implement principles of developmental state in in the absence of effective political regimes and legitimate institutions since consolidation of different political forces is required to facilitate effective reforms (Verena & Rocha, 2007, p. 531).

According to Verena and Rocha (2007, p. 542), economic policies that seek to improve potential of the supply-side in an economy are very significant in promoting growth of markets and industries and consequently accelerates the growth of real national output.

However, to promote the role of supply-side in an economy, deliberate economic and political policies by a government must be present to promote product and labor markets. Verena and Rocha (2007, p. 542) underscore that deliberate supply-side policies tend to increase competition and promote efficiency and subsequently reverse challenges of development state.

The first strategy that can be used to promote supply-side policy is privatization of state-owned businesses (Verena & Rocha, 2007, p. 538). In UK, deliberate political and economic reforms have facilitated privatization of public- sector institutions such as British Gas and British Aerospace (Schwab, 2009, p. 32).

More recently, the wave of New Public Management has seen more public sectors privatized in a move to make them more competitive and profitable (Schwab, 2009, p. 64).

On the same note, markets liberalization has been praised for its effectiveness in minimizing challenges in developmental state (Verena & Rocha, 2007, p. 541). Consequently, the UK government has recognized the role of liberalization in the economy for its tendency to increase market supply and hereafter reduce prices (Verena & Rocha, 2007, p. 542).

Apparently, the recent political reforms aimed at deregulating higher education sector as proposed by Lord Brownie was aimed at increasing competition among academic institutions and consequently bring prices down as well as improve the quality of education (Schwab, 2009, p. 102).

According to Verena and Rocha (2007, p. 549), developmental states have been accused of anti-competitive practices whereby some price-fixing cartels apply dirty tactics to prevent free market entry as firms attempt to preserve their monopoly status in the economy.

However, the UK government has enforced deliberate political and economic policies to promote tough competition policies to enable businesses to operate in a competitive environment and therefore ensure their effectiveness in the economy (Schwab, 2009, p. 64).

Moreover, supply-side policies must be adjusted to permit free international trade. As a matter of fact, free international trade amidst the wave of globalization is very crucial to a nation’s economy owing to the fact that global competitiveness improves costs and drives consumer prices down (Verena & Rocha, 2007, p. 550).

The recent economic and political reforms in UK show that the country is committed towards expansion of free international trade. For instance, UK as a member of World Trade Organization is committed towards liberalization of international trade, and to portray her commitment, UK has opened avenues for free trade within the European Single Market (Schwab, 2009, p. 44).

As exemplified above, deliberate supply-side policies aimed at improving quality and quantity of labor are very significant in the economy and such a move has the potential of eliminating some challenges of developmental state (Verena & Rocha, 2007, p. 532).

In UK, the deliberate move to accommodate labor migration and flexible retirement policies that allow older people to postpone their retirement are aimed at promoting flexibility of labor and as a result, minimize risk of structural unemployment (Verena & Rocha, 2007, p. 550).

According to Verena and Rocha (2007, p. 542) flexibility of labor has positive economic effects to an economy. On the same note, current reforms in UK that demoted the power enjoyed by trade unions have been responsible for decreased industrial strikes. For this reason, industrial relations have improved significantly (Schwab, 2009, p. 48).

In a nut shell, although it was not possible to thoroughly explore the deliberate economic and political policies that have promoted the effectiveness of developmental state, it is evident that deregulation, reduction in trade union power, reform on unemployment and privatization polices have contributed positively to development of various world economies.

However, in spite of the gradual improvements in some economies like that of Britain, some weaknesses still persist in various sectors and this hinders their effectiveness in the face of increased competition heightened by impacts of globalization.

References

Schwab, K. (ed.). 2009. The Global Competitiveness Report 2009-2010. Geneva: World Economic Forum.

Verena, F. M. & Rocha, A. 2007. Developmental States in the New Millennium: Concepts and Challenges for a New Aid Agenda. Development Policy Review, 25(5), 531-552.

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