A The Successful Experiences of Taiwan and South Korea

There are historical examples of enlightened elites or rulers enjoying a strong initial legitimacy and using this advantageous position to build a modern state, foster the emergence of a nucleus of industrial capitalists, transform traditional institutions, regulate the market, and harness the country’s resources for the long-term advantages. Think of the Meiji elite in Japan (made of lower-level samurai and the intelligentsia), or of Atatürk and the Kemalists in Turkey. Having gained a lot of prestige from his military victory against Greek troops in the battle of the Dardanelles, Atatürk was in a position to embark upon radical reforms aimed at educating the people, removing the hold of religion on their minds, and totally transforming the Turkish legal system, even though a large part of the population was still immersed in a traditional Muslim culture (Kuru, Reference Kuru2009: 214–15; Zürcher, Reference Zürcher2012: 136, 214). In the Middle East, this approach was later adopted by President Bourguiba in Tunisia, who was not supported by an army but by a strong single political party (Platteau, Reference Platteau2017, Reference Platteau, Basu and Cordella2022). Even more recently, in the People’s Republic of China, the far-reaching market-oriented reforms initiated under the paramount leadership of Deng Xiaoping in 1978 marked a critical turnaround for a country just emerging from a radical left-wing deviation and the ensuing chaos of the Cultural Revolution. They played a decisive role in launching China on a path of rapid catching-up with the advanced countries of the Western world (see, e.g., Wu, Reference Wu2005).

The case of Taiwan illustrates a somewhat different situation: here, an enlightened elite from the KMT, the ruling party defeated by Mao’s communists, settled down in Taiwan with the firm idea of one day reconquering continental China. On the island, it did not initially enjoy strong legitimacy because, unlike a common view that sees all (Han) Chinese people as forming a homogeneous group, its seizure of political power was considered with a lot of suspicion by the indigenous inhabitants, most of whom left China during the last centuries, starting in the seventeenth century (To this date, around 90 per cent of Taiwan’s inhabitants are Han Chinese).Footnote ¹ Bloody riots quickly erupted which were harshly put down by an authoritarian KMT-dominated regime. However, thanks to impressive economic achievements and to effective dissemination of a national ideology, the same regime succeeded in overturning the situation by becoming much more popular than it was at the beginning of independence. Development success was obtained on the basis of a strong one-party state system, which can be described as one of ‘authoritarian corporatism’ and, paradoxically enough, had adopted important features of a central planning system. Convinced by the importance of its mission (regaining control of mainland China), it did not hesitate to impose strict controls on the population and was little inclined to bargain with established groups or organisations. Since the latter were rather weak, the task of the new masters of the country was relatively easy, much like the task of the Japanese colonisers had been before. Still, although the regime cannot be described as totalitarian, it was under martial law until 1987.

There were at least two main lessons drawn by the KMT from its failure to stay in power in China: the defeat was caused by both party indiscipline and business capture of the nationalist government. To solve the first problem, the party’s organisation was tightened and purged of all unreliable elements. As a result, factionalism inside the party was bridled and the party state became a coherent entity placed under the paramount leadership of general Chiang Kai-shek (1949–75) and, later, Chiang Ching-kuo (Reference Kuo1975–88). As for the second problem, the regime was determined to keep all business groups on a short leash, treating them like all other social groups. Again, this was all the easier to do as almost all the established business firms from mainland China had chosen to migrate to the United States and Hong Kong rather than to Taiwan. It is thus revealing that the Taiwanese policy network hardly included representatives of private business, allowing the government to retain a striking degree of autonomy in setting the directions and details of policy. As a matter of fact, the powerful economic technocrats were largely free from societal pressures, being answerable only to the party’s top leadership and responsible mainly for the overall performance of the economy and the success of the targeted sectors.

There were thus no intimate state–business relationships, and the KMT party state did not actually encourage the creation of big private industrial concerns. In fact, most industrial assets under the Japanese colonial administration and most zaibatsu were converted into SOEs, implying that key sectors of basic industry (power, cement, steel, heavy machinery, shipbuilding, defence-related industries, etc.) were under state control. Elements of political patronage were clearly present since political loyalty was a major consideration behind the choice of managers of state firms. Moreover, when state firms were allowed to go private or to be transformed into semi-public concerns, or when the state itself created new upstream undertakings, choice of owners was based on the same considerations: priority was given to loyalist mainlanders, members of a few politically well-connected native families known for their loyalty to the regime, or local county-level patrons with a stake in region-based oligopolies. Therefore, recruitment was not unambiguously based on competence under the KMT regime. The central principle was rather that only once political loyalty is assured can selection be made primarily on the basis of competence criteria. In other words, obedience to the top political leadership and compliance with its prescriptions were the most highly praised virtues. Because rules were strict and corruption was put severely under check, the system did not degenerate into widespread and uncontrolled cronyism.

Finally, the Taiwanese economy has a dual structure: coexisting with relatively large firms are SMEs, most of which are family firms located in both urban and rural areas, and largely owned and run by islanders. Institutionally, it is through industrial associations shaped and managed by the party state that the latter communicated its regulations and that performance-based incentives for investment, production, and export were negotiated. The overall picture is therefore one in which the state was largely autonomous vis-à-vis social groups and business interests, in particular. It was thus able to orient the destiny of the country, devising and implementing effective development policies, the success of which served as a sound basis for the emergence of an integrated economy, society, and polity. If clientelism was allowed, it was essentially of a competitive kind because the party state was eager to keep rent-seeking activities under tight control. In practice, this meant that it typically cultivated at least two competing factions in a given county, thus preventing a single faction from reaching a position of political monopoly over the distribution of economic rents.

Like Taiwan, South Korea could rely on an autonomous state. Yet the beginnings were more laborious. The first autocrat, Syngman Rhee, had no vision for the future of his nation and was more preoccupied with enriching himself and his ruling clique. His deeply corrupt and ineffective regime was heavily contested, particularly when students organised themselves toward that purpose, and he was forced to resign when he lost the support of the army. Convinced that civilian politicians would be unable to end the prevailing mayhem, re-establish order, and root out corruption, the army eventually came forward with another candidate who was to prove much more enlightened and long-lasting (two decades) than his predecessor, General Park Chung Hee. In order to achieve its objectives of fighting against corruption, poverty, and public sector ineffectiveness, he equipped himself with two powerful organisations: the Korean intelligence services (the KCIA) and the EPB. While the former’s function consisted of controlling all segments of the civil society and ensuring law and order, the latter’s role was to design and manage growth strategies based on development planning. To enable the EPB to fulfil its mission, Park staffed it with highly competent technocrats, and did not hesitate to grant its head a rank practically equivalent to that of prime minister.

Park’s rule was no doubt harshly repressive and deeply authoritarian, and military personnel operated in most high- and medium-level tiers of state decision units. However, it is under his regime that South Korea embarked on a remarkably successful growth strategy. Having inherited a strong sense of discipline from the Japanese army doubled with a national patriotism reinforced by the threat of communist North Korea, the South Korean military, and the KCIA in particular, were able to build a rigorous, corruption-free administration where competence and discipline were the predominating virtues. In order to finance development along the priorities set by the EPB, and to eradicate corruption, all banks were nationalised. In addition, SOEs were created or strengthened in strategic sectors, such as energy, water, and transport infrastructure. Simultaneously, big private concerns, known as the chaebols, were brought to heel.

Because of its critical importance for the country’s development, the relationship between state authorities and the chaebols deserves a few more words. Under Rhee’s regime, when imports played a dominant role in the South Korean economy following the end of the Korean War and the demise of Japanese rule, big trading businesses were consolidated (e.g., Samsung, which was born under Japanese rule) or formed, which benefited egregiously from their privileged connections to the state. Privileges were obtained in the form of exclusive import licences in some key sectors. Progressively, and again under privileged conditions – in this case, high import barriers – these big trading companies started to expand their activities into local production. Collecting huge rents, the chaebols became dominant players in a political economy pervaded by bribery, vote rigging, and intimidation. A major turning point came with the advent of Park to supreme power. To avoid being nationalised outright, the heads of these firms accepted a deal according to which they would fully cooperate with the new authoritarian regime lest they should be expropriated. That the threat was credible was soon proven true when Samsung was caught in a corruption affair and immediately punished by being coerced to transfer its fertiliser company to the state. From then on, the chaebols became the main instrument of the state to push development in the direction set at the highest political level.

The South Korean model was born, which combines a mix of state-guided development centred on the task of coordination in macro resource allocation, on the one hand, and coordination in micro-corporate strategies managed by big private companies, on the other hand. While the former task aims at coaxing private economic activities so that they help move the economy in a certain direction, the latter is intended to improve the internal strategies of the private firms (product and process innovation, marketing, quality control, product standardisation, etc.) with the purpose of enhancing their efficiency (Okuno-Fujiwara, Reference Okuno-Fujiwara, Aoki, Kim and Okuno-Fujiwara1997). It is nonetheless interesting to notice that, on the occasion of the heavy industry programme launched by Park, the chaebols increased their bargaining power tremendously, to the point of challenging the state authority. It was actually in the logic of export incentives that they would raise the leverage of exporters since a major incentive to drive firms to enter the new heavy industry sector was the provision of credit at highly subsidised interests (which tended to be significantly negative in real terms) and state-guaranteed foreign loans. It was then unavoidable that some failures, sometimes major ones, occurred. What was unanticipated, though, is that because they had become ‘too big to fail’ as a result of a considerable expansion of their investments and operations, several chaebols had to be bailed out by the state against the terms of the contract struck between the two parties. Chaebols had acquired a real but ominous autonomy vis-à-vis the executive and the EPB. Still, the macroeconomic crisis that followed, itself accentuated by the second oil price boom, allowed the government to impose restructuring measures aimed at putting the chaebols on a sounder financial footing.

From the political economy standpoint adopted above, it is easy to imagine circumstances susceptible of derailing the development process. Two of them retain our attention here: (i) a leader enjoying strong initial legitimacy and authority makes flawed economic policy choices that cause the erosion of his/her political capital; and (ii) a leader who does not enjoy strong initial legitimacy and authority or prestige, and cannot be accused of having followed inept economic policies, is unable to resist the pressures and influences of powerful business interests. Strong initial legitimacy, it may be noted, means that a ruler is in a good position to achieve national integration, an objective especially challenging in the case of countries abruptly emerging from colonialism and comprised of disparate populations. It could be argued that inefficient economic policies are the price to pay for the building of a new nation, implying the existence of a trade-off between economic and political objectives. But this is not the sort of situation we have in mind under scenario (i), where economic policies and development strategies involve costs that could have been avoided, not costs justified by the need of national integration or political stability.

The ensuing discussion follows three successive steps. In the first step, pursued in the next subsection, we illustrate the possibility of faulty economics as understood under scenario (i). In the second step, pursued in Section III, we consider a number of important trade-offs between economic efficiency and political stability or social harmony, whether they arise from the challenge of nation-building or not. Finally, in the third step, pursued in Section IV, we address the pivotal issue of state capture by business interests, which corresponds to scenario (ii).

B Faulty Economics

A common feature of most faulty economic development policies is their excessive reliance on central planning and ignorance of the role of individual incentives. We begin with the regime of Julius Nyerere in Tanzania. Head of the party which led to the country’s independence struggle, Nyerere soon became prime minister (in 1961) and then president of the newly formed country in 1964. Endowed with the considerable prestige and authority of the ‘father of the nation’, he embarked upon an ambitious development programme announced in his famous Arusha Declaration in 1967. The ideological orientation was clearly socialist as it provided for the state control of the means of production and exchange, implying the nationalisation of a major part of the non-agricultural sector. As for the agricultural sector, a top priority under the programme, a major approach to its modernisation consisted of exploiting scale economies through the regrouping of dispersed subsistence farms into the so-called Ujamaa villages. Lastly, Nyerere aimed at rapidly expanding education and health among the masses, as well as increasing equality and participation in public decision making.

Things did not go according to plan, though. For one thing, nationalised enterprises were inefficient as a result of bureaucratic mismanagement, constant meddling of politicians in the running of state firms, and mounting corruption among the managers themselves. For another thing, agricultural reforms yielded so disastrous results that Tanzania shifted from being a net exporter to a net importer of food crops in just a few years. Major problems arose from the coercive displacement of rural populations, which were attached to their traditional land location, and from the collectivisation of agricultural services, including the marketing of crops that were traditionally disposed of through rather effective networks of small and medium-scale merchants. Although Nyerere initially resisted the pressure exerted by international donors and organisations to modify his socialist strategy, he had eventually to give in and accept both a stand-by agreement with the IMF in 1985 and a Structural Adjustment Programme with the World Bank. That his over-confidence in the guiding role of an all-powerful state and his consequent denial of the potential role of market forces in the economy were misplaced and doomed to failure became evident when the income per capita of the Tanzanians started to fall after 1976. At the time of Nyerere’s retirement (in 1985), Tanzania was actually among the poorest countries in the world.

This being reckoned, it bears emphasis that, if Nyerere thus lost the control of economic development policies, his political capital was not completely wasted because of his indisputable achievement as the builder of the Tanzanian nation. He succeeded not only in disbanding the multiple traditional chiefdoms existing in the country, but also in bringing cohesion and national unity to the country. Furthermore, this successful national integration drive was fostered and complemented by major social investments in literacy, education, and health, all areas in which Tanzania appeared as a rather exceptional performer on the scale of sub-Saharan Africa. Finally, Nyerere has been a major factor behind the country’s political stability, a feat that owed much to his personal integrity and his respect of constitutional rules. The latter became plain when he decided not to run for a new presidential mandate, preferring to let his successors manage the transition to a market economy.

In Benin (then known as Dahomey), the long-lasting regime of Lieutenant-General Mathieu Kérékou (1972–90) bears some similarities with Nyerere’s regime. Even though his ascent to power came as the result of a military coup (the sixth one in succession since independence), Kérékou wanted to lead his country to a new destiny by undertaking a Marxist-Leninist revolution. This came at a time when, understandably, people aspired to more political stability without which development is impossible to achieve. Kérékou thus started his political career with a good measure of popular support, yet mainly in the north from where he originated. Therefore, his nationwide legitimacy was not as strongly established as that enjoyed by Nyerere (or Nkrumah in Ghana). His regime, inspired by the same ‘socialist’ vision, ended calamitously.

His leftist revolution involved the creation of a one-party state and single workers’ and youth organisations, the nationalisation of production units and the development of collectivism. Democratic centralism and state economic interventionism became the new watchwords. The former principle implied restrictions of fundamental freedoms while the latter was to be applied with special vigour to agriculture where massive investments were contemplated to attain food self-sufficiency. Hopes were soon shattered as the poor economic performance of the new regime were coupled with its propensity to nurture corruption and rent-seeking. Top-down corruption and widespread inefficiency were noticeable in virtually all parastatal organisations, which turned out to be highly bureaucratic and hierarchical, as well as full of employees who, besides being corrupt, were in many cases unqualified or ill-qualified, and tended to be idle, undisciplined, and arrogant. Growing frustrations about the suppression of freedoms, corruption, months of salary arrears, and deteriorating living conditions resulted in street protests and general expressions of anger against the ruling clique by teachers, civil servants, workers, and church groups, in particular.

Mozambique’s experiment with Marxist economics yielded basically the same results as those highlighted above. It was carried out by the Frelimo, the party which came out victorious of the independence struggle and many of whose members were opposed to private sector development. It is in 1977, three years after independence from Portugal, that Frelimo declared itself a Marxist-Leninist vanguard party in charge of establishing state farms, imposing agricultural mechanisation, and forcefully resettling important population groups, among other things. As could be easily anticipated, support for the regime among the peasantry sank as a result of these policies, and Frelimo was forced to quickly backtrack. The opposition party, the Renamo, which was historically supported by Apartheid South Africa and Rhodesia, did not miss the opportunity to exploit people’s frustrations. Its base was enlarged from people with roots in the central part of the country and who had serious grievances, ethnic and religious, against the regime, to people who had become increasingly critical of its top-down orientation. And even though Renamo did not succeed in displacing Frelimo from power, probably due at least in part to electoral manipulation, there is no doubt that the nation-building efforts of the latter party were undermined by its misguided economic policies.

There are two important differences between Nyerere’s regime, on the one hand, and the regimes of Kérékou and the Frelimo (in the socialist period), on the other hand. The first difference lies in the widespread corruption which characterised the latter regimes but not the former. Second, the success of the nation-building project of Nyerere contrasts strikingly with the fragmentation of Benin and Mozambique along ethno-regionalist lines. Under Kérékou, in particular, state rents disproportionately favoured his own region and network of supporters. Let us now delve into this second issue, which affects many developing countries, especially but not exclusively in sub-Saharan Africa.

A The Challenge of Nation-Building

As Clifford Geertz (Reference Geertz1973: 239) has pointed out a long time ago, the formative stage of nationalism essentially consists of ‘confronting the dense assemblage of cultural, racial, local, and linguistic categories of self-identification and social loyalty that centuries of uninstructed history had produced with a simple, abstract, deliberately constructed, and almost painfully self-conscious concept of political ethnicity – a proper “nationality” in the modern manner’. In any nation-building process, therefore, the new states, or their leaders, must contain or domesticate primordial attachments instead of wishing them out of existence or belittling them. They must be able to reconcile them ‘with the unfolding civil order by divesting them of their legitimizing force with respect to governmental authority, by neutralizing the apparatus of the state in relationship to them, and by channelling discontent arising out of their dislocation into properly political rather than para-political forms of expression’ (Reference Geertz1973: 277). Clearly, a nation-building effort can succeed only if a sustainable compromise can be struck between the need of a country to modernise its social, political, and economic structures so as to adapt to the world environment, on the one hand, and the need to win a mass-based legitimacy and to involve traditional interests that play upon primordial attachments, on the other hand. In other words, there is a need to somehow overcome the severe horizontal cleavages inherited from the past, and which Basil Davidson (Reference Davidson1992) called ‘the black man’s burden’.

Whereas in Taiwan and South Korea, the adoption of an effective and inclusive development model that did not ignore agriculture and the rural sector helped integrate the nation at a rapid pace, in most of sub-Saharan Africa, the daunting task pointed out by Geertz has only been partly accomplished and, in some countries or regions (e.g., Somalia and the Democratic Republic of Congo), it has not even started to be seriously addressed. If, at the supra-territorial level, pan-African ideologies and pan-African political movements (such as the National Congress of British West Africa, with branches in the Gold Coast, Nigeria, Sierra Leone, and the Gambia) had gained currency toward the end of the colonial period, ‘tribal patriotism’ (Iliffe’s words) generally prevailed at the infra-territorial level, resulting in the spawning of innumerable local associations of traders, commercial farmers, teachers, clerks, and clergymen. Although their official purpose was to promote the development of the country, in actual practice they defended particularistic interests and did not hesitate to foster tribal identities to better achieve their objective. Nationalism was often a veil behind which many parochial interests concealed themselves. In the words of Iliffe (2007: 258), ‘as predominantly local people, most Africans saw nationalism in part as a new idiom for ancient political contests’.

In sum, nationalist movements were frequently plagued by factional conflicts that put local issues in the forefront while minimising the importance of national party affiliations. The fact of the matter is that ‘nationalism only partially aroused many of Africa’s deepest political forces’, and that ‘responses to it depended on local circumstances’ (Iliffe, 2007: 257). It is thus revealing that the political driver of many African insurgencies during the colonial period, such as the Mau-Mau rebellion in Kenya and the Teso rebellion in Uganda, was ‘parochial rather than regional in orientation’ (Jones, Reference Jones2009: 50). Instead of being directed at district and regional officers, grievances typically originated in local conflicts between rival ethnic groups and clans, between different age groups (often youngsters against elders), or between ordinary people and traditional chiefs or village council chairmen. And they often turned around land issues (see Platteau, Reference Platteau, Akyeampong, Bates, Nunn and 337Robinson2014: 190–6, for more details). Precisely because it was thus absorbed into local political rivalries, the nationalist movement was able to gather the support needed to remove the colonial rule. Yet it is for the same reason that after independence people continued to perceive national issues in terms of local interests and to judge their representatives and the state on the basis of their contributions to local advancement (Iliffe, 2007: 258, 267). As pointed out by Basil Davidson (Reference Davidson1992: 112): ‘From being instruments of pressure against foreign rulers, the new parties at once became instruments of rivalry within the nation-statist political arena’, implying that the competing interests of the elites ‘took primacy over the combined interests of the masses’ (our emphasis).

When put in this broader perspective, Tanzania’s success appears quite remarkable. A careful examination of the history of its nationalist movement sheds interesting light on the reasons behind this success. At the same time, it provides another illustration of the importance of initial conditions. The first thing to point out is that many African countries did not obtain independence after a protracted anti-colonial struggle (think of South and Southeast Asia by way of comparison), as the abdication of colonial power came rather abruptly and unexpectedly.Footnote ² With the notable exception of Portuguese colonies, their nationalist movements were therefore of rather recent origin at the time of national emancipation. A direct consequence of this situation is that the African elites were confronted with the hard challenge of abruptly shifting from the comparatively easy task of claiming national freedom and sovereignty by uniting against an external power to the much more complex task of building a modern nation endowed with sufficient cohesion.

In this regard, Tanzania occupied a relatively enviable position because of the exceptionally widespread support enjoyed by the nationalist TANU party thanks to its use of the widely spoken Swahili language and the absence of strong tribal politics, conditions largely inherited from Tanganyka’s nineteenth-century experience (Iliffe, Reference Iliffe, Maddox and Giblin2005, 2007: 256).Footnote ³ The nationalist movement was also helped by the existence of multiple ethnic groups of comparatively equal strength – a feature at variance with the situation of many African colonies where the presence of a few dominant ethnic groups created a fertile ground for polarised conflicts. As a result, leading political figures functioned ‘as companions rather than as rivals’, in contrast to, say, Nigeria where they went at each other’s throat for the spoils of office (Davidson, Reference Davidson1992: 112). Inside TANU, moreover, the radical and activist faction represented by the Youth League was remarkably effective in constructing a nationalist discourse, and defining the content of a national identity and common destiny. In pursuing its aim of gaining independence swiftly, it did not hesitate to openly blame the ruling clans for protecting unqualified officeholders and denying positions to educated individuals, for preventing appeals against the decisions of the chiefs’ courts, and for perpetuating inefficiency, nepotism, and corruption (Giblin, Reference Giblin, Maddox and Giblin2005b: 143–4; Monson, Reference Monson, Maddox and Giblin2005: 109–10).

These historical antecedents do not diminish the important role of Nyerere who, thanks to his outstanding leadership qualities, was able to give a decisive impetus to the process of Tanzania’s nation-building after independence. Still, a balanced account must also acknowledge the influence of the Youth League on the leader, as well as the pre-independence dynamic of a strong and strictly disciplined nationalist movement.

B Trade-offs between Economic Efficiency and Political Stability

The social cost incurred as the result of the wrong-headed economic policies followed by Nyerere in Tanzania cannot be considered as the necessary price to pay for advancing the nation-building project: they represented a sheer waste of scarce resources. The same actually applies to another outstanding figure of a ‘father of the nation’ in Africa, Kwame Nkrumah in Ghana. Interestingly, the latter entered into a vivid controversy on precisely this kind of issues with his special economic adviser and Nobel Prize winner in economics, Arthur Lewis (see Tignor, Reference Tignor2006, for a detailed review). Indeed, Nkrumah argued that politics should have primacy over economics, and therefore refused the idea that his actions can be rated in terms of economic efficiency yardsticks since their objective was political. Lewis was particularly disturbed by the fact that Nkrumah was ready to justify some expensive and inefficient policies by the need to crush the opposition and put an elite political party in the position of the supreme authority of the country (Lewis, Reference Lewis1965: 30).Footnote ⁴

It is nevertheless possible to look at the issue in a way more charitable to Nkrumah’s standpoint (Kanbur, Reference Kanbur, Aryeetey and Kanbur2017). As hinted at above, we would then stress that building a new nation is hard in societies riven by intersections of horizontal cleavages of region, ethnic group, language, and religion. In such contexts, adopting policies that cut across the most important group divides in a nation may well be justified even though they involve efficiency losses from a conventional economic standpoint. In other words, reaching political compromises and maintaining a proper horizontal balance can be a top priority, especially at the early stages of state formation. In the following, we elaborate on this proposition by referring to four different issues, the last of which will deserve a rather detailed illustrative discussion.

Examples 1 and 2. Coming to mind here are (temporary) positive discriminatory policies in societies polarised between elite immigrant groups and the mass of native residents, or between elite and subject castes, or between historically favoured and traditionally backward regions (think of positive discrimination in Malaysia, India, and South Africa, as examples). Such policies are not first-best efficient, since they erode incentives to effort for both categories of people, yet they are arguably constrained-efficient in societies suffering from strong horizontal cleavages and lacking a minimum level of cohesion. Land and family laws are other policies or rules that reflect a trade-off between economic efficiency and political stability in societies fraught with horizontal cleavages. It is often the case, indeed, that the lawmakers willingly forsake the benefits of uniformisation and standardisation of local norms and informal rules in order to avoid head-on conflicts with local communities and their cultures (more on this in Chapter 9).

This is especially evident when states choose to accept and even institutionalise the coexistence of modern laws and their associated courts, on the one hand, and traditional norms and practices and their informal conflict-settlement mechanisms, on the other hand. Known as legal pluralism, this system has been implemented with remarkably positive effects on social and political stability in a country such as Indonesia where it dates back to the post-independence secular military regime of Suharto (see Bowen, Reference Bowen2003; Platteau, Reference Platteau2017). In that country, the same pluralistic principle has been followed in matters of schooling, since madrasas (formal religious schools) have been allowed not only to survive but also to expand side by side with secular public schools (see Marx et al., Reference Marx, Bazzi and Hilmy2020). In such instances, inter-cultural harmony and social cohesion have clearly been prime objectives dominating economic efficiency concerns.

Example 3. Along the same line, a valuable insight is suggested by an analysis of the demand for wealth redistribution in the presence of ‘communities’, when the latter are conceived as so many social networks or informal organisations that provide local public goods specifically targeted to their membership.Footnote ⁵ The idea is that, if these public goods are largely funded by rich members, the poorer ones may not demand a reduction of the former’s wealth, even when they directly benefit from the ensuing transfers. The reason is that they would then lose access to local public goods, which they value. In such a setup, Dasgupta and Kanbur (Reference Dasgupta and Kanbur2007) show that in societies with multiple communities, each with its own exclusive public goods, pro-poor income growth would dampen or eliminate incentives to demand radical wealth redistribution whereas pro-rich income growth would have the opposite effect of generating incentives for the poor to support cross-community redistributive alliances along class lines. Moreover, pro-rich growth can turn opponents of redistribution in the middle class into its supporters. A possible lesson to draw from this analysis is that a government eager to avoid the turbulence arising from demands for radical wealth redistribution has an interest in opting for pro-poor growth, even if it means that capital accumulation may be slowed down and that informal agencies beyond the grasp of the state will continue to play an important role in maintaining social order. Otherwise, pro-rich growth may be its preferred choice of development strategy.

A serious problem with the pro-poor growth solution, however, is that communities are and remain separated in the sense that the members of a given community do not have access to, or do not value the activity (or public good) constitutive of another community’s identity. In these conditions, they have an incentive to support the expropriation of other communities, thereby creating a fertile ground for sectarian political platforms and communal strife. Fortunately, such a forbidding state of affairs can be potentially avoided if, rather realistically, some individuals are ready to relate to other communities or have multiple identities. Even more promisingly, they may want to contribute to a public good that transcends communal divisions and incorporates a ‘meta-communal’ element to their self-identity, assuming that such a good exists or can be created. In a two-community framework in which intra-community wealth differences (i.e., vertical inequality) are abstracted away, Dasgupta and Kanbur (Reference Dasgupta, Kanbur and Barrett2005) show that the two communities will contribute to the meta-public good provided that the wealth gap between them (i.e., horizontal inequality) is relatively small. In addition, while they remain separated at the level of their own specific public good, no individual has any incentive to support expropriation of the other community. The reason is that the capacity of the latter to contribute to the meta-public good, which both communities value, would then be reduced.

By contrast, a wide wealth gap implies that only individuals in the richer community will contribute to the meta-public good, an outcome that entails the risk of communal tension. In this instance, what happens is that ‘even non-communal forms of identity, such as nation, class or language, would become identified with the dominant community, and would not have the capacity to hold distributive conflicts in check’ (Dasgupta and Kanbur, Reference Dasgupta, Kanbur and Barrett2005: 160).Footnote ⁶ Illustrative of this possibility is Indonesia (and, we could add, Myanmar) where, despite attempts at developing a national identity, ethnic tensions have remained strong because of persisting inter-community wealth disparities (Reference Dasgupta, Kanbur and Barrett2005: 164). Malaysia offers a better picture, probably thanks to the aforementioned positive discrimination policies, which have helped mitigate wealth inequalities between the Bumiputera and the Chinese communities. The central message is therefore the simultaneous importance of a meta-communal public good, which is essentially tantamount to a nation-building project, and a moderate inter-community inequality in wealth. Deliberate efforts to create these two conditions, even if they involve significant losses of economic efficiency, hold the key to communal harmony in societies fraught with deep divisions of race, ethnicity, religion, or language (Reference Dasgupta, Kanbur and Barrett2005: 164).

Example 4. Concessions which a civilian ruler or regime makes to the military with a view to preventing them from seizing power through a coup, and following their own vision of the country’s destiny, provide yet another illustration of how economic efficiency may be sacrificed to maintain political stability. In most instances, such concessions take the form of allowing the military to participate in lucrative business activities on terms that are generally very generous. Bangladesh is a case in point: since 2009, after a short and disastrous return to the forefront of politics, the army retreated to its barracks and agreed to support the civilian government, yet not without becoming a major beneficiary of contracts for large-scale infrastructural projects, in particular.Footnote ⁷ Involvement of the military in business is even more massive in countries such as Pakistan, Myanmar, Syria, Egypt, and Sudan (see Siddiqa, Reference Siddiqa2017; Sayigh, Reference Sayigh2019). Because contracts, licences, monopoly rights, and other advantages are typically granted to the army as political favours, implying that they are unaccompanied by performance-based conditions, and because the beneficiaries have been selected for their status in the military hierarchy and not for their management qualities, losses of economic efficiency are unavoidable. Often revealed as time delays, cost overruns, and poor quality of the works supplied, they are actually the price which the civilian regime is willing to pay in order to co-opt the men in uniform and keep them inside their barracks or on the backseat of politics.

In reality, the political game is more complex than what has been suggested above. As theorised by Auriol, Platteau, and Verdier (Reference Auriol, Platteau and Verdier2021), and explained in Chapter 1, the political game played out in countries where radical religious movements are present is a triangular game between the ruler, the military, and religious clerics. An important implication of this more complete perspective is that in order to stabilise his power and avoid a state coup, a ruler may choose to reduce the strength of the military and simultaneously co-opt religious leaders. This strategy of double co-option is likely to involve even higher efficiency costs than the strategy of exclusive military co-option because religious authorities are typically opposed to key institutional reforms that would encroach on their traditional prerogatives. Such reforms include those aimed at removing land access rules which hamper efficiency or maintain many people under feudal shackles; at emancipating individuals from the sway of communal or collective prescriptions; at replacing rules emphasising status or loyalty by merit-based selection; or at combating forms of social discrimination, against women and low caste members in particular.

The cost of religious co-option is particularly evident in the case of Pakistan, a country founded on the idea of a Muslim identity distinct from the Hindus of India. Unsurprisingly, Muslim movements and organisations of a conservative puritan kind (the Deobandi school of Islam) were active from the beginning, pressuring successive governments to decide how far they would go in the direction of creating a Muslim state. On the other hand, because of its geopolitical situation and, more specifically, because it has borders not only with India but also with Iran, China, and Afghanistan, Pakistan has attracted a lot of attention from the United States. Economic cooperation and, above all, military assistance, have thus been willingly provided by the US superpower, which had the effect of reinforcing the influence of the Pakistani military (Haqqani, Reference Haqqani2005; Shah, Reference Shah2014). Interestingly, and in broadly similar geo-political circumstances, General Ayub Khan (1958–69) pursued a course that seemed to replicate the regimes of Chiang Kai-shek in Taiwan and Park Chung-hee in South Korea. He thus pursued active industrialisation policies that made the country’s economy the fastest growing one in Asia, and major infrastructural projects (hydroelectric stations, dams, and reservoirs) were completed under his watch. In addition, he cracked down on religious hardliners, banned the Jamaat-e-Islamic fundamentalist party, and checked the political influence of Sufi orders. This allowed him to enact remarkably progressive family laws. Lastly, he inherited a colonial legacy of strong bureaucratic state and weak representative institutions: elected politicians only had an advisory role and were effectively subordinated to an executive rule where the military and the civilian bureaucrats called the shots. A combination of circumstances caused his downfall: corruption of his family and the clique around him, accusations of vote rigging and political murders, an unpopular peace treaty with India, popular uprisings in East Pakistan (today’s Bangladesh), and food demonstrations (Abbas, Reference Abbas2005: 37–54; Wilder, Reference Wilder2009).

A major turning point happened somewhat later, under the regime of another general, Zia ul-Haq (1978–88). In the wake of his predecessor, Zulfikar Ali Bhutto, Zia reinforced the subordination of the bureaucracy to elected politicians, so much so that the latter acquired the power to suspend and transfer uncooperative civil servants and gained unprecedented access to district officials inside strategic departments. Under his watch, the administration thus became highly politicised. Also worth singling out are Zia’s pandering to emerging business elites constituted as political families ready to play by the new rules of the political game, as well as the Islamisation at his behest of the administration, the army (and the intelligence services), the judiciary, and the education sector (Malik et al., Reference Malik, Mirza and Platteau2022). All these steps meant that, in spite of indisputable economic accomplishments – he oversaw the highest GDP growth in the country’s history – Zia deeply undermined key Pakistani institutions with ominous long-term consequences (Cheema et al., Reference Cheema, Khwaja and Qadir2005; Platteau, Reference Platteau2017: 217–23). The country’s change of direction brought about by Zia led Pakistan astray, as none of his successors, including not only General Musharaff but also civilian presidents (Benazir Bhutto, Nawaz Sharif, Imran Khan), would really dare question the new orientation chosen for the country, namely a model based on a close military-religious alliance.

Since Zia, Islamist clerics have been systematically instrumentalised by the army and the intelligence services (known as the ISI) for the purpose of serving their foreign policy objectives, particularly in Kashmir and Afghanistan. In their view, indeed, India has always constituted a serious threat to the very existence of the Pakistani nation whose defining feature is Islam. To counter this presumed, and in fact much exaggerated threat, it was deemed important to intervene in neighbouring countries with a view to stirring up trouble or promote the interests of Pakistan. It is for such tasks that extremist militias acting as surrogates in the defence of national identity confounded with the Muslim faith proved highly convenient. However, if radical religious clerics trespass the limits set by the army, they are quickly called to order, as has been recently demonstrated by the repressive military campaign along the Afghan border (in North-West Frontier Province). In the end, it is the prominent role of the army (and the ISI) as the carrier of the national project, and its continuous manipulation of Islamist movements, that have forced the civilian authorities of Pakistan to grant egregious privileges to the men in uniform and to let radical clerics wield an outsize political influence (Platteau, Reference Platteau2017: 209–22). The long-term efficiency costs have been considerable.

When Bangladesh, then East Pakistan, seceded from (West) Pakistan, Islamist movements, the Jamaat-e-Islami in particular, took sides with the central government against the pro-independence fighters backed by India. Being considered as traitors and even war criminals, they invited the opprobrium of a large part of the population and wielded much less power than their counterparts in Pakistan.Footnote ⁸ And, yet, because authoritarian rulers chose to cynically court them in a way reminiscent of Zia’s strategy in Pakistan, they were able to gain unexpected political influence. Whereas under Sheikh Mujibur Rahman (1972–5) the new nation was constitutionally defined as Bangali, that is, alongside an ethno-linguistic secular dimension, Generals Ziaur Rahman (1977–81) and Ershad (1983–90) opted for transforming ‘Bangladesh identity from ethno-linguistic Bengali culture and secular polity to religious-cultural Muslim Bangladeshi identity and Islamic polity’ (Sheikh and Ahmed, Reference Sheikh and Ahamed2019: 11–12). Such a move, as stressed by the same two authors, was part of a tactic consisting of portraying political rivals as intended to make Bangladesh into a satellite state of Hindu India, and of reviving an Islam-oriented Bangladeshi nationalism susceptible of gaining the support of religious and conservative parties. In the same move, Ziaur Rahman created the BNP, a party which was also joined by many members of left-leaning political parties with links to China and anti-India sentiment.

It is thus by presenting the secular Bengali identity as pro-Indian or pro-Hindu in a context where Indian domination was resented by popular masses, that the regimes of Ziaur Rahman and Ershad attempted to obtain their legitimacy. Despite successfully gaining public support, the former was nevertheless unable to ensure the backing of the armed forces and he was eventually assassinated by a group of army officers, thereby replicating the tragic fate of the nation’s founder himself.Footnote ⁹ What deserves to be stressed, however, is that in stark contrast to Zia’s regime in Pakistan, the use of Islam under Ziaur Rahman and Ershad was more a matter of ostensible symbols than real substance. It rested on displays of Quranic verses and Prophet’s sayings on posters hanging in government offices, telecasting of principles of Shariah on radio and television, frequent visits of mosques and Islamic shrines by high-level officials, regular attendance by the same to religious festivals and events, establishment of a new Islamic university and provision of generous grants to religious institutions, promotion of Islamic learning, and the like (Sheikh and Ahmed, Reference Sheikh and Ahamed2019: 13).

After a prolonged period of authoritarian rule with generals at the helm of the country, Bangladeshi politics became essentially the arena for contest between two major political parties, the BNP and the AL, led by two dynastic figureheads (the so-called begums), Khaleda Zia and Sheikh Hasina, respectively. Even though in 2013 the Jamaat-e-Islami was banned from registering and contesting in elections (by a High Court order), twenty-two Jamaati candidates obtained tickets to run under the BNP banner. A lot of turmoil ensued, and the BNP eventually decided to boycott the 2014 elections. The AL won an easy victory and a few years later, in 2018, Sheikh Hasina threw her rival begum in jail. There then began an era of uncontested political dominance of the AL, backed by the army and the intelligence services, duly purged of all BNP elements and properly remunerated for their support (see above).Footnote ¹⁰ As for the Jamaati leaders, they were not only excluded from politics but also sued for crimes committed during the independence war.

As can be seen from our examples, Example 4 in particular, efficiency losses may result not only from the pursuance of political objectives such as the imperative of nation-building, but also from the possibility that the strategy designed toward that purpose is misguided or unnecessarily costly. In this matter, unfortunately, it is practically impossible to make out whether a specific strategy is constrained-efficient in the sense of minimising efficiency losses given the need to attain a certain political objective. Quality of available leadership and the international environment are critical determining factors and are essentially exogenous. Nonetheless, a central lesson from the experiences of Taiwan and South Korea must be borne in mind: to a non-negligible extent, nation-building can be achieved gradually as the consequence of successful long-term development strategies. In short, nation-building is partly endogenous to sound development policies. To carry out these policies, however, there is still need for minimum state capacity and a strong commitment of the country’s leadership to the idea of development as a lengthy process embodying structural transformation and deep societal change. The former condition, state capacity, will be examined in detail in Chapter 9. As for the latter condition, commitment to development, it implies that the interests of business oligarchs or Big Men are kept at bay so that they do not intrude on the domain of policymaking. Unfortunately, as argued in the rest of the present chapter, it is often the case that the state is captured by powerful private interests.

A Sketching a General Framework

We now turn our attention to the first task, which amounts to highlighting what is perhaps the most critical institutional difference between Taiwan and South Korea, on the one hand, and many poor developing countries, on the other hand. To recall, the state in the two Southeast Asian tigers has been effectively insulated against potential pressures from private sector interests. In this sense, there were strong states, able to impose a coherent and sustained direction on the economy and the society. Because their leaders did not initially enjoy great popular legitimacy, their power had to rest on authoritarian rule whose effectiveness depended on the support of a powerful organisation such as a political party (the KMT in the case of Taiwan), the army, or the police and intelligence services. And it is only after the regime’s economic and social achievements became largely visible that its legitimacy was gradually building up, thereby making relaxation of restrictions on freedoms, political liberties in particular, eventually feasible.

In many poor developing countries, rulers with relatively low initial legitimacy and no strong supporting organisation at hand were forced to seek access to political power through elections of some sort, whether in the open space of the whole nation or in the restricted arena of a single party. If, indeed, there is no strong ruler or autocrat at the top of the state and the dominant (single) party, competition for the leading position inside this party is typically stiff. In such conditions, and particularly on the occasion of elections, ambitious politicians need to court wealthy individuals or Big Men (men with deep pockets) to finance their political campaigns and the distribution of perks to the heads of their voting blocs and their clientelistic networks between election rounds. In return for their financial support, the Big Men demand advantages and privileges which only politicians can provide, such as import, trading or manufacturing licences, public procurement arrangements and direct adjudication of juicy government contracts, privileged access to on-sale state assets, tax exemptions, licences, special land grants, favourable labour laws, interference in the settlement of judicial and administrative cases, and so on.

When open electoral contests take place in the above-described context, a major feature of political parties is that they are not organisations articulated around a clearly defined programme, but rather loose setups based on the strong personality of the leader and whose main role is to establish electoral alliances for the purpose of winning the forthcoming election. They are single-purpose vehicles designed solely to catapult their leaders to power (Economist, April 2, 2022b 36). Not surprisingly, party switching is a common phenomenon, sometimes called ‘turncoatism’ (in the Philippines, for example), and electoral alliances made in every legislature are essentially opportunistic (for illustrations, see Qerubin, 2012, 2016, for the Philippines; Malik et al., Reference Malik, Mirza and Platteau2022a, 2022b, for Pakistan). Just take the example of the three most important politicians of Kenya: Mr Odinga has belonged to six political parties, Mr Ruto to five, and President Kenyatta to four. Moreover, in February 2022, Kenyatta endorsed Mr Odinga, once his bitterest rival, and denounced Mr Ruto, his deputy for the past ten years. Politics in Kenya, as in many other countries, such as Benin and Tanzania in our sample (see details later in this chapter), is thus like looking through a kaleidoscope: ‘the bits are still the same but every time you shake it they form different patterns’ (Economist, 2022b: 36).

The outcome of this personalised and non-programmatic political system, in which politics is pervaded by clientelistic practices and electoral strategies are focused on contingent political exchange such as patronage and vote-buying, is the loss of autonomy of the state and its consequent inability to guide the country on a path of sustained development compatible with the general interest. In addition, there is the deleterious effect of corruption and sleaze inherent in crony capitalism: public trust in public institutions such as the judiciary, tax authorities, and customs service is gradually eroded while perceptions that the country’s political economy is rigged in favour of Big Men and their political associates inexorably undermine support for the regime.

An important determinant of the Big Men’s bargaining power is the relative demand for politics money, that is, the ratio of politicians seeking to reach top-level positions to the number of business people susceptible of financing their ambitions. An immediate implication is that the more fractionalised the political space – the higher the number of political candidates – the greater the ability of business oligarchs to dictate their conditions on these candidates. And, conversely, when the political arena is less competitive, either because political parties or groupings are rather few or because the number of factions within the dominant party is rather low, we expect the bargaining strength of the business oligarchs to be relatively weak. The relationship between the relative number of political candidates and the scope for business capture is not monotonous, however. As a matter of fact, if the number of these candidates is high compared to the number of business oligarchs, the latter will be unwilling to finance the former because the probability of their being elected is then too small. This incentive dilution mechanism can be overcome only by driving politicians to regroup and form coalitions for the purpose of elections, an outcome which they should quickly understand is in their own interests. If that does not work, powerful business people may be tempted to run for elections themselves, a last resort solution which they are typically eager to avoid, especially if they belong to foreign communities. As we are soon going to verify, Beninese politics aptly illustrates the two possibilities, political regrouping and the move of oligarchs to the forefront of politics.

For reasons easy to understand, the endogamous relationships between state and business are intrinsically opaque. Lack of transparency is especially valued by businesspeople belonging to ethnic minorities, such as Chinese entrepreneurs in Malaysia and Indonesia, Indian entrepreneurs in Tanzania, Kenya, Uganda, and South-Africa, or Lebanese traders and businessmen in West Africa. Being vulnerable to xenophobic attacks when they are economically successful, they are eager to act behind the stage, believing rightly that the more occult their power and their influence the more effective they will be. Deviating from this strategy can be extremely costly, as recently epitomised by the sudden flight of the Gupta brothers from South Africa, where they publicly appeared as the financial arm and the policymaking brain of the highly corrupt President Jacob Zuma. It is only under exceptional conditions of political uncertainty that Big Men – typically not members of ethnic minorities – can consider it rewarding to personally claim the supreme position of political power. President Talon of Benin vividly illustrates this possibility.

Table 8.1 schematically presents and illustrates the political regimes that arise under different combinations of initial conditions and effectiveness of social and economic development policies. Two types of initial conditions are considered: the initial level of legitimacy of the ruler and whether the latter could rely on a strong supporting organisation when starting his/her rule. By strong organisation, we mean an organisation, such as a single party, an army, or police and intelligence services, which meets the following requirements: (i) it fulfils a public function and does not enjoy an electoral mandate; (ii) it possesses a unified internal structure; and (iii) it is not subservient to particularistic interests, business interests in particular, whether domestic or foreign. Thus, an army or a political party lacking a strong leadership and fraught with factionalism, or an army at loggerheads with the intelligence services or the police, or a puppet army at the beck and call of foreign interests, are all examples of weak organisations according to our definition.

We distinguish between two types of policies, developmentally sound or developmentally flawed or, equivalently, enlightened and non-enlightened. Developmentally sound policies have four characteristics that must be simultaneously observed, although to varying degrees: (i) they rely on private initiative and the associated individual incentives, meaning that the market mechanism is allowed to operate and static efficiency considerations are given due attention; (ii) they create the physical infrastructure needed to make private initiative profitable; (iii) they provide for human capital accumulation, thereby laying the basis of dynamic efficiency; and (iv) they ensure that income inequalities are held in check, so that whatever national integration exists is reinforced rather than eroded.

Developmentally flawed policies are those that fail to satisfy at least one of the above four conditions. For instance, economic and other policies driven by dogmatic ideologies rather than by pragmatic considerations cannot meet requirement (i), even though they may well satisfy some or all of the remaining requirements, sometimes to an admirable extent. The ideology guiding economic policymaking is political when a government rigidly adopts socialist policies of central planning, which repress the market mechanism and give pride of place to a bossy state. This situation is observed in most so-called socialist regimes, including states bent on social achievements and emancipation at the expense of competitiveness considerations (the state of Kerala in south India comes to mind here). Ideology is also political when a radical laissez-faire approach is advocated without due consideration to the need for redistribution and sufficient attention to the importance of collective goods, including human and physical capital. In these instances, objective (i) is pursued at the expense of all the other requirements. On the other hand, ideology is religious when rules and policies are governed by religious prescriptions and when recruitment or promotion (at least in public organisations) is based on profession of faith allegiance and not on competence criteria. Regimes that ground their policies in religion are likely to fail with respect to both conditions (i) and (iii). Finally, regimes dominated by big business interests, often referred to as crony capitalism, may be lacking not only with respect to (i) – since market competition is then throttled – but also, possibly, with respect to (iii) and (iv).Footnote ¹¹

Before looking at country-specific lessons, two important remarks are in order. First, the actual effectiveness of enlightened or developmentally sound policies depends on the existence of an enabling international environment in the form of economically advanced countries allowing poor developing countries to temporarily gain special access to their markets and shield their domestic industries from the effects of foreign competition. Second, the question of democracy has been deliberately eluded, the main reason being that development has often been pursued in contexts where individual liberties were initially restricted. The historical experiences of Taiwan and South Korea, as well as the contemporary examples of communist China and Vietnam, are cases in point. Whether the trampling upon individual liberties is justified by long-term development objectives is an immensely complex issue that clearly lies beyond the scope of the present book.

Clinging to our dichotomous categorisation, there are eight possible regime configurations. For the sake of illustrating all of them, we provide examples drawn not only from our four case studies but also from other regime/country experiences. It turns out that endogamous state–business relationships have created serious obstacles to stable and sound development in all our country case studies. Benin is particularly worthy of attention not only because of the aforementioned exceptional feature (the rise of an oligarch to the presidency), but also because it has been analysed in comparatively great depth. We therefore start our discussion by telling the Beninese story. Thereafter, our attention will be turned to Tanzania, Mozambique, and Bangladesh in that order.

B Benin

Until recently, Beninese politics has been characterised by a profusion of political parties: their number thus reached the astronomical figure of 250 during the 2010s. Considerably exceeding the number of ethnic groups in the country, these parties were designed as true vehicles for power by ambitious politicians backed by wealthy businessmen forming factions inside ethno-regional groups. Obeying a clientelistic logic, they do not confront each other on the level of programmes and policies based on varying visions of the country’s future. Instead, inter-party competition is really a struggle for power conceived as a zero-sum game, the payoffs of which consist of the huge rents associated with state control. Opportunistic coalitions made before presidential elections ensure that the contest is actually limited to a few Big Men or oligarchs. Besides causing important allocative and dynamic inefficiencies as well as encouraging all sorts of malpractices, this system has created a lot of political instability underpinned by regular shifts of alliances and acts of personal treason vis-à-vis political allies. It is therefore not surprising that the country’s press has been rife with accusations of embezzlement and rent capture related not only to prestigious construction projects but also to pro-poor programmes and the delivery of essential local public goods (water, electricity, and other vital infrastructure projects).

The business career and political role of Patrice Talon, the present president of Benin, is illustrative in this respect. By betting on the right presidential candidate at each critical stage of his personal capital accumulation process, even when this implied dropping support for the incumbent in favour of another candidate deemed to have better chances of winning the subsequent contest, Talon succeeded in gradually gaining control of the main sectors of the Beninese economy, including the customs service. Of course, maintaining control is as important as gaining it, hence his continuing interest in politics. In a major turning point, however, Talon decided to eventually run for presidency himself (in 2016). Political instability and increasing uncertainty about results in an atmosphere fraught with extremely tense interpersonal rivalries between a few oligarchs persuaded him that the usual tactics of pushing frontmen onto the political stage to represent one’s interests had become far too risky. To exert direct control over the state apparatus appeared as the only reliable solution, and one justified by the need to bring back law and order, fight against corruption, and end instability.

Talon’s winning gamble caused the defeat of the old political elite, and the question then arises as to whether this major political change can be a game changer. On the one hand, because Talon has succeeded in consolidating his power and taking a firm control of the polity and the economy of Benin, democracy has suffered. This has caused a major stir in a country where freedom of expression is highly valued and where free elections and changes of incumbents had become a regular feature of the political scene during the last decades. On the other hand, precisely because he holds key decision-making levers in his hands, he might perhaps become an enlightened autocrat eager to promote his fame and reputation as the man who rescued his country from stagnation and pervasive corruption. This is actually the image of himself that he is keen to project, as he declares that his role model for leadership is Paul Kagame, the authoritarian but effective president of Rwanda. In contrast to Kagame, however, Talon is an oligarch, which raises serious doubts about his ability to design enlightened policies oriented toward the general interest of the Beninese people. It could nevertheless be retorted that precisely because he exerts a large control over the economy, and has now become immensely rich, he does not need to bother any more about wealth accumulation. Therefore, he can devote all his energies to a high-order mission susceptible of bringing him superior satisfaction. It is of course too early to form a judgement on such a thorny issue, but the forthcoming future will be particularly interesting to watch.

So far, the signs are rather good. Surrounded with a team of highly competent technical collaborators – many of them assembled in a special office directly attached to the presidency, somehow in the manner adopted in Taiwan and South Korea – Talon has established sound priorities for reforms that address key constraints on the country’s economic development. They include reforms of the education system (with emphasis on the creation of technical schools and training institutions), plans for infrastructure expansion (including the improvement of the generation and distribution of electricity), and measures aimed at diversifying the economy and adding value to agricultural and raw material (e.g., cotton) products. Moreover, Talon has made efforts to keep the streets clean and clear the rubble in big cities such as Cotonou. Even more importantly, he has declared war against corruption. In just a few years, the petty corruption that was so extensively observed under all the previous regimes appears to have been significantly reduced as a result of drastic sanctions imposed by his government. Since day-to-day extraction of bribes by officials (the police, in particular) hits poor and ordinary people especially hard, energetic steps to combat this practice is bound to earn him popular support. What remains to be seen, however, is how a president-cum-oligarch will be able to surmount the serious conflicts of interests inherent in his double capacity (hence the question mark in the cell of Table 8.1 where Talon’s regime is featured).Footnote ¹²

C Tanzania

Tanzania offers an interesting contrast to Benin in the sense that, instead of proliferating political parties representing micro ethno-regional groups, a single party (the CCM, formerly TANU) has largely dominated national politics since independence.Footnote ¹³ The central lesson, though, is that this setup has not prevented the same clientelistic logic as in Benin from operating inside this party: in this restricted arena, bitter struggles oppose faction leaders backed by different businessmen, foremost among whom are big entrepreneurs from the Indian community (and, at a later stage, from the Arab trading community).Footnote ¹⁴ Because it is essential to maintain the unity of the party at election times, the head of CCM refrains from expelling powerful party members who illegally trade business money against undue privileges. This is a game with a bad corruption equilibrium where, given his belief about how other party members behave, no player has an incentive to play a clean move. Some members make illegal deals while others refuse to sanction bad behaviour, and the head of the party does not have the power to break this equilibrium owing to his fear of causing its dissolution in the transition to a new equilibrium. Incidentally, this situation resembles that observed in Malaysia where, as the dominant party (the United Malays National Organisation, UMNO) became increasingly fractionalised, the financial support of Chinese businessmen became more crucial for political campaigns (Jomo and Gomez, Reference Jomo, Gomez, Aoki, Kim and Okuno-Fujiwara1997: 364). This is in line with our earlier prediction that fractionalisation of the political space helps to enhance the power of big business interests vis-à-vis the state.

Even across parties, political clientelism prevails. This is illustrated by the 2015 presidential election for which the CCM nominated John Magufuli as its candidate instead of former prime minister Edward Lowassa. The latter was actually the front-runner but had been displaced after his involvement in a big corruption scandal was made public. Revealingly, rather than withdrawing from politics, Lowassa defected to the main opposition party who selected him as its candidate for the presidential race. This choice attests how much the opposition plays the same game of political clientelism and cronyism as the incumbent party. By contrast, the CCM’s choice of Magufuli was vindicated by his anti-corruption image acquired while minister of public works in the previous government. This decision was probably not a reflection of a genuine desire for changing the rules of the political game, but a rather opportunistic defensive move. As a matter of fact, the party had been badly discredited by a wave of resounding corruption affairs, especially toward the second term of Kikwete (Magufuli’s predecessor), which led donors with a pivotal role in the funding and designing of Tanzania’s development strategy to suspend their aid programmes. As in many countries emerging from a socialist planning regime, news about corruption scandals actually started to proliferate after the process of transition to the market economy was initiated (that is, in the post-Nyerere period).

Because of his premature death from COVID, Magufuli’s mandate at the helm of the country was dramatically shortened. There is no doubt that his rule was deeply authoritarian, and his methods echoed those used by Kagame in Rwanda: intimidation and disappearances of critical journalists, jailing of political opponents, and so on. Yet, at the same time, Magufuli was bent on stamping out corruption, stopping the internal disunion inside the CCM, and imposing a strict discipline on its leaders. His idea was apparently to re-establish full control of the party in the hands of its president (implying a return to Nyerere’s system), to terminate the practices of political clientelism, and to reduce the influence of the oligarchs by prohibiting deals with private firms. This last strategy led him to be especially tough with both domestic and foreign business concerns. Moreover, he launched a vigorous anti-corruption campaign for which some success was beginning to show during his shortened mandate. Similarly for Talon, therefore, we put a question mark in the corresponding cell of Table 8.1.

D Mozambique

The Frelimo in Mozambique, which also benefited from strong initial legitimacy as a successful anticolonial movement, occupies about the same dominant position as the CCM in Tanzania. And, most relevant for our discussion, its internal politics is also dominated by fierce struggles for access to power. Financial strength being a key determinant of the ability to rise within the party’s machine, this intra-party elite rivalry creates a fertile ground for the spread of money politics and influence peddling. The interpenetration of business and politics was reinforced after the liberalisation and privatisation drives imposed by the IMF and the World Bank in the 1990s. What happened was sheer political capture of the privatisation process itself. Thus, privatised firms were taken over by party members, civil servants, and army officers, thereby ensuring de facto continuity with the previous state of affairs.Footnote ¹⁵ As for entrepreneurs with ties to the opposition, they were systematically excluded. Given its overwhelmingly dominant position, whose persistence is partly caused by its ability to manipulate elections, the Frelimo was in a position to effectively rein in the country’s business community, since the latter was deprived of any credible alternative to protect its interests. In the quid pro quo at the heart of a circular and self-reproducing patronage system, the Frelimo machine was thus oiled by the money obtained from the rents it itself awarded to supporters-turned-businesspeople. In other words, the corruption money and equivalent in-kind advantages flow up and down the ladder of political clientelism and, as long as the gives and takes are predictable, a corruption equilibrium is well established.

The rent-awarding process is based on internal competition. It takes place at the level of presidential primaries in which business leaders seek political frontmen with whom to forge an alliance while party insiders willing to stay in central organs and obtain high offices in the government reciprocally look for men with money to achieve their ends. The winner of the internal political contest becomes the president of the Frelimo, who automatically becomes the president of the Republic. Precisely because of the logic of competitive clientelism prevailing inside the Frelimo, its de facto character of a single party state offers no guarantee of intertemporal policy continuity.Footnote ¹⁶

What bears most emphasis is that things could have evolved differently. At the beginning of the reform process initiated at the behest of external forces (international organisations), the Frelimo was in a strong bargaining position reminding us of KMT’s position in Taiwan. It held the most important cards in its hands and was apparently able to manipulate election results in its favour. It could therefore have chosen to use party discipline and its leverage on the nascent business community to launch the country on a consistent development path. In contrast to the KMT, however, it chose not to follow that line and instead promoted a system of crony capitalism based on a competitive clientelistic system from which transient leaders would emerge. In the end, it is perhaps the lack of a strong and enlightened leadership at the head of the party that best explains why the option of a developmental state was ignored.

The discovery of oil and gas reserves in Cabo Delgado (during the years 2006–10) did not help. The existence of these valuable resources created new rent opportunities, real or anticipated, that considerably raised the stakes involved in the struggle for political power and influence. In this context, it is not surprising that the trend towards improvement of governance indicators was reversed, and that huge scandals came to the surface, such as the hidden debt scandal in 2016, which deeply affected the country’s economic and political climate and its relations with the international community.Footnote ¹⁷ Given the weakness of anti-corruption institutions and their lack of independence from political influence, it is hard to think of significant improvements of this situation in the near future.

E Bangladesh

In Bangladesh, two political parties, the AL and the BNP, have dominated national politics since the end of the military dictatorship of General Ershad in 1990: they correspond to two groups with unclear ideological differences but neatly differentiated identities defined by strong leaders known as the two begums. The stands of these two parties have always reflected the deep personal antagonisms between Sheikh Hasina (the daughter of Sheikh Mujib, the founder of the nation) and Khaleda Zia (the widow of General Zia), and their winner-takes-all approach to politics. The year 2008 witnessed the end of regular rotation of these two parties in power as the AL was able to take full political control of the country. What our study of Bangladesh reveals about state–business governance is the important political leverage of the textile business sector. This sector is no doubt one of the main drivers of economic growth and exports in the country. It is nevertheless striking that the textile business elite, thanks to their intimate connections with influential politicians, has been able to extract enormous advantages in a variety of forms: tax exemptions (textile exporters are exempted from import duties on intermediate products), export performance benefits, subsidies of various kinds, export guarantee schemes, and lax labour laws condoning low wages, long working hours, absence of regular contracts, and poor working conditions (as epitomised by the Rana Plaza disaster, in which more than 1,000 workers died when their factory building collapsed). With trade unions suppressed and union organisers intimidated, workers’ rights have no chance of being properly protected.

It can be argued that, since they are part and parcel of an industrial policy and this policy has proven to be remarkably successful, the above measures evoke those adopted by the governments of Taiwan and South Korea to encourage economic development and manufacturing growth in particular. Two remarks are nevertheless worth making here. First, and in contrast to Taiwan and South Korea, the government support for the textile sector has been rather exclusive in the sense that it has not been justified as a component of a comprehensive economic development strategy aimed at the diversification of manufacturing and export activities. There is therefore a legitimate suspicion that the favourable treatment of the textile sector and the relative neglect of other sectors have been the outcome of the disproportionate political influence of the textile lobby. Second, it is even harder to understand why the well-being of the labour force operating in the favoured sector has been so much ignored by the authorities, hence reinforcing the suspicion that politicians serve the interests of the textile firm owners rather than the whole sector. The compliance of the former is explained by the regular donations they receive from the latter for their political campaigns and other purposes.