mill and a shipbuilding industry; the steel mill supplies inputs to the shipbuild-
ing industry. Neither can be profitable without the other. Contracts could be
negotiated and signed between the steel mill and shipbuilding firms to estab-
lish production and agree to buy/sell a particular amount of steel, but such
contracts are likely to be too costly to draw up and monitor. The solution to
investment co-ordination in 1960s and 1970s Taiwan was for state enterprises
to take over production in sectors where the efficient scale of production was
very large; production was very capital intensive (risky and costly) and where
linkages to downstream enterprises were high. These sectors included petro-
leum refining, petrochemicals, steel and other basic metals, shipbuilding,
heavy machinery, transport equipment and fertilizer (Wade, 1990:179).
The problem with generalizing the state–business model to other develop-
ing countries is that relatively unusual political pre-conditions are required
for a state to be able to implement such policies. A state is needed that can be
‘developmental’, defined as ‘states whose politics have concentrated suffi-
cient power, autonomy and capacity at the centre to shape, pursue and encour-
age the achievement of explicit development objectives, whether by
establishing and promoting the conditions and direction of economic growth,
or by organizing it directly, or by a varying combination of both’
(Leftwich,1995:401). Many of these pre-conditions take us into the realm of
the deeper determinants of growth. Adrian Leftwich (1995) compiled a list of
various political factors that between them gave some developing countries
the capacity to be developmental.
First,the state had a politically-driven desire to promote growth and the
capacity to do so. The desire often comes from the executive head, surrounded
by a small elite of senior politicians who share the motivation to promote
growth. Examples often discussed include President Masire in Botswana,
President Lee Kuan Yew in Singapore, and President Park in Korea. Some
leaders have had completely different motivations, such as Mao Tse-tung to
impose a communist society on China, or the current leadership of North
Korea to build a nuclear weapon. Other leaders have aspired only to enrich
themselves and their supporters by confiscating and redistributing wealth from
rival groups.
Second, these elites and state institutions had sufficient autonomy and inde-
pendence from the demands of special interest groups to focus relentlessly on
promoting economic growth. In non-democratic developmental states the
major source of autonomy has been a seizure of power by an elite; in Taiwan
the 1949 KMT takeover, in South Korea the 1961 military coup led by General
Park, and in Indonesia the New Order of General Suharto in 1966. These were
followed by the elimination or marginalization of opposition groups that had
previously enjoyed wealth and power. The autonomy of formally democratic
developmental states, such as Singapore, Malaysia, and Botswana, has been
derived from the dominance of a single political party.
The third factor was the competence and insulation of an economic bureau-
cracy characterized by selective and meritocratic recruitment. These differed
74 Sources of Growth in the Modern World Economy since 1950