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The Practice of Industrial PolicyGovernment—Business Coordination in Africa and East Asia$

John Page and Finn Tarp

Print publication date: 2017

Print ISBN-13: 9780198796954

Published to Oxford Scholarship Online: April 2017

DOI: 10.1093/acprof:oso/9780198796954.001.0001

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State Capability and Prospects for Close Coordination

State Capability and Prospects for Close Coordination

Considerations for Industrial Policy in Africa

(p.80) 5 State Capability and Prospects for Close Coordination
The Practice of Industrial Policy

Rachel M. Gisselquist

Oxford University Press

Abstract and Keywords

Recent research highlights the considerable potential of industrial policy to support structural transformation in sub-Saharan Africa (SSA). A key gap in this literature, however, is the failure to grapple fully with other work on the state in Africa which highlights challenges posed by state weakness. The basic argument of this chapter is simple: we should be careful in attempting industrial policy in ‘fragile’ or ‘weak’ settings—and SSA has many such settings. Furthermore, while industrial policy historically has had success even in states that could be characterized today as fragile, research suggests that such state capabilities differed in potentially significant ways from those in many African countries today. In order to understand the practice and promise of industrial policy in SSA, therefore, more attention should be paid to the systematic study of weak state capability and strategies to address the challenges it poses, in particular through so-called ‘islands of success’.

Keywords:   industrial policy, state capability, structural transformation, sub-Saharan Africa (SSA), weak states

5.1 Introduction

Recent research highlights the considerable potential of industrial policy to support structural transformation in sub-Saharan Africa (SSA) (see Ajakaiye and Page 2012; Chang 2012; Stiglitz et al. 2013). A key gap in this literature however is the failure to grapple fully with other work on the state in Africa which highlights the challenges posed by state weakness. This chapter speaks to this gap. Its basic argument is simple: we should be careful in attempting industrial policy in ‘fragile’ or ‘weak’ state settings—and SSA has many such settings.1 Standard metrics suggest at least half of SSA countries can be characterized as such—a higher proportion than in any other world region. Furthermore, while industrial policy historically has had success even in states that could be characterized today as ‘fragile’, research suggests that state capabilities in these contexts differed in potentially significant ways from those in many African countries today. In short, the potential for state-supported industrial transformation is much clearer in relatively robust SSA states, such as South Africa and Ghana, than in more fragile states, such as Nigeria, Côte d’Ivoire, and Sudan. Thus, industrial policy has the potential to support structural transformation in the region as a whole, but it holds much more promise for some countries than others.

(p.81) In order to more fully understand the practice and promise of industrial policy in SSA, therefore, more attention should be paid to the systematic study of weak state capability and strategies to address the challenges it poses, in particular through so-called ‘islands of success’ (Dinh et al. 2013). This can help both national governments and donors in better crafting of more flexible and country-specific approaches to industrial strategy (see UNIDO 2013: 144–50).

Bringing together key findings from work on industrial policy and on state fragility, this chapter explores promising avenues for deepening research along these lines. These recent literatures have each highlighted a central role for the state, but the treatment of the state differs remarkably from one to the other.2 Recent work on fragility, on the one hand, pays particular attention to the causes, consequences, and contours of state weakness. It conceptualizes and measures the dimensions of state strength/weakness and explores the role of the state with respect to security, the rule of law, and the provision of public goods and services (see Engberg-Pedersen, Andersen, and Stepputat 2008; Brinkerhoff 2014). Significant related work considers the impact on economic development of patrimonialism, corruption, economic mismanagement, internal divisions, and weak institutional capacity (see, e.g., Naudé, Santos-Paulino, and McGillivray 2011; Addison 2012).

On the other hand, recent research on industrial policy—and in particular, the New Structural Economics (NSE)—highlights how states in developing countries can take better advantage of opportunities and design appropriate strategies for structural transformation (Lin 2011). The focus is decidedly not on how a state’s characteristics might impact its ability to implement such a strategy. The state, as treated in the NSE, appears as basically a unitary actor, supportive of national development (or at least not inimical to it), and capable ‘enough’—almost the mirror image of the fragile state. That said, earlier work on industrial policy has explored the relationship between state weakness and industrial transformation (e.g., Amsden 1989; Wade 1990; Evans 1995; Kohli 2004) and offers useful frameworks to guide further research in this area.

This chapter has five sections. Section 5.2 makes a case for further consideration of the state—and of state fragility in particular—in current research on industrial policy. Section 5.3 considers dimensions of state fragility, presenting evidence that contemporary SSA is an outlier relative to other regions and thus deserving of special focus in discussion of the state and industrial policy. It relatedly critiques the claim in recent work on industrial policy that contemporary state fragility in SSA is no different to historical state fragility in many of today’s industrialized countries. Section 5.4 reviews key hypotheses (p.82) about the relationship between state capability and ineffective industrial policy, building from Evans’ (1995) juxtaposition of archetypical predatory and developmental states and Kohli’s (2004) discussion of state types. This work provides useful frameworks upon which to build, while underscoring the need for better understanding of the precise channels or processes through which state weakness hampers industrial transformation. Section 5.5 concludes and considers areas for future research.

5.2 The State and Industrial Policy

The relationship between states and markets is at the heart of competing theories of economic growth and industrial transformation.3 In the simple neoclassical view, markets work best when the state’s role is limited. The state should act primarily as a ‘rule maker’ and ‘umpire’ to maintain macroeconomic stability and to provide secure property rights, the rule of law, and certain essential public goods to facilitate market functioning (Friedman 1982: 25–7; Wade 1990: 11). In structuralist economics, by contrast, states are necessary to create well-functioning markets and development. Beginning with Rosenstein-Rodan (1943), this role has been emphasized especially for late industrializing countries. Economic sociology likewise built on Polanyi’s ([1944] 1967) analysis of the emergence of industrial capitalism in 19th-century England to emphasize both the economic and political factors underlying capitalist development.

Industrial policy by definition implies a central state role, thus it has been linked historically to a more structuralist approach, although neoclassical arguments also have been advanced for industrial policy (see Krueger 1993; Rodrik, Grossman, and Norman 1995; Stiglitz and Greenwald 2015).4 As Warwick (2013: 16) defines it:

Industrial Policy is any type of intervention or government policy that attempts to improve the business environment or to alter the structure of economic activity toward sectors, technologies or tasks that are expected to offer better prospects for economic growth or societal welfare than would occur in the absence of such intervention.

(p.83) As the United Nations Industrial Development Organization (UNIDO) describes:

The state can promote policy either as a regulator, financier, producer or consumer, using policy instruments that target key drivers of structural change: education and skills, capital and technology, and material inputs. In this targeting the state should oversee close coordination with other policies such as those on competition, trade and foreign direct investment (FDI), as well as the exchange rate, as they can undermine the objectives of industrial policy if misaligned. (UNIDO 2013: 132)

While the first wave of modern development thinking after the Second World War had a more structuralist bent, by the late 1960s and 1970s mainstream economists had become suspicious of the role of the state and industrial policy (Wade 1990: 8–14; Lin 2012: 3–5). This more neoclassical approach came to dominate multilateral development policy, with emphasis on economic liberalization, privatization, stabilization, and rejection of import substitution industrialization.

The Washington Consensus held in policy circles through the 1990s (Birdsall, de la Torre, and Valencia Caicedo 2010), but the 1980s also saw increasing research attention to ‘bringing the state back in’ (Evans, Rueschemeyer, and Skocpol 1985). In Governing the Market, Wade (1990) presented a defence of industrial policy, highlighting the state’s central role in industrialization. Building on Wade, subsequent work explored in more depth how different types of states influence industrialization. Evans’ (1995) analysis of ‘embedded autonomy’ in particular highlighted how the state’s internal organization and the structure of its ties to society distinguish ‘developmental’ states that successfully employed industrial policy from ‘predatory’ states that did not. While much of this literature focused on successful industrializers—with particular attention to the East Asian Tigers (Hong Kong, South Korea, Singapore, and Taiwan)—the role of the state in ‘intermediate’ cases, such as Brazil and India, also received focused attention.

In more recent years, industrial policy has received new attention through Justin Lin’s research program on NSE during his tenure as World Bank Chief Economist (2008–11). NSE might be understood as a middle ground between neoclassical and structural approaches. Building on a neoclassical approach to economic structure, it argues that states and governments in developing countries should play an active role in industrial transformation. Advantages to late development can be achieved if states help to mitigate the coordination and externality problems inherent in upgrading the industrial structure and infrastructure.

‘New structural’ economists further argue against the so-called ‘Afropessimist’ position that industrial policy is unwise and impractical for SSA (p.84) countries due to a variety of constraints—both structural factors (such as climate, geography, history, culture, and natural resources) and political and institutional factors (such as state coherence, bureaucratic capabilities, and political leadership) (Chang 2012). With respect to the latter in particular, the new structural position highlights that such problems should not hinder industrial policy in the region because: (1) they are not unique to SSA countries; and (2) ‘the advanced economies all suffered from these problems in the past’ (Chang 2012). As Section 5.3 explores, it is true that such problems are not unique to SSA countries, but SSA countries appear to be disproportionately affected by them. The second point also requires further empirical examination for several reasons:

First, the literature has paid relatively little systematic attention to contemporary state weakness. In particular, the argument that state weakness in developing countries today can be equated with historical state weakness in developed countries is supported much more by historical analysis than empirical examination of contemporary cases. Chang’s (2003) book, Kicking Away the Ladder, for instance, explores how the rich countries became rich. Likewise, the empirical analyses in Chang (2007) focus on Britain, the US, Switzerland, Brazil, Taiwan, China, and ‘three “successful” African economies’—Mauritius, Botswana, and Uganda. This work tells us a lot about institutional change in once-weak states, but we still cannot be sure that contemporary state weakness is the same as historical state weakness unless we also study contemporary state weakness.

Second, as these examples suggest, the extant literature speaks more to understanding development success than development failure. Classic work on East Asia also focused more on understanding their remarkable industrial transformation and economic growth, rather than failed transformations (Amsden 1989; Wade 1990; Evans 1995). Lin (2011) similarly draws lessons mainly from countries that achieved sustained growth and high incomes through industrialization: Western European countries, the US, Japan, Hong Kong, China, South Korea, Singapore, and Taiwan.

For social science methodologists, learning from success alone represents a classic problem: selecting on the dependent variable (Geddes 1990). Failing to study both instances in which a phenomenon occurs and those in which it does not, means that we cannot know which factors are common to both, and this weakens our ability develop and test causal hypotheses (see Gisselquist 2014c). Indeed, some scholars go so far as to argue that ‘nothing whatsoever can be learned about the causes of the dependent variable without taking into account other instances when the dependent variable takes on other values’ (King, Keohane, and Verba 1994: 129).

The new structuralists are certainly correct that many of today’s developed countries were historically weak states and that they were nevertheless able to (p.85) successfully employ industrial policy. However, it may be that countries that failed to develop historically were even weaker states or were weak in particular ways that hindered industrial transformation. Thus, without analysis of failed industrialization, we cannot test Chang’s contention that challenging political and institutional factors are largely irrelevant to the success of industrial policy in today’s fragile states. Nor, by extension, do we have much traction on understanding precisely how political and institutional variables may matter—and how policies might be designed to mitigate their effects.

Earlier work on industrialization, such as Evans (1995) and Kohli (2004), does speak to the relationship between different state types and successful industrial transformation, as discussed in Section 5.4. By themselves, however, they are also incomplete: in Evans (1995: 43–7), for instance, state fragility and institutional weakness are clearly not the focus. The main case of failure—Zaire—is reviewed in just five (of 323) pages. Kohli (2004) offers more—a quarter of his book is devoted to ‘dashed expectations’ in Nigeria—and developing further analyses along these lines is an important area for future work.

Third, the emerging literature in the NSE is especially open to criticism by scholars of weak states. In contrast to the historical institutionalist approach to the state adopted by Wade, Evans, Kohli, and others, the NSE has adopted a distinctly more rationalist approach. In the NSE, the state appears as a largely unitary actor interested in national development. The central challenge is in identifying the opportunities and strategies that such a state should take advantage of in supporting structural transformation, not in understanding why and how some states take advantage of such opportunities and some do not. This view of the state—as unitary, supportive of national development, and basically capable—is almost the mirror image of the fragile state.

5.3 State Fragility in SSA

Fragile states are defined by what they lack: legitimacy, authority, and capacity to fulfil basic state functions, such as the provision of security, the rule of law, and core public services (see World Bank 2011; Addison 2012; Gisselquist 2014a; UNU-WIDER 2014). In a much cited definition, ‘states are fragile when state structures lack political will and/or capacity to provide the basic functions needed for poverty reduction, development and to safeguard the security and human rights of their populations’ (OECD/DAC 2007: 2).5 (p.86) Fragility then implies the state’s inability and/or lack of interest in fully supporting national development. The depth of social, communal, and political divisions in many fragile states is also notable, suggesting the importance of not treating states as unitary actors but instead considering how factional politics within the bureaucracy and polity influence political outcomes. Such political economy approaches are now considered best practice for development policy in fragile states (see Booth 2012).

Table 5.1. Fragile states in 2014


In Other Regions



Burkina Faso*



Bosnia and Herzegovina

Central African Republic








Congo, Democratic Republic

Korea, DPR*

Congo, Republic of


Côte d’Ivoire



Marshall Islands


Micronesia, Federated States








Solomon Islands


Sri Lanka*










West Bank and Gaza

Sierra Leone


South Sudan





Note: The World Bank’s list includes only IDA eligible countries. All countries included in World Bank (2014) are also included in OECD (2014).

(*) indicates listed in OECD (2014) but not World Bank (2014).

Source: Author, based on OECD (2014) and World Bank (2014).

Notwithstanding considerable debate in the literature over how state capability should be measured (Fabra Mata and Ziaja 2009), it is clear that SSA is an outlier. According to standard metrics, not only are a disproportionate share of SSA states fragile, but the region is also home to most of the world’s fragile states. This is illustrated in Table 5.1, a list of all states classified as ‘fragile’ in both the OECD’s Fragile States 2014 and the World Bank’s 2014 Harmonized List of Fragile States and Situations. It includes twenty-nine SSA states—that is, well over half of all forty-nine countries in the region and well over half of all fifty-one fragile states and situations on the list.

Table 5.2. Average 2013 CPIA scores for SSA as compared to other regions (on a scale of 1–6)

SSA Countries (Average)

Other Countries (Average)

Economic management

Monetary and exchange rate policy



Fiscal policy



Debt policy



Average for ‘economic management’



Structural policies




Financial sector



Business regulatory environment



Average for ‘structural policies’



Policies for social inclusion/equity

Gender equality



Equity of public resource use



Building human resources



Social protection and labour



Policy and institutions for environmental sustainability



Average for ‘policies for social inclusion/equity’



Public sector management and institutions

Property rights and rule-based governance



Quality of budgetary and financial management



Efficiency of revenue mobilization



Quality of public administration



Transparency, accountability and corruption in public sector



Average for ‘public sector management and institutions’



Overall rating



Source: Author, based on World Bank’s CPIA 2013. Available at: <http://datatopics.worldbank.org/cpia/> (accessed 14 November 2015).

If we dig a bit deeper into such standard measures, we can also see that SSA countries on average are considered to have worse performance than other regions in a variety of specific areas relevant to industrial policy. This is illustrated for one in the World Bank’s Country Policy and Institutional Assessment (CPIA) ratings, which are used by the World Bank to identify fragile states. CPIA ratings offer assessment across sixteen areas, grouped into four categories: economic management, structural policies, policies for social inclusion/equity, and public sector management and institutions. Simple comparison of average 2013 scores for SSA as compared to non-SSA countries shows that the region tends to have lower scores on average in all but two of the sixteen areas (fiscal policy, and policy and institutions for environmental sustainability), as Table 5.2 shows. Furthermore, looking at overall CPIA scores, the World Bank identifies as fragile those countries with ratings of 3.2 and below, and the ‘average’ SSA country is fragile according to this threshold.6

State Capability and Prospects for Close CoordinationConsiderations for Industrial Policy in Africa

Figure 5.1. Selected WGI, 2014: a comparison of regional averages

Source: Figure from the Interactive Data Access tool for the WGI at <http://info.worldbank.org/governance/wgi/index.aspx#reports> (accessed 14 November 2014), based on Kaufmann et al. (2010).

Variation in state capabilities between SSA and other world regions is also suggested by other standard measures. Figure 5.1 presents another example, this from the Worldwide Governance Indicators (WGI), showing 2014 averages for all world regions across WGI indicators for government effectiveness, (p.87) regulatory quality, and control of corruption. With one exception, SSA lags behind all regions in all three indicators.

While we should be careful in reading too much into such comparisons given ample critiques of both these and other such measures (e.g., Arndt and Oman 2006; Gisselquist 2014b; Rocha De Siqueira 2014), they illustrate clearly the simple point that SSA states are characterized disproportionately as ‘fragile’. Thus, given the important role of the state in industrial policy, we should be cautious in applying findings and expectations about industrial policy from other world regions to contemporary SSA.

Table 5.3. Comparative capabilities of African states based on 2013 overall CPIA scores

CPIA score


Relatively robust (CPIA > 3.7, or 1 standard deviation above world mean)

Cape Verde, Rwanda, Kenya, Senegal, Burkina Faso, Tanzania

Average (3.7 <= CPIA < 2.8)

Uganda, Ghana, Mozambique, Nigeria, Benin, Lesotho, Niger, Ethiopia, Zambia, Mali, Mauritania, The Gambia, Sierra Leone, Burundi, Cameroon, Côte d’Ivoire, Liberia, Malawi, São Tomé and Príncipe, Republic of Congo, Madagascar, Guinea, Togo, Democratic Republic of the Congo

Relatively weak (CPIA <= 2.8)

Comoros, Angola, Chad, Guinea-Bissau, Central African Republic, Sudan, Zimbabwe, South Sudan, Eritrea

Source: Author, based on World Bank’s CPIA 2013. Available at: <http://datatopics.worldbank.org/cpia/> (accessed 14 November 2015).

It is also worth highlighting the variation in state capabilities within SSA, as well as the similarities in state capabilities between many SSA countries and those in other world regions. This is illustrated also in the CPIA ratings. Table 5.3 uses the 2013 overall CPIA scores as an indicator of the comparative (p.88) capability of SSA states. The second column lists the thirty-nine SSA countries assessed in the 2013 CPIA in order of highest to lowest overall score. The twenty listed in bold are fragile according to the 3.2 threshold. As shown, if we focus on overall scores that fall within one standard deviation of the world mean (3.3), most SSA countries in fact have comparatively average institutional capability. Nine have scores below this middle band (‘relatively weak’), while six have scores above it (‘relatively robust’).

In discussions about industrial policy in SSA, we generally hear more about countries at the top of the list in Table 5.3. We should also keep in mind the countries more towards the bottom of the list. What specifically are the expected prospects for industrial policy in these countries?

Finally, it is important to note that none of the standard indicators of state capability allow for historical comparison. The WGI, for instance, is available from 1996, and the CPIA currently from 2005. None of these indicators can (p.89) thus be used to examine the claim that today’s developed countries had similarly weak state capability to today’s fragile states. The discussion in Section 5.2 reviews several methodological reasons for why this claim requires further empirical analysis. The literature on fragility and state weaknesses underscores several further reasons:

(p.90) The first has to do with qualitative differences in fragility and comparisons between the East Asian Tigers and SSA (see Aryeetey and Moyo 2012). East Asian countries experienced periods of significant political instability and violence prior to their rapid growth and thus some might be classified retrospectively as ‘fragile’ during these periods. However, as Gisselquist (2014a) argues, they were not fragile in the same way as many contemporary SSA states as they had generally significant and extended experiences with effective statehood prior to their periods of conflict (see Gray 2014; Kim 2015). Many SSA countries—in conflict, post-conflict, or outside of conflict—have never had effective states; only rarely do historical SSA polities coincide with contemporary state boundaries (Rwanda is a key exception) (see McDoom 2009). In other words, while East Asian states might be classified in retrospect as temporarily fragile, chronic fragility is the challenge in contemporary SSA (see also Englebert and Tull 2008; Gisselquist 2015).

Second, the literature on the state in Africa highlights additional ways in which states in the region may be relatively distinct, even when compared to other historical and contemporary states at similar levels of development. Placing the African state-building process in comparative perspective, Herbst (2000) in particular finds differences with the European experience stemming from the particular geography and settlement patterns in the region. In SSA, Herbst argues, relatively lower population density across vast regions with more varied topography meant that states never had the same territorial control as in Europe, making state authority characteristically different. Other work has emphasized the distinct influence of colonial institutions on state capabilities and legitimacy in some SSA countries (see Migdal 1988; Kohli 2004; Acemoglu and Robinson 2006).

Third, drawing lessons about contemporary state weakness from historical state weakness may also be problematic due to changes in the international system. Jackson and Rosberg (1982) argue that whereas state jurisdictions historically resulted in Europe from effective statehood, the modern state system provides juridical recognition and longevity to entities in SSA that de facto are not effective states. More recent work has highlighted the contemporary international norm of ‘border fixity’ in maintaining weak states and contributing to political instability (Atzili 2011). Highlighting the role of development agencies in the modern international system, Pritchett, Woolcock, and Andrews (2013) further contend that aid has served to support ‘state capability traps’ in some contexts by providing a continued flow of development resources and legitimacy to states that ‘look like’ states without ‘delivering’ like states.

Putting these various pieces together, Mann’s (1984) discussion of state power offers a useful preliminary way of thinking about the nature of diverse state capabilities to successfully implement industrial policy for national structural transformation. Mann highlights two dimensions of state power vis-à-vis non-state actors. The first he describes as the ‘despotic’ power of the (p.91) state elite over civil society, and the second the ‘infrastructural’ power of the state ‘to penetrate and centrally coordinate the activities of civil society through its own infrastructure’ (Mann 1984: 114). Putting these two dimensions together gives four ideal types based on ‘low’ or ‘high’ power on each dimension: ‘feudal’ (low infrastructural power, low despotic power), ‘imperial’ (low infrastructural power, high despotic power), ‘bureaucratic’ (high infrastructural power, low despotic power), and ‘authoritarian’ (high infrastructural power, high despotic power) (Mann 1984: 115).

The CPIA measures summarized in Section 5.3 underscore the generally low infrastructural power of SSA states (setting aside important inter-country variation). Likewise, ‘despotic power’ is low—in Mann’s sense—if the state is not autonomous from society, that is, if private, non-state interests such as family, clan, ethnic, or communal group loyalties exercise a high degree of influence in public affairs. This suggests the typical fragile state would fall in the ‘feudal’ quadrant of Mann’s typology.7

By contrast, as explored more fully in Section 5.4, the literature on the state in successful industrializers suggests relatively high infrastructural power and a middling level of despotic power (as the concept of ‘embedded autonomy’ suggests, Evans (1995)). This suggests states that fall somewhere between the ‘bureaucratic’ and ‘authoritarian’ quadrants of Mann’s typology. Think of Baeg Im’s (1987) discussion of the bureaucratic-authoritarian model of South Korean industrialization.

5.4 Variations in Statehood and IndustrialPolicy: Two Frameworks

How precisely should we expect such differences in states to influence the success or failure of industrial policy? What particular institutional characteristics or weaknesses are associated with ineffective industrial policy? Through what channels do such processes play out? Evans (1995) and Kohli (2004) provide two approaches upon which to build.

Evans’ (1995: 50) analysis highlights two ideal state types: developmental states that foster industrial transformation and predatory states—their ‘mirror image’—that do not. The archetypical example of a predatory state is Mobutu Sese Seko’s Zaire (now the Democratic Republic of the Congo (DRC)). In Mann’s terms, the Zairian state under Mobutu might be characterized as ‘feudal’: it had weak infrastructural power to coordinate and address the needs of diverse interests, and it had weak despotic power in the sense that (p.92) the state’s actions under Mobutu were indistinguishable from the private interests of the ruling junta—at the core of which was a ‘presidential clique’ of some fifty kinsmen (Gould 1979: 93; Evans 1995: 46). But in classifying Mobutu’s Zaire as a predatory state, Evans’ analysis goes further. Beyond its poor development performance, key to this classification are its internal organization and the structure of its ties to society, characterized both by the lack of a state bureaucracy and the government’s efforts toward the (violent) destruction of civil society:

While the Zairian state’s ability to penetrate and reshape civil society is certainly imperfect, the Mobutu regime has been quite effective at disorganizing civil society. It has systematically worked at weakening the cohesion of traditional collectivities.…Zaire confirms our initial suspicion that it is not bureaucracy but its absence that makes the state rapacious. At the same time, Zaire suggests that is it not so much ‘weakness’ in relation to civil society that prevents the state from fostering transformation. Instead the state’s energies are directed toward preventing the emergence of social groups that might have an interest in transformation. (Evans 1995: 47)

Predatory states for Evans are defined by what they lack, embedded autonomy, which ‘combines Weberian bureaucratic insulation with intense connection to the surrounding social structure’ and is ‘the key to the developmental state’s effectiveness’:

Given a sufficiently coherent, cohesive state apparatus, isolation is not necessary to preserve state capacity. Connectedness means increased competence instead of capture. How autonomy and embeddedness are combined depends, of course, on both the historically determined character of the state apparatus and the nature of the social structure… (Evans 1995: 50)

For weak states, Evans’ analysis thus highlights the problems posed for industrial policy by the lack of a ‘modern’ state bureaucracy in the Weberian sense—a ‘coherent, cohesive state apparatus’. It implies constraints, for one, in terms of the administrative, logistical, and technical ability of the state to implement policies. Equally important, Evans suggests, it implies state capture by private interests and thus the state’s inability to act in the broader national interest. In short, Evans’ analysis highlights that the absence or weakness of a coherent state bureaucracy is at the core of understanding the prospects for successful industrial policy by fragile states; this suggests that figuring out how to mitigate this bureaucratic absence or weakness—in whole or (more likely) in part—is the central challenge for proponents of industrial policy for structural transformation in SSA.

Precisely how incoherent does a bureaucracy have to be for it to stand in the way of successful industrial policy? There is considerable variation in the coherence of bureaucracies across SSA states, even across those considered fragile. Evans offers a partial response in his analysis of intermediate states. (p.93) Brazil and India, his two examples, present different models and suggest several ways forward for industrial policy in weaker states:

Brazil, Evans (1995: 64) argues, ‘is testimony to the fact that it takes only a very rough approximation of the Weberian ideal type to confer advantage. Even developmental states are only approximations of the ideal type, but intermediate states show that the basic bureaucratic model can be stretched further and still deliver.’ Despite the incoherence of the system as a whole, Weberian bureaucracy can be found in many Brazilian state agencies. In addition, Brazilian leaders from the 1950s worked to mitigate weaknesses in the state bureaucracy by creating ‘pockets of efficiency’ (Evans 1995: 61), that is, ‘insulated agencies outside the traditional bureaucracy, charged with specific, usually developmental, tasks and accountable to the executive’ (Geddes 1994: 61). Key examples include the National Development Bank (BNDE, founded in 1952); the grupo executivo, groups created by presidential decree to implement particular development goals; and Petrobrás, the state oil company (Geddes 1994: 61–9). These agencies implemented ‘some of Brazil’s most impressive pre-1964 economic achievements’ (Geddes 1994: 61).

India, Evans finds, has a bureaucratic apparatus much closer to the Weberian ideal than Brazil, but its developmental prospects are challenged by its social structure and state-society relations which are more complex than those in East Asia’s developmental states. This complexity factors in to India’s intermediate state status in several ways. For one, it means higher demands on the bureaucracy: ‘ethnic, religious, and regional divisions add to the administrative nightmare of trying to govern (say nothing of develop)’ the country (Evans 1995: 67). It also implies more complexity in the state’s relationship with society, with implications for industrial policy: the survival of political elites relies both on the support rural landowning elites (even more than in Brazil) and of highly concentrated industrial capitalists, a delicate balancing act. Despite such challenges, Evans assessed the Indian state as having contributed to structural transformation largely through state investment in basic agricultural inputs and basic and intermediate industries like steel and petrochemicals.

In thinking about industrial prospects in SSA, the Indian example may be especially apt in one sense: like India, SSA countries on average stand out in terms of their ethno-linguistic and regional diversity (see Alesina et al. 2003). Evans’ consideration of the Indian experience suggests that the historical coherence of the Indian state bureaucracy—which is in contrast to the state’s incoherence in many fragile states—played a key role in mitigating these societal challenges.

A second approach is developed in Kohli (2004)’s work on state-directed development. Kohli highlights three state types in the contemporary developing world: ‘cohesive-capitalist’ or developmental states, ‘fragmented- (p.94) multiclass’, and ‘neopatrimonial’, a declining spectrum of political effectiveness. In Kohli’s schema, the three types are defined by the cohesion of state authority among elites and at the elite–mass level, and by state–class relationships. Like Evans’ predatory states, neopatrimonial states lack the modern state bureaucratic apparatus held by the other two and his more detailed consideration of these weakest states, in particular, adds important elements to our consideration of industrial policy in SSA.

Like cohesive-capitalist and fragmented-multiclass states, neopatrimonial states have sometimes intervened heavily in their economies—but had ‘disastrous’ results (Kohli 2004: 15). Weak private sectors are characteristic of neopatrimonial states. These states themselves may further weaken the private sector by appropriating economic resources and employing inconsistent economic policies. Instead of working with domestic capitalists, neopatrimonial states thus tend to invite in foreign capitalists or act directly in the economy themselves. The latter strategy tends to have little success due to the weakness of the state’s administrative capabilities.

Kohli’s key example of a neopatrimonial state is Nigeria, whose efforts towards industrialization he describes as ‘a dismal failure’ (Kohli 2004: 329). The key problem has been the nature of the Nigerian state and state capture: ‘Whatever the current regime, the Nigerian state has repeatedly lacked the commitment and the capacity to facilitate economic transformation, as state elites focused their energies on maintaining personal power and on privatizing public resources’(Kohli 2004: 329).

Basic challenges of administrative capacity also impede the design and implementation of policy. The Economist’s observation in its 1982 survey of Nigeria suggests just some of them: ‘This is the first survey published by the Economist in which every number is probably wrong. There is no accurate information about Nigeria.’8 Analogous challenges with basic national statistics in many SSA countries have recently received considerable attention (see Round 2012; Jerven 2013).

It is worth noting that other analyses of Nigeria in particular offer different perspectives on industrial prospects. Lin and Treichel (2012: 219, 221–2), for instance, note Nigeria’s sustained expansion since 2001 across all sectors of the economy, although ‘notwithstanding Nigeria’s strong economic performance over the past 10 years, its export and production structure has shown little diversification’.

(p.95) 5.5 Conclusion and Areas for Future Research

Industrial policy has considerable potential to promote structural transformation in SSA, but as this chapter shows, weak state capability also influences industrial prospects and SSA faces particular challenges in this regard. Care should be taken in attempting industrial policy in fragile settings—and SSA has many such settings. Further, while new structural economists are correct that many advanced industrialized countries were once weak states, state weakness today, particularly in SSA, may be different in kind and thus require more focused research in several key areas:

The first is more theoretically grounded empirical analysis of the state and industrial policy along the lines outlined in Section 5.4, to flesh out the distinction between intermediate/fragmented-multiclass and predatory/neopatrimonial states. Analyses should provide, on the one hand, empirical documentation of diverse experiences with industrial policy (successful and failed) in states in the lower half of Table 5.3. These analyses should be designed explicitly to provide traction on more precise hypotheses about the relationship between weak state capabilities and industrial prospects: in Evans’ analysis, for instance, the comparison of the Indian and Brazilian experiences suggests that a coherent state apparatus alone is not enough. Extremely factionalized societies can mean the difference between developmental and intermediate statehood. But how factionalized does a society need to be to push a state from the intermediate to the predatory type? Alternatively, what happens when the state apparatus is less coherent and the social structure equally complex? Or, building on Kohli, can we expect different outcomes in neopatrimonial states in which stronger private sectors have emerged? How strong would the private sector need to be to balance the neopatrimonialism of the state?

A second key area for future research concerns how various international and domestic actors might support accelerated state construction or strengthening. The literature on state-building suggests reasons for both optimism and pessimism in terms of this project (see Fukuyama 2004). Both Evans’ and Kohli’s analyses of the factors that influence state types point toward the latter, highlighting historical trajectories and institutional path dependency (i.e., the difficulty of rapidly altering state type).

In a related vein, one interesting approach points to efforts to improve business–government collaboration (UNIDO 2013: 145–6). As the discussion of Brazil and India suggests, this can be a key sticking point for intermediate states in pursuing industrial policy. Drawing on Latin American experiences, Schneider (2013: 1) explores three key functions of such efforts: ‘i) maximizing the benefits of dialogue and information exchange; ii) motivating participation through authoritative allocation; and iii) minimizing unproductive (p.96) rent seeking’. Further work could be done along these lines to explore SSA experiences in facilitating business–government collaboration.

Finally, as Section 5.4 suggests, perhaps the most promising approach to state capacity-building highlighted by the Brazilian case is focus on ‘islands of success’ or ‘pockets of efficiency’. Nevertheless, existing research also suggests some challenges and drawbacks. In Brazil, Evans (1995: 61–3) highlights the following:

  • Their reliance on presidential support made them vulnerable (in terms of their existence and mission) to changes in executive leadership.

  • They further served to reinforce paternalistic ties (see Schneider 1991).

  • Their existence itself contributed to the state’s incoherence: ‘trying to modernize by piecemeal addition…undercuts the organizational coherence of the state apparatus as a whole’ (Evans 1995: 62).

  • The unstable nature of their political support had negative effects on the career trajectories of civil servants—who could not count on long-term state employment—and thus on the development of the professional bureaucracy.

  • Finally, because the Brazilian political leaders in the executive branch who supported these agencies relied on landed elites for support, they effectively fused the interests of the state with traditional oligarchic power, thus impeding collaboration with industrial capital.

Future research would do well to explore these challenges in greater depth and in light of experience with islands of success in diverse country contexts. Such work would speak directly to both major theoretical and policy concerns, including the challenge of supporting transformation and building state capability in fragile states.


I am grateful to the participants in the authors’ workshop on ‘The Practice of Industrial Policy: Lessons for Africa’, 9–10 March 2015—in particular Hinh T. Dinh, Eun Mee Kim, Lotta Moberg, John Page, and Finn Tarp, for valuable comments and support.


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(1) ‘Fragile’ and ‘weak’ are used interchangeably here to refer to states that lack legitimacy, authority, and capacity to fulfil basic state functions, as discussed further in Section 5.3. The opposite is referred to as a ‘capable’ or ‘robust’ state.

(2) Two exceptions are Briscoe (2009) and Hoeffler (2012). See also Fritz and Menocal (2007).

(3) This topic has been covered in considerable depth in other work and is reviewed only briefly here. See, e.g., Woo (2011), Lin (2012), and Wade (1990).

(4) ‘State’ refers here to the sovereign territory and institutions through which it is governed, while ‘government’ refers to the group of individuals in office at a point in time. In Wade (1990: 8, n. 1), ‘government’ refers to the executive branch and ‘state’ to the wider structure of governance institutions, so much of his discussion of the role of ‘government’ in industrial transformation relates to the role of the ‘state’ as the term is used here.

(5) This definition has the benefit of simplicity but is now a bit out of fashion in policy circles. A more recent definition from OECD (2012: 85) is: ‘A fragile region or state has weak capacity to carry out basic governance functions, and lacks the ability to develop mutually constructive relations with society. Fragile regions or states are also more vulnerable to internal or external shocks such as economic crises or natural disasters. More resilient states exhibit the capacity and legitimacy of governing a population and its territory. They can manage and adapt to changing social needs and expectations, shifts in elite and other political agreements, and growing institutional complexity. Fragility and resilience should be seen as shifting points along a spectrum.’

(6) It also includes International Development Association (IDA)-eligible countries with United Nations (UN) and/or regional peacekeeping or peace-building missions.

(7) Evans (1995: 45–7) discusses Mann’s approach to state power with reference to predatory states, but characterizes it slightly differently.

(8) The Economist (31 January 1982), p. 4, as quoted in Kohli (2004: 331).