57 2. Failed Industrialisation Attempts Both countries attempted to overcome the aforementioned developmental blockages by formulating and implementing specific development strategies, which aimed to create a viable indigenous industrial sector. In both cases a distinct coalition was forged between certain types of entrepreneurial capital and dominant socioeconomic groups within the state. The trajectory of the respective development strategy expressed not only the interests of both parties, but was also influenced by external factors. Thus, the formulation, implementation and success of the respective development policies were the product of internal and external issues. Pivotal to this investigation is the role of the state in formulating and implementing the envisaged development strategy. Its role in the development process will be analysed by using the neo-institutionalist criteria of autonomy and capacity. Both notions are expanded and modified to capture internal and external factors of influence. The issue of social consent is a further important variable. It determines the extent of the autonomy of the state to formulate development policies. It will be argued that underperformance of the developmental agent reduces the capacity of the state to implement its development policies, leading the development regime to malfunction. The resulting economic crisis turns popular consent into dissent towards the development regime, reducing the state’s autonomy. The development regime is therefore de-legitimised and replaced. It will be shown that despite great differences in terms of the role of the state in the modernisation process, ideology, institutional set-up and policy, the results were in both cases similar. Hungary and Ireland both failed to execute a successful development strategy by creating an internationally viable indigenous industrial sector. Hence, the respective industrialisation and modernisation strategies failed. Consequently, both remained members of the European periphery. As the focus is placed upon the analysis of the state, the portrayal of the Hungarian and Irish development regimes investigates autonomous policy-making. Beginning with the restitution of Hungarian autonomy within the Austro-Hungarian Empire in 1867, Berend (2001a: 1-2) identifies for Hungary a total of three different development regimes concluding with the failure of the state-socialist modernisation regime in 1990. For Ireland, observers25 have analysed two development regimes commencing with the creation of the Irish Free State after Irish independence in 1922 and ending in 1958 with the demise of the protectionist phase. 25 For example, O’Malley (1989: 32-89), Kennedy et al. (1988: 33-92), O’Hearn (1990), Jacobsen (1994: 45-128), Fink (2004, 2008) and Ó Gráda (1997: 1-40). 58 2.1 The Concept of the Development Regime In order to analyse the various modernisation strategies, the individual periods of economic policy will be distinguished from each other by following O’Hearn’s (1990: 2) concept of the development regime. Closely aligned to class and state theories on development,26 a specific regime is categorised with a specific economic policy or trajectory (e.g. import-substituted industrialisation or export-led industrialisation). The development strategy is formulated in dependence of the existing social structures. Consequently, a development regime is defined by a distinct coalition, comprising the state (technocratic and political elites) and capital with its owners (entrepreneurial elites), whereby the latter acts as the developmental agent. Hence, a political coalition is formed between the state with its institutions and the developmental agent (Ó Riain 2004a: 169). Development policies and decisions made by the state aim to support the type of capital favoured by the respective development regime. 2.1.1 Capacity and Autonomy The development regime is, therefore, a tool forged by the state to attain development. Hence, the role of the state will be analysed according to the neoinstitutionalist notions of autonomy and capacity. These criteria have been repeatedly used to try and classify the Irish and Hungarian states.27 Whilst Grindle and Hilderbrand (1994: 445) define capacity as “the ability [of public sector organizations] to perform appropriate tasks effectively, efficiently and sustainably”, Skocpol (1985: 9) presents a broader definition. State capacity is placed within the context of the role of the state in economic development. However, it is connected to the state structure in general and not singularly focused on administrative capabilities. Capacity classifies the ability to successfully implement the chosen policies of development (Skocpol 1985: 9). Shafer (1994: 7) notes that bureaucratic capabilities form one dimension. Capacity is rather the product of the state’s resources and institutional capacity is “augmented by those of its allies” (Shafer 1994: ibid.).28 Consequently, within the context of the analysis of development regimes, the state’s capacity to steer the development regime to attain the envisaged developmental goals is dependent on the performance of the respective developmental agent. 26 For a brief overview on class, state and regime theories, see Matinussen (1997: 203-204). 27 For Ireland, see Breen et al. (1990), Ó Riain (2000, 2004a) and Fink (2004, 2008). For Hungary, see Greskovits/Bohle (2001), Ádám (2004) and Fink (2006). 28 Shafer’s (1994: 7) relative capacity definition also includes the resources and capacities of the actors confronted by the state. As will be shown, the role of opposing interests and actors are more effectively conceptualised by the variables of internal autonomy and popular consent. 59 The policies formulated to attain the developmental goals are the outcome of decision-making. The notion of autonomy relates to the ability of the state to define and pursue its own goals in the form of policy-making. A prerequisite for state autonomy is a high degree of isolation from partisan or vested interests (Skocpol 1985: 9). Within the context of the analysis of development regimes, autonomy therefore describes the exclusion of interests outside of those represented by the developmental agent. Nevertheless, the examples of Ireland and Hungary show that policy formulation was never free of external influences in the form of exogenous political and economic factors. External factors can influence the formation and the performance of a development regime such as effects of international economic interdependence or the influence of greater regional powers. Hence, in similarity to O’Hearn (1990: 32), development regimes are seen as the result of exogenous pressure exerted by the forces of economic interdependence. Thus, the autonomy of the state can be infringed externally. However, O’Hearn’s (2001) dependency-driven analysis overemphasises the role of external constraints in inducing a change to development policies. Although the role of external influences on policy making is certainly valid, internal or social dimensions remain nevertheless underestimated (Kirby 2002: 93). Dependent development is far more the result of a culmination of external and internal constraints. Dependency is therefore the outcome and not the reason for failed development (Elsenhans 1987b: 66). Consequently, internal events and structures also affect the autonomy of the state to formulate the respective development policies. In this case one can speak of internal autonomy. 2.1.2 Popular Consent and Dissent A further influential factor determining the success of a development regime as well as its constitution and trajectory is the issue of popular consent or dissent to the chosen development strategy and ultimately the development regime. Hirschman’s (1988, 1970) Exit/Voice concept outlines the two possible responses, which can be taken by individuals in response to organisational decline. The responses are defined by the incapability of the organisation to produce the desired goods resulting in waning loyalty. The choice of “Exit” denotes the preference for a different social organisation than the prevailing form. This leads to the exit of the disillusioned individual from the declining organisation. The option of “Voice” entails the voicing of an opinion to avert decline by inducing change in the organisation in order to receive the desired goods. Voice is only a viable option when the opportunity costs to the individual for engaging in reform are lower than the costs for exiting the organisation (Hirschman 1988: 69-74). Greskovits (1998: 75) shows that the forms of voice and exit depend on the context in which the individual is able to respond. Exit can take on the extreme form of emigration, such as in the case of Ireland. In societies, where individual free move-