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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).
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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.
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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-
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References
Zusammenfassung
Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.