The Yen Starts Where?: a review of Developmental States

I spent a good portion of the beginning of my professional career doing business management, accounting, and finance. And yes, I can hear some of you already saying, “Well that explains a lot about why his writing style is so boring.” Ha, ha. Thanks a lot.

Seriously, though, I worked for a series of progressively larger non-profit companies in Chicago. I even helped to found a couple of them, with one celebrating its sixteenth year of operation this year. For a small storefront theatre on the north side of the city, I nearly doubled the budget from approximately $150,000 dollars a year to nearly $250,000. I did this simply by identifying that they were not properly classifying the flow-through ticket sales money and operational expenses of the rental companies utilizing the space. Very important for grant opportunities. You see the more money you can show the grant organizations you are properly able to handle, the larger grants you are capable of applying for; thereby increasing your budget and demonstrating your increasing capacity. A positive upward spiral.

Another company I worked for, the budget went over a million dollars while I was the business manager. Additionally, I was involved in helping develop the capital campaign, which eventually culminated in the move into their very own theatre space in a prestigious location in the center of the Loop in downtown Chicago. On top of that, we instituted health insurance and a 501c3 program – the non-profit version of a 401k – for the employees for the first time. This was separate from handling the donation to Actors Equity for the performers, for which I was also responsible.

I also worked for a law firm in their client intake department. We were responsible as the gatekeepers for the company. Making sure the lawyers were fully aware of the relationship of any prospective client to any other prospective client, existing client, or prospective or existing rival party. Handling input for an organization that had offices from Belgium, across Europe and the United States, and reaching all the way into China.

My present job also requires that I understand the flow of the international financial system. How money moves through the international system. What are the flow of goods and services? How to utilize exchange rates and financial vehicles to minimize risk and affect the operations of global organizations as well as local proprietors. It also helps to understand the legal and diplomatic vehicles available to affect those transactions in both positive and negative ways.

I mention all this, not to imply I’m some sort of financial genius. Far from it. (If that were the case, I could hire someone to write these reviews for me and they would come out on a regular basis instead of the haphazard way I get them out now.) Rather, it’s to demonstrate that I have more than a passing interest in the financial system and might have a slightly better understanding of economics than the average consumer may. I am fortunate enough to be able to do slightly more than balance my checkbook and understand my monthly bank statement.

Which, I hope, will give you some insight when I review this book and I tell you, it’s a very difficult read. Frankly, unless you have a degree in economics – which, as I have said I don’t – you’re likely not going to enjoy this book. Even if you have a better than average grasp of basic economics and political science, as I do, you’re going to find reading this book difficult if informative. In fact, if you don’t have an interest I would suggest you stop reading this post as it is likely to just bore you from this point on.

Ten years after the great recession, we still feel the reverberations of the momentous collapse of the housing market and all the follow on effects of the global financial crisis. People are looking back, to see what could have been done better to protect us from the crisis and what the proximate causes were; and forward, to see if there are better ways of handling globalization in order to make it a more equitable and stable proposition. As such, I was interested to see what, if anything, the so-called “Developmental States” can teach.

Developmental States, published by Cambridge University Press, discusses the concept of the – wait for it – developmental state. This is a term used by economists and political scientists to refer to a number of countries in East Asia following World War 2. These countries experienced a period of rapid growth following the destruction wrought by that conflict. It is also used, sporadically, to refer to states which are going through similar reconstruction, either because of conflict or because they are perennially poor performing countries which have decided to take certain steps in both governance and finance – often specifically in concert – to increase their capacity and grow their markets. Many economists and political scientists including the author of this piece Stephan Haggard, hope by studying the steps and techniques undertaken by these developing states we can learn certain process to apply to the developed nations to increase their capacity.

Although overall, a very slim volume at only one hundred and seventeen pages with references and ninety-five without, the book is quite dense. Delving into the various actions taken by the developing states of the mid twentieth century with Japan and South Korea being the primary examples cited by the author, he hopes to demonstrate certain fundamental principles taken which led to the rapid growth these countries managed to obtain.

The majority of the density coalesces around attempting to understand the intricacies of these processes. How developing states utilize a combination of state sponsorship or direction and to what level of interaction or control the specific states have with private corporations demonstrating the gradation of capitalism and socialism – the delicate balance between the two – that is exceedingly visible in these states. It also throws a light on the complexity and nuance of developed nations as well.

The debates continue to heat up in the United States regarding the place, if any, for socialism in a developed democracy. This piece is a reminder that all systems, whether financial, social, or political, are much more complex than a five-minute news article and infinitely more than an angry tweet haphazardly constructed in the dead of night could ever be.

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