Ha-Joon Chang and the Forgotten Development Model
In our earlier article, Ignited Foundations, Derailed Dreams, we argued that India's early development strategy was built on a simple but powerful idea:
The State had a central role in economic development.
It would build infrastructure.
It would create institutions.
It would nurture industries.
It would invest in strategic sectors.
It would help create the productive capacity upon which future prosperity would depend.
Over the past three decades, this approach gradually fell out of fashion.
Markets were expected to do what states had previously done.
Industrial policy was viewed with suspicion.
Strategic planning was dismissed as outdated.
State intervention was often portrayed as the problem rather than part of the solution.
Few economists challenged this orthodoxy as consistently as Ha-Joon Chang.
For decades, Chang argued that the history of economic development looked very different from the story often presented in textbooks.
The world's successful industrial economies did not become prosperous by embracing free markets from the beginning.
They became prosperous through deliberate state action.
Japan did.
South Korea did.
Taiwan did.
Singapore did.
China did.
The details differed from country to country.
The institutions differed.
The political systems differed.
But a common pattern remained.
The State actively participated in the creation of productive capacity.
One of Chang's most important contributions has been his analysis of South Korea's transformation.
In the 1950s, South Korea was one of the poorest countries in the world.
Its per-capita income was comparable to many countries that today are still classified as developing economies.
Yet within a few decades, South Korea emerged as one of the world's leading industrial nations.
This transformation is often called the "Miracle on the Han River."
According to the conventional narrative, South Korea succeeded because it embraced free markets and free trade.
Chang has spent much of his career challenging that interpretation.
His argument is straightforward.
South Korea's success was not the result of laissez-faire economics.
It was the result of deliberate state-led development.
The government protected infant industries.
Directed credit toward strategic sectors.
Supported technological learning.
Promoted industrial upgrading.
Invested heavily in education and infrastructure.
And coordinated long-term development objectives.
Shipbuilding.
Steel.
Automobiles.
Electronics.
These industries did not emerge spontaneously through market forces alone.
They were actively cultivated.
The same pattern appears elsewhere.
Japan's post-war industrial rise.
Taiwan's manufacturing success.
Singapore's strategic development model.
And, more recently, China's transformation into a global industrial powerhouse.
In each case, the State played a central developmental role.
There is another country that broadly followed this developmental path for several decades.
India.
In the decades after Independence, India pursued a strategy centered on public investment, institution-building, infrastructure creation, scientific development, industrialization, and strategic state participation in key sectors.
The results were incomplete and often uneven, but the foundations were real.
India built scientific institutions.
Engineering capabilities.
Heavy industries.
Public-sector enterprises.
Research establishments.
Educational infrastructure.
Much of the country's later success was built upon these foundations.
Unlike South Korea, Taiwan, Singapore, or China, however, India gradually moved away from this developmental framework during the 1990s.
The State increasingly shifted from builder to facilitator.
Industrial policy lost prominence.
Strategic planning weakened.
Development came to be viewed primarily through the lens of liberalization, privatization, and market reform.
The question India faces today is not whether the developmental state ever worked.
The question is whether the country abandoned that path before its full potential had been realized.
This historical reality is becoming increasingly difficult to ignore.
Even countries that once championed free-market orthodoxy are rediscovering industrial policy.
The United States now invests heavily in semiconductors and strategic technologies.
Europe increasingly speaks of industrial strategy, technological sovereignty, and strategic autonomy.
Supply-chain resilience has become a national priority.
Governments are once again discussing questions that were supposedly settled decades ago.
How should industries be developed?
Which technologies are strategically important?
What capabilities should a nation possess?
How should long-term development be coordinated?
In many respects, the world is rediscovering lessons that countries such as Japan, South Korea, Singapore, China, and even post-independence India understood long ago.
This does not mean every state intervention succeeds.
It does not mean governments are always wise.
It does not mean markets have no role.
But it does mean that one of the central assumptions of the neoliberal era has become increasingly difficult to defend.
Development is not something that simply happens.
Productive capacity does not emerge automatically.
Industrial capability is built.
Technological capability is built.
Infrastructure is built.
And throughout modern history, the State has played a decisive role in that process.
That may be Ha-Joon Chang's most important lesson.
And it remains as relevant today as when he first began making the argument.
Ha-Joon Chang has helped restore the developmental state to the economic conversation.
That contribution is enormously valuable.
Yet an equally significant question remains.
If the State is expected to build productive capacity, direct development, nurture strategic industries, and coordinate long-term transformation, how should it mobilize the financial resources required to perform that role?
That question takes us beyond industrial policy itself and into the monetary and financial foundations of development.
It is a question we will examine in a future article.