Locked in Place: State-Building and Late Industrialization in India (review)

India seemed like one of the best bets, among newly independent countries in the 1950s, to make the leap to industrialization. South Korea, on the other hand, seemed likely to remain a poor agrarian society, stuck behind its more advanced northern twin. Of course, things turned out quite differently. India, at least until the 1990s, failed to advance relative to other Third World nations. South Korea rose to first-world status on the basis of a strategy of export-led industrialization.

Chibber, in an initial theoretical chapter that offers the clearest explanation yet produced of the political economy of development, reminds us that India and Korea both pursued policies that relied upon state subsidy and planning. Neither nation, despite the claims of neoliberal proponents of Korea, accepted free trade or economic deregulation. Korea differed from India in that it abandoned the strategy of import-substituting industrialization pursued by all developing nations in the 1950s in favor of an export-oriented strategy. Many developing nations, plagued with overproduction for weak domestic markets and under pressure from the U.S. to repay loans with foreign exchange, sought to make exports the new engine of their industrialization. Most aspirants lacked access to developed markets for their goods. Chibber convincingly shows that Korea's success was due to the happy coincidence that Japanese firms, which did have access to U.S. markets, sought in the early 1960s to move up to higher- margin products and so ceded their networks for textiles and other cheap goods to Korean firms in return for shares in Chaebols. Indian enterprises lacked such access abroad and so followed the more feasible and lucrative path of selling shoddy products at high margins to home markets protected by tariffs.

India's import-substitution planning suffered from opposition by domestic capitalists. Chibber describes how Indian industrialists allied with Congress party leaders to undermine labor unions that could have served as a counterweight to capitalists in the immediate postindependence years when planning legislation was passed. In the absence of effective working-class opposition, Indian industrialists were able to ensure that government planners never received the power to impose discipline on capitalists who diverged from the investment plans that justified their subsidies. India was left with a weak planning bureaucracy, which was further undermined by challenges from other government ministries. Korean government planners, in contrast, were able to coordinate resources and information among government ministries and with the Chaebols and thereby were able to enforce "the 'disciplinary' aspect of 'embeddedness.'" Indian bureaucrats found it rational to award industrial licenses (which were de facto monopoly rights to a particular line of production) to existing large enterprises because such decisions were easier to justify, even if those firms often "banked" the licenses to forestall competition and to await favorable conditions to begin production (often years down the road). Facing challenges from rival ministries and lacking political support from the top of the government or the Congress party, Indian planning officials never could make credible threats to withdraw licenses or to take back allocations of foreign exchange or other resources. As a result, it was rational for firms to hoard licenses and to reallocate resources from promised investments. Indian capital remained stuck in luxury production and backward industries. Korean planners, with a unified government behind them, could make credible threats to withhold resources. As a result, Korean Chaebols almost never called the government's bluff and investment plans and production standards were followed to the letter.

Chibber makes real his theoretical and broad historical analyses with a detailed concrete study of how government policy actually was made in Korea and India. He shows the conflicts and interactions among state agencies and the ways in which capitalists came together to demand certain policies or divided and allowed room for greater state autonomy. In the final section of the book, Chibber compares India with a variety of cases to explain why India did become locked in place...