Growing Apart: Oil, Politics, and Economic Change in Indonesia and Nigeria

Chapter 9. Conclusion Indonesia and Nigeria in Comparative Perspective

Chapter 9 Conclusion Indonesia and Nigeria in Comparative Perspective This book offers a perspective on the political challenges of economic development . The problems of uneven development among regions and states have given rise to many questions about the conditions needed for sustained growth and competitiveness. Analyses of economic growth have increasingly centered on institutional factors, including the character of markets and the qualities of states in providing economic governance. The political conditions for institutional change, and the effects of different institutional arrangements on economic outcomes, provide central themes in understanding comparative economic performance. This study addresses these issues through a study of two comparable cases, Indonesia and Nigeria. Among many important factors that in›uence relative economic performance , the conditions for private capital formation are clearly decisive. The ways that governments structure relations with private economic actors create the foundation for long-term economic performance. Growth and competitiveness are linked to market-supporting interventions by states that induce assets holders to commit to ‹xed capital in diverse areas of the economy. This entails coordination among state elites and private actors that enhances the calculability of economic affairs and focuses incentives for investment and entrepreneurship.1 Close government -business relations can give rise to collusive dealings that suppress competition and restrict markets, fostering an inevitable tension between governance and opportunism. Despite such hazards, collaboration between the state and the private sector is needed for capital formation.2 1. Barry Weingast, “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development,” Journal of Law, Economics, and Organization 11, no. 1 (1995): 1–31; Thomas Callaghy, “The State and the Development of Capitalism in Africa: Theoretical, Historical, and Comparative Re›ections,” in Donald Rothchild and Naomi Chazan, eds., The Precarious Balance: State and Society in Africa (Boulder: Westview, 1988). 2. These problems are explored in Sylvia Max‹eld and Ben Ross Schneider, eds., Business and the State in Developing Countries (Ithaca: Cornell University Press, 1997); Andrew Institutionalist approaches to development generally emphasize the importance of credible commitments to private economic actors. This entails a set of guarantees by political rulers that can induce long-term investment in ‹xed assets, which are the basis for increased productive capacity. Secure property rights and reliable contracting are essential institutional bases for growth, often resting upon a stable rule of law. Increasingly , however, there is recognition that credible commitments may coalesce in circumstances of political uncertainty or institutional turbulence, where a broad legal and regulatory framework cannot be assumed. This leads to the general questions at the heart of this study: How are credible commitments furnished? How do such arrangements arise in adverse political or institutional settings? What factors sustain such commitments, and what circumstances undermine these assurances? This analysis outlines a set of political factors that affect the emergence and sustainability of credible commitments. Political leadership, conditioned by particular sets of challenges and opportunities, is decisive in fostering (or undermining) institutional arrangements for economic growth. Coalitions provide another essential part of the analytical framework , since institutional arrangements embody particular bases of support . Elite coordination and accommodation with popular groups are integral strategies for the emergence of a stable growth compact. In addition , policy learning and other linkages from regional neighbors—embodied in a general “neighborhood effect”—in›uence states in different ways. Leadership, coalitions, and neighborhood in›uences shape the analysis of institutional change and economic performance in the cases considered here. These themes and concepts have been applied to a structured comparison of Indonesia and Nigeria. The cases yield broadly applicable insights about the comparative politics of development. Both are populous countries that anchor their respective regions. They are communally and regionally diverse states, endowed with substantial natural resources— notably oil and gas—and each country was ruled by authoritarian regimes for three decades. In terms of size, diversity, resource wealth, and political regimes, Indonesia and Nigeria re›ect attributes that are found in a number of other developing or transitional states, including Russia, Ukraine, Mexico, Brazil, South Africa, and Malaysia. Further, their strong similarConclusion 269 MacIntyre, ed., Business and Government in Industrializing Asia (Ithaca: Cornell University Press, 1994); and David C. Kang, Crony Capitalism: Corruption and Development in South Korea and the Philippines (Cambridge: Cambridge University Press, 2002). ities in terms of historical milestones and structural characteristics allow us to isolate particular political factors in institutional development, controlling for such broad elements as regime type, resources, social characteristics , and historical...