draining development.pdf - Khazar University

44 Draining Developmentcaptured by privileged firms in the modern sector are wasted, and, inthese cases, the modern sector remains inefficient at significant socialcost. However, in other cases, periods of hand-holding and bailouts dolead to the emergence of global competitiveness through formal andinformal links between emerging enterprises and the state. The efficacyof developmental strategies depends on the nature of the relationshipsbetween business and politics, the compulsions on both sides to generateproductivity growth over time, the time horizons, and so on, but not inany simple way on the degree to which formal laws are upheld (Khanand Blankenburg 2009; Khan 2009).It is not surprising that all developing countries fail the test of adherenceto a rule of law and political accountability. Yet, some developingcountries perform much better than others in terms of politically sustainablegrowth that eventually results in poverty reduction, economicdevelopment, and movement toward the economic and political conditionsof advanced countries. These observations suggest that what constitutesa damaging financial flow may be more difficult to identify indeveloping countries. Because of the significant differences in the economicand political conditions across developing countries, we find ituseful to distinguish between normal developing countries, which wecall intermediate developers, and fragile developers that suffer frommore serious crises in their political settlements.Normal developing countries: The intermediate developersOur term intermediate developers refers to the typical or normal developingcountry in which internal political and economic arrangementssustain political stability. Their internal political settlements can be quitevaried, but also differ from those in advanced countries in that theirreproduction typically requires significant informal arrangements inboth redistributive arrangements and the organization of production.Nonetheless, in most developing countries, there is a political settlementthat has characteristics of reproducibility, and these societies can sustaineconomic and political viability. This does not mean that the governmentsare universally recognized as legitimate, nor are violence and conflictentirely absent, but the political arrangements are able to achievedevelopment (at different rates) without descending into unsustainablelevels of violence. 3 Countries in this category include, for example, China