The Politics of Business Associations in the Developing World

The Politics of Business Associations in the Developing WorldAuthor(s): John LucasSource: The Journal of Developing Areas, Vol. 32, No. 1 (Autumn, 1997), pp. 71-96Published by: College of Business, Tennessee State UniversityStable URL: http://www.jstor.org/stable/4192733 .

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The Journal of DevelopingAreas 32 (Fall 1997) 71-96

The Politics of Business Associations in the Developing World

JOHN LUCAS

The role of business in development has undergone a profound transformation in the past 20 years. Whereas previous development strategies emphasized the importance of a powerful state, current trends privilege the role of the private sector. One of the many consequences of this reorientation has been the growth and invigoration ofbusiness associations. While the power ofbusiness associations is in part a function of the power of business, their significance extends beyond the simple registering of state-society balance in a particular country. The rise of associations contributes to the pluralization of the institutional environment, and thus has implications for class formation, patterns of representation, and the nature of the state. This article examines trends in business association activities over the past 25 years in the developing world; discusses regional variations in Africa, Asia, and Latin America; and speculates on the implications of association growth.

From the 1950s through the 1970s, business-government relations in the developing world were ordered according to the model of the strong, interventionist state. This model posited that successful economic transformation resulted from the determined efforts of a state capable of dominating social groups, including business. In fact, it was commonly assumed that the weakness of the private sector in poorer countries forced the state to assume the leading entrepreneurial role in development. Even where indigenous capitalist classes were prominent, they were frequently assumed to be so malformed by dependency and the colonial heritage that they required substantial government assistance. Consequently, interest groups such as business associations were treated dismissively and generally subordinated to the development priorities of policymakers.

Visiting Assistant Professor, Political Science Department, Bucknell University, Lewisburg PA 17837. The author is grateful for the helpful comments of Ansil Ramsay on an earlier draft of this paper. Useful criticisms were also provided by three external JDA reviewers.

01997 by Western Illinois University. All rights reserved.



72 John Lucas

This model, however, eventually engendered resistance. Economic growth and international competition led to the rise of a "new class" opposed to the hegemonic role the state had created for itself Corporatist arrangements designed to control business associations became increasingly tenuous. Globalization shifted the balance of power between business and government and generated pressures for a more limited role for the state in the economy. These trends assumed different importance in different regions. In Asia, the rise of the new class provided the impetus for change, in Latin America corporatist disintegration was the dominant theme, and in Africa the decline of government authority shaped the emergence of new patterns.

As a result of these changes, business-government relations have taken on a more mutualistic character, which has alternately been described in terms of "growth coalitions" and "embedded autonomy." Business associations play a central role in these new arrangements, and are in a position to shape the direction and content of economic development. Government officials support public- private partnerships in order to enhance the capacity of the state. At the same time, the elevation of business to the status of a partner (albeit a junior partner) necessarily places limits on the autonomy of policymakers. While officials will resist these limits on the grounds that they obstruct rational and impartial policy making, business influence might improve the policy process by monitoring, motivating, and educating officials. Business associations are also likely to benefit from the current commitment to political and economic liberalization in many countries. While economic liberalization expands opportunities for entrepreneurial activity, political liberalization safeguards the right of associations to organize. To make a lasting contribution to development, however, business associations also need to confront a number of long-terms problems, including government resistance to surrendering control, the politicization of association leaders, and communal fragmentation.

Business Associations and the Developmental State

According to one group of theorists, the "strong-state" school, development results from the efforts of a determined technocratic elite that is able to implement efficient policies in the face of opposition from rent-seeking groups within the society. Under this scenario, rapid economic growth requires a state that is insulated from rent-seeking coalitions and distributional pressures. An example would be Stephan Haggard's Pathways from the Periphery, which presents the argument that East Asia was able to industrialize more successfully than Latin America partly because the technocratic elite was more insulated.' Similarly, Andrew MacIntyre has argued that in Northeast Asia "the ability of these strong states to both operate in a coherent fashion and avoid diversion by rent-seeking business interests underpinned the reorientation of economic policy and push for internationally competitive export industries in the 1 960s."2 In Africa, by contrast (and to a lesser degree, Latin America and Southeast Asia), the penetration of the state by rent-seeking networks is seen to have precluded a rational development



Politics of Business Associations in the Developing World 73

strategy.3 The implication of this analysis is that effective policy requires the state to dominate business.

An alternative to the insulation approach has recently been articulated by a group of scholars who have argued that an effective development strategy requires a cooperative relationship between business and government, sometimes referred to as a "growth coalition."4 This group argues that a state needs to cultivate the support of business if its development goals are to be achieved.5 Not only does business make the investment and production decisions that drive development in a market economy, but it is also a potential source of information and support for the government's policies. In the words of Richard Doner: "Development requires the consent, indeed the active participation of diverse economic actors. State domination does not necessarily translate into national power. The latter is above all a function of active cooperation among capable groups rather than domination."6

Peter Evans has tried to reconcile these perspectives with his theory of "embedded autonomy." Evans argues that an effective developmental state is characterized by external linkages, which facilitate state capacity; and internal coherence, which preserves state autonomy.7 He stresses that both external links and internal coherence are necessary for developmental effectiveness. Unfortunately, his standards for internal coherence are the exceptionally strong bureaucracies of South Korea, Japan, and Taiwan. In a state lacking such a strong bureaucracy, external linkages are predicted to result in corruption and the capture of the state by vested interests. On the other hand, insulating an ineffective state might simply facilitate its evolution into a predatory state similar to Mobutu's Zaire. In Zaire, insulation "does not enhance the state's capacity to pursue goals of its own, but rather removes critical social checks on arbitrary rule."8 It seems that for states that fall short of the exacting ideal set by South Korea and Taiwan, they are damned if they do, and damned if they don't.

As Ben Schneider and Sylvia Maxfield have recently argued, the challenge is to structure business-government relations in such a way that they encourage collaboration without degenerating into collusion.9 Fortunately it is possible to conceive of a scenario whereby embeddedness would reinforce rather than undermine the integrity of a weak state. Although bureaucracy is weakened when it is embedded in a fragmented social structure dominated by personalistic networks, there are several reasons to believe that official integrity would be strengthened by being connected to corporate groups such as business associations.

First, associations can act as a source of accountability by monitoring and motivating bureaucrats. One example would be a movement for reform of a corrupt state. It is more likely, however, that associations will use their leverage to challenge specific ineffective or exploitative policies. Thus in Nigeria associations have successfully demanded disbanding of a discredited system of mobile law courts, reform of an inefficient phone system, and termination of a corrupt import-licensing scheme, among other achievements.'0 Similarly in Indonesia associations challenged inefficient government interventions in specific sectors such as textiles and pharmaceuticals." While these actions diminish the



74 John Lucas

discretion and autonomy of individual officeholders, they also reinforce the general institutional goal of promoting economic development. Mobilized business associations can thus act as a force for disciplining the state in limited areas, and thereby serve to further the bureaucratic institutionalization that Evans champions.'2

Second, compared to individual ties, associations are less compatible with (but not immune to) corrupt practices as a result of their transparency. By contrast, personalized relationships are opaque, informal, and correspondingly difficult to monitor. Business associations are by no means immune to abuses and corruption, but in a formal organization these abuses are easier to detect and are less likely to persist. For entrepreneurs, transparency offers the additional benefits of reducing the uncertainty of the economic environment and increasing confidence that competitors are not being given unfair concessions."

Third, by representing collectivities, business associations are less susceptible to rent-seeking. Associations aggregate interests and encourage entrepreneurs to address their problems in sectoral and systemic terms rather than individually. They define problems inclusively and generally rather than particularistically. In the absence of business associations, entrepreneurs will respond to collective problems with adaptive and avoidance techniques such as bribery and clientelism. As Merilee Grindle has noted, where channels to influence policy formulation are not available, individuals will try to influence policy implementation.'4 Under the military regime in Brazil, the failure of the government to establish regularized channels of interest representation gave rise to corrupt, individualistic ties." Ferdinand Marcos is alleged to have purposely emasculated business associations in order to bolster a network of corrupt clientelistic networks. 6 Conversely, Anek Laothamatas has argued that the rise of associations in Thailand has been associated with a decrease in clientelism. '7 One ought not push this line of reasoning too far, of course. Business associations by themselves will not transform a corrupt system, as the example of Nigeria vividly illustrates. In conjunction with efforts to restore official integrity, however, associations will help reduce pressures for corruption. Where their power is concentrated, they might be able to contribute to the creation and maintenance of "pockets of efficiency" in the bureaucracy.

Business Associations as Interest Groups

Despite an acknowledgment of the importance of business in the political process, business associations have failed to attract as much scholarly attention as other interest groups such as labor unions. This could be because it was assumed that the power wielded by individual capitalist firms rendered associations superfluous. Charles E. Lindblom, for instance, felt that individual businesses had the financial and organizational resources to act as interest groups on their own.'8 Similarly, Claus Offe has argued that in a market economy the structural power of capital is concentrated and its collective interests already being met, a situation rendering broader associations unnecessary)19

What such analyses fail to consider are the difficulties that even powerful individuals face in addressing collective-action problems. The existence of firm-




specific resources does not, in and of itself, make cooperation between firms any easier. Given the mutual dependencies that develop between businesses in a market economy, mechanisms to facilitate and manage cooperation are necessary even for the largest firms. Associations provide an institution for organizing collective action by setting agendas, mobilizing resources, and formalizing norms and expectations.

Furthermore, it is not necessarily the case that the structural power of capital by itself will succeed in producing policies that are favorable for business. In the absence of a strong voice to articulate business interests, policymakers might fail to discern the most effective economic policy. Indeed, history provides ample evidence of policies that not only failed to promote development, but may even have retarded it. In addition, even if policymakers devise an effective plan for development, there is no guarantee that administrators will faithfully implement it. Associations can articulate the interests and concerns of business to ensure that their "structural powere is respected. Associations can also play a role in monitoring the implementation of policies to ensure that they are effectively carried out.

The institutional capacity of business associations to efficaciously perform their representative functions is influenced by three key organizational factors. First, what are the professional resources of the organization? One of the most important tools of an association's influence is its command over information. Information, in turn is prepared by a full-time staff in the form of reports and press releases. These activities, of course, cost money, and a strong business association will usually have an ample operating budget, supported by donations from the government and/or dues from members.

Second, an effective business association should be free from excessive government influence. The distinction is clear between wholly independent associations that are willing to confront the government on a wide range of issues, and associations that act as simple extensions of government power. In most countries, however, many associations occupy an ambiguous intermediate status, in which they enjoy public support and recognition under corporatist arrangements, and yet still retain a limited ability to articulate private-sector concerns. Evidence for the proposition that business-association strength has been increasing can be found in the growing number of truly independent associations, as well as in the greater willingness and capacity of corporatized associations to challenge the

government. A third indicator of the strength of business associations relates to their level

of centralization. Where associations are fragmented, it will be difficult to maintain a unified business position on important issues. A decentralized system of business associations can be influential, but this influence is more likely to be exercised at the sectoral and regional levels. The emergence of a dynamic peak association would have the potential to transform the influence of business, particularly at the national level.

In short, the argument that business associations are rendered irrelevant by the power of individual firms and the structural power of capital neglects several



76 John Lucas

critical considerations. Individual resources are insufficient to address collective- action problems. The exercise of individual influence may take a form that is very different from collective influence. Finally, in the absence of a strong institution to represent the interests of business associations, the structural power of business might fail to have the desired impact.

The Emergence of Strong Business Assoclations

The prevalence of the "strong-state model" through the 1 970s gave rise to a business-government partnership in which the private sector was decidedly subordinate. Business was willing to accept a subordinate role in part because it was aware of its own weakness, and in part because entrepreneurs could expect generous benefits from the state in the form of subsidized credit and government interventions on their behalf. As a consequence, until the 1 970s, most business associations in the developing world tended to be either weak, controlled by the government, or both.

By the late 1970s and early 1980s, however, business support for the interventionist state had begun to erode, and as it did, business associations were increasingly used to articulate the interests of a more independent private sector. The emergence of a politically assertive business class in the developing world is a result of four interrelated factors. The first is the emergence (with state support) of a capable and confident indigenous business class. The interventionist state, whose support and leadership seemed so critical to a weak capitalist class, seemed more like a liability to a stronger capitalist class. Second, the failures of the interventionist state were manifested in economic crises, bureaucratic inefficiency, and threats to property rights. In response, private-sector groups were prompted to organize in defense of their interests. Third, the corporatist mechanisms by which the state had previously subordinated business began to erode. Not only did a new class of independent business associations emerge, but many of the official and semiofficial associations were emboldened to assume a more critical stance vis-a-vis the government. Finally, international factors provide a fourth possible explanation for the growing independence and assertiveness of the private sector. Globalization has indirectly encouraged a more activist business class by altering the bargaining relationship between the government and the private sector. In addition, a number of international actors with an ideological commitment to the promotion of capitalism have directly promoted a more assertive private sector by subsidizing the development of business associations in developing countries.

While all four of these factors were present to some degree in almost all of the major countries of the developing world, the relative importance of each varied in different regions.

The Rise of the "New Class. " One of the justifications for interventionist, developmental states is that they compensate for the entrepreneurial weaknesses of the bourgeoisie. It was felt that business people in the developing world lacked the resources and expertise necessary to spearhead rapid economic growth. As a result, states intervened to support local businesses with subsidies, loans, regulatory




support, and protection. In particularly demanding sectors, the state might itself assume the role of capitalist, establishing public enterprises or nationalizing foreign firms. Over time, the success of the state resulted in the emergence of a "new class"-a group of entrepreneurs confident of their ability to promote their country's development. Ironically, it was this class that often came to regard the interventionist state as an obstacle to future economic growth.20

Not surprisingly, the growth ofthe private sector has been accompanied by the emergence ofbusiness associations.21 As the private sector develops, the business class grows and the resources its members can deploy in support of collective goals correspondingly increase. The contribution of industrialists to this process is especially important. A study by Richard Doner and Ernest Wilson found that the more advanced network of business associations in Asia as compared to Africa resulted from greater industrialization.22 Industrialists control large, concentrated resources that can be used to support effective associations and campaigns. In addition, the goal of industrial transformation links capitalists and the state, and requires collaboration between the two to be implemented effectively.23 By contrast, resources that are distributed among a large number of smaller merchants are more difficult to mobilize in support of collective goals. Resources that are devoted to commerce rather than industry tend to be very mobile, which often makes exit a more appealing option than voice. As a result of these considerations, industrial associations are usually the best organized and most politically influential type of association.

As the new class has matured, it has turned to business associations to articulate a critique of the role of the state in the economy. While such critiques have frequently emphasized reducing the role of the state in the economy, at other times they have been oriented toward improving the efficiency of interventions, or even increasing government's assistance in some areas. In either case, the growing frequency and coherence of these critiques indicates the crystallization of a significant business class.

Failures ofInterventionist States. Up until the 1 970s, it was not unusual for the business class to support, or at least acquiesce to, the expansion of the state's role in the economy. In fact, this expansion generated a number of benefits for emerging business classes in the form of subsidies, government contracts, and rents. But when economic problems undermined the interventionist state's ability to provide material benefits and a prosperous economic environment, business groups became restive. Stephan Haggard and Robert Kaufman have neatly encapsulated the breakdown of the "implicit bargain" between business and the state:

[A]ll regimes in mixed economies rest on some explicit or implicit bargain between political leaders and key support groups. Economic conditions will determine how stable and robust that bargain is. Good times generate support. Economic crisis, by contrast, creates incentives for the private sector to defect from the bargain, increases the likelihood of political protest "from below," and reduces the capacity of ruling elites to manage the resulting distributive conflicts.24

Why interventionist states should have begun to encounter so many problems in the late 1970s and early 1980s in so many different countries is somewhat



78 John Lucas

puzzling. After all, for the prior two to three decades state intervention had promoted rapid economic growth and industrial transformation in a number of countries. Some of the factors that may have played a role include the debt crisis, capital mobility, the cumulative inefficiencies of prior government interventions, and the increasing complexity of economies as they reach more advanced stages of industrialization.

Regardless, mounting economic difficulties had the effect of focusing attention on the costs of intervention. Business hostility to the state was most apparent in cases where government policy threatened to undermine critical property rights, particularly under populist regimes. Actions that the private sector found most alarming were programs to redistribute land or to nationalize the banking system. Another potent issue was the special privileges granted to well-connected firms. As the size of the business class grew and the resources at the disposal of the state shrank (as a result of economic crisis), the number of entrepreneurs excluded from government support increased. Predictably, hostility to a necessarily restricted corrupt and clientelistic system increased as well. Finally, the top-down nature of state-led development came under fire. Many business people eventually became disenchanted with a policy process they saw as dominated by imperious and unresponsive technocrats. These grievances found expression as entrepreneurs began to turn to business associations to assume a more aggressive stance in pressing their interests and views on the state.

A second possible response to state failure was for businesses to directly provide governance functions and collective goods. In cases where the demand for effective government and services exceeded the supply, associations have frequently emerged to supplement the state's role. Wolfgang Streeck and Philippe C. Schmitter have coined the term "private interest government" to refer to situations in which business associations discharge "tasks that would otherwise have to be undertaken by the state."25 Private-interest governments contribute to the public policy goals of governments, and thus reinforce government power. Associations have several advantages that allow them to perform these tasks more effectively than governments, including their flexibility, their legitimacy with members, and their specialized knowledge.26

Anecdotal evidence suggests that businessmen have turned to associations and private-interest government as one response to state failure. In Thailand, for example, business associations have been active in providing investment in infrastructure, research and development, and sales promotion." In Kenya, the peak manufacturing association responded to govemment failures by itself assuming responsibility for statistics collection and maintenance of infrastructure, particularly roads.28 In Nigeria, business associations have been active in a number of areas including financing industries, building technical schools, assembling police forces, and providing loans.29 Despite these efforts, however, the ability of business associations to provide private-interest government is likely to remain inconsistent until their resource base is expanded, either through an augmentation of private-sector funds, or through government assistance. Nevertheless, the available evidence suggests that associations can be used to




address collective problems in an efficient and flexible manner. Policymakers, however, must judge whether the gains that association activities offer in terms of improving state capacity outweigh the limitations they necessarily impose on state autonomy.

Corporatism and Centralization. During the era of state-led development, corporatist arrangements emerged as the most widespread tactic to organize and control interest groups in the developing world. Under corporatist systems, particular associations were designated as the representatives of key groups in the society (i.e., labor, farmers, industrialists) and given a quasi-public status. In its most highly developed variants, the official associations were created by the state, membership was made mandatory, and rival groups were proscribed. In less restrictive formulations, government would encourage the creation of peak associations that then assumed a privileged role in discussions with the govemment. For governments, corporatism offered the advantage of simplifying a bewildering network of interest representation. It also promised to extend government control over potentially independent interest groups. Proponents of corporatism have argued that it promotes social harmony and facilitates the negotiation of "social pacts" between key interest groups.30 Corporatist representation for business has almost always included the chambers of commerce and industrial associations. In more developed systems, trade associations have been designated for the different sectors of the economy. If a large union movement existed, it might also be expected that government would recognize an official employers' association.

In practice, corporatism has proven to be an unreliable tool for either securing long-term social harmony or controlling business.3' One recurring problem of corporatist arrangements has been their inflexibility. Once government has locked a particular system of interest representation in place, it has proven difficult to adjust it to accommodate the emergence of new groups (such as the "'new class"). In addition, governments have manipulated official associations to control social groups, rather than allowing them to function as channels of genuine interest representation. As a result of these problems, corporatist institutions have tended to experience declining legitimacy in the eyes of the groups they claimed to represent.32

Businesses have responded to the inflexibility and unresponsiveness of imposed systems of interest mediation by finding ways to capture, undermine, or circumvent them. Where it has been possible, they have created alternative channels that have had the effect of "hollowing out" the official representative institution. Where it was not possible to pursue alternate channels of representation, business has attempted to "capture" official representative institutions and use them against the state. Where neither strategy has been possible, business has often disengaged from the official policy process.

In "weak corporatist" systems in which the monopoly of official interest groups was not rigidly enforced, entrepreneurs have been able to pursue a strategy of establishing rival associations. For instance in Egypt, when entrepreneurs became frustrated with the government-controlled chambers of commerce, they formed a rival group, the Egyptian Businessmen's Association. By the mid-1980s,



80 John Lucas

this was the group that had emerged as the most important representative of business interests in negotiations with the government?3 Similarly in Brazil, frustration with the government-controlled FIESP (Federation of Industries of the State of Sao Paulo) prompted the formation of a rival independent group, the PNBE (National Grassroots Business Association).34 Comparable objections to the corporatist system of business/industrial representation in Cote d'Ivoire led to the formation of new representative organizations there." While this might allow entrepreneurs greater autonomy to articulate their views, there is a danger that government might be in a position to simply disregard unofficial business associations.

In situations where the state has prohibited the formation of unofficial interest groups, entrepreneurs have captured imposed associational structures and attempted to use them against the government. In Pakistan the government asserted its control over business associations in a series of corporatizing decrees in 1958 and 1961. But when the Bhutto regime attempted to enact harsh antibusiness policies in the 1970s, entrepreneurs used these same corporatized structures to resist the government.36 Likewise in Indonesia, the sectoral associations that the government had created in the 1 960s and 1 970s were eventually used to protest the regime's policies at the sectoral level in the 1 980s.37 In general, however, there are limits to how far an official organization can be used to criticize official policies.

Globalization. While business associations have become most prominent in countries witnessing the emergence of a new class of industrialists, it is important to stress that the assertiveness ofbusiness is not limited to the newly industrializing countries (NICs). Business has also asserted itself in countries such as the Philippines, Panama, and Nigeria. Nigel Harris has cited this fact as a confirmation that the appearance of the new class is a function of international as well as domestic factors.38 A 1995 issue of Daedalus included a number of articles presenting the case that the process of globalization has led to growing business strength at the international level.39

Globalization refers to increasing international economic integration as a result of changes in technology, communications, transportation, and production. It manifests itself in freer trade, the dispersion of production processes, the growing mobility of capital, and the prominence of multinational corporations (MNCs). These trends reduce the control of governments over their economy.,* They place a new premium on economic competitiveness that makes it difficult for government to sustain inefficient interventionist policies. Finally, the new prominence of MNCs provides potential allies for local businesses in their dealings with the state.4' This decreases their dependence on the government and allows them to be more forceful.

International actors have also more directly abetted the development of business associations. As part of its commitment to the spread of capitalism and democracy, the United States has subsidized the strengthening of business associations in a number of developing countries. The two most important organizations involved in this effort have been the United States Agency for




International Development (USAID) and the Center for International Private Enterprise (CIPE). USAID has assisted business associations under a program initiated in 1981 to promote private enterprise in developing countries. CIPE is an affiliate of the United States Chamber of Commerce, but its most important sources of funding are USAID and the U.S. government-financed National Endowment for Democracy. Most of these funds have gone toward pro- fessionalizing associations and training their staffs. While the total amount of money involved may seem small in relation to the number of countries affected, its impact is magnified by its role in resolving the collective-action problem.42 Free riding and the indivisibility of the benefits from policy change indicate that there are few incentives for individuals to invest in a business association, even if they support its goals. The resources provided by external organizations help to establish the credibility of associations and thus help to mitigate the free-rider problem.

Regional Variations

While evidence for all of the preceding trends can be found throughout the globe, different factors were more or less prominent in different regions. In Asia, for instance, the emergence of an independent capitalist class was the most important development. In Latin America, the erosion of corporatist systems seems to be the dominant variable. Events in Africa have been governed by the collapse of state authority and the emergence of nonstate institutions. Why is it that different patterns of business-government relations tend to be associated with particular regions? In part, this stems from the fact that regions have tended to have distinctive experiences with colonialism, which has conditioned the possibility of creating a strong state.43 Different regions have tended to interact with the world economy in distinctive ways (as illustrated by the Latin American debt crisis of the 1980s, or the Asian financial crisis that began in 1997). Perhaps most important, different regions have tended to be influenced by different models of business-government relations. In Latin America, countries have preferred inclusive corporatist systems (perhaps owing to Spanish influence); in Asia, countries have aspired to recreate the strong state-business coalition that proved so successful in Japan; and in Africa, countries have structured business according to ethnically defined patrimonial networks. This having been said, each region has its exceptions: Chile under Pinochet had many similarities to the Asian developmental state, and the institutionalized corruption of the Marcos regime in the Philippines is comparable to what one finds in many African countries. Furthermore, it is important to remember that each of these variables is present (to a greater or lesser degree) in each of the regions, and in each region there has been a movement over the past 20 years toward a more assertive business class.

Asia: Industrial Success and Association Assertion. The most striking feature of the Asian success stories has been the effectiveness of their developmental states. As a result of a number of historical and international factors, states have appeared in a number of Asian countries that were characterized by a reasonable



82 John Lucas

level of bureaucratic integrity and the capacity to exercise effective control over social groups. Following the Japanese model, Asian capitalist countries have used this state to actively support and promote the emergence of an indigenous capitalist class. While virtually all states in late-developing countries have intervened in support of local entrepreneurs, the Asian cases have been distinguished by bureaucratic effectiveness, an emphasis on exports, and the close collaboration between business and government. But the success of the developmental states has been a two-edged sword for the government: as the "fnew class" it nurtured has grown stronger and more confident, it has rebelled at the control the state has exercised over it. Increasingly, business associations have been used to challenge the hegemony of the developmental state.

The archetypal cases of strong developmental states are South Korea and Taiwan. The success of these countries in sustaining phenomenal rates of growth is frequently attributed to the strength of their states and their insulation from social pressure groups." A closer look at the role of business associations in the Korean case, however, suggests that the state-centric view pays insufficient attention to the contributions made by the organized private sector, especially since 1980. The period of very rapid growth in Korea is conventionally dated from 1961, when a new military regime came to power and restructured business- government relations. From this period onward, economic development was directed by a heavily interventionist state, whose control over business flowed from its ability to allocate subsidized finance. But if the story of the Korean miracle is one of state dominance, it also has a subplot of increasing business independence and autonomy.

This can be illustrated using the example of the most powerful of several associations representing Korean big business, the Federation of Korean Industries (FKI). FKI was established in response to a threat by the new military regime to expropriate the resources of the wealthiest capitalists in 1961. In exchange for the government's dropping this threat, Korean businessmen agreed to cooperate in the regime's development plans, and formed FKI in August 1961, in part to carry out this bargain.45 Over the ensuing decades, however, FKI became increasingly assertive. In response to a 1971 economic crisis, FKI aggressively (and successfully) lobbied the government to provide a generous financial bailout for big business.46 Since that time, studies have calculated that anywhere from 70 to 90 percent of FKI proposals have been eventually adopted as official policy.47 In the 1980s, FKI became even more assertive, demanding a reduction in the overwhelming role of the state and an end to informal taxation of business (a form of government extortion whose magnitude came to exceed official taxes).48 Several factors seem to have contributed to a more independent and activist role on the part of business: the maturation of the business class; frustration with heavy-handed and politicized government interventions in the market; and access to nongovemmental sources of finance with the advent of economic liberalization and the development of international financial markets.

In Taiwan, the influence of business associations has been less noticeable owing to the absence of a strong peak association comparable to FKI. Nevertheless, sectoral associations are very active and have had a significant impact on the




success of policies in particular sectors such as textiles and electronics.49 With the advent of political and economic liberalization, there seems to be a movement in the direction of a more prominent role for business associations.50

A similar dynamic can be seen in the Southeast Asian countries of Thailand, Malaysia, and Indonesia. Although these countries have also for the most part relied on an authoritarian, interventionist state to promote development, they are frequently distinguished from the Northeast Asian cases of Korea and Taiwan based on their governments' less effective bureaucracies and general lack of insulation from social pressure groups, particularly business.5 Nevertheless, the relative weakness of the state has not prevented these countries from sustaining a rapid industrial transformation. This is in part a function of the way in which business interests have been organized, as can be seen by examining the case of Thailand.

Following the military's assumption of power in 1932, Thailand entered a period of fluid authoritarianism that has been dubbed the "bureaucratic polity."52 Despite this authoritarianism, business associations retained an unusual amount of autonomy, although they were reluctant to directly challenge the government. By the 1970s, however, the emergence of a new class of Thai entrepreneurs encouraged peak business associations to confront the government over such issues as reducing bureaucratic red tape, getting rid of restrictive laws and rules, and curbing high taxation.53 Eventually government institutionalized the growing influence of the private sector with the convocation of the Joint Public-Private Consultative Committee (JPPCC) in 1981. The JPPCC was composed of key government ministers and representatives of the most powerful business associations (the Thai Bankers' Association, the Thai Chamber of Commerce, and the Association of Thai Industries). From 1981 until 1988 the JPPCC provided information to officials, thus improving the quality of policy; and instilled confidence in business, which encouraged investment. But perhaps the most important achievement of the JPPCC was to provide a forum for the articulation of business interests that was both transparent and collective. This forum became an alternative to the corrupt patrimonial networks that are endemic in Thailand.54 After 1988, the newly elected Chatichai government bypassed the JPPCC in order to develop clientelistic links with politically influential business people. Whereas the JPPCC had met monthly throughout most of the 1 980s, it met only twice in 1990, and not at all thereafter.55 Not surprisingly the decline of the JPPCC was associated with an alarming increase in political corruption and rent- seeking by business.56 But even without the JPPCC, Thai business associations have remained powerful advocates of private-sector interests and important actors in the provision of collective goods.57 Inspired by the Thai example, the Malaysians have created their own variant of the JPPCC, the Malaysian Business Council, which brings together public officials and business representatives.58

In Indonesia, as in Taiwan, business influence is exercised through an increasingly vigorous system of sectoral associations, rather than peak associations, which tend to be weak. For instance in Indonesia, the authoritarian Soeharto regime was successful in promoting rapid industrial growth starting in the 1970s.19 Initially, business was controlled by a network of corporatist interest



84 John Lucas

groups established by the state to regularize business-government relations and extend control. The most important of these was KADIN (the equivalent of the Indonesian Chamber of Commerce), which from 1968 through 1979 had a military representative as its president. This organization is complemented by several hundred sectoral business associations. By the 1 980s, a newly emerging capitalist class had become emboldened to use sectoral associations to challenge the government. For instance, in the textile industry businesses created their own association to compete with the association imposed upon them by the government. In the pharmaceutical industry, the official government association was mobilized to protest government-imposed price controls. While the Indonesian government remains heavily authoritarian, the rise of the "'new class" there has had the result of creating pressures for greater pluralism. Business associations have been a central element in the changing balance of power between public and private actors.60

Latin America: Corporatist Decay and Liberalization. Latin American states have generally been less powerful or effective than their Asian counterparts. Economic policy has likewise been less successful, in part as a result of an overreliance on inward-looking strategies of import substitution and a number of unsuccessful populist experiments. But even if economic development has been less spectacular than in Asia, it has been respectable, and a substantial and powerful business class has emerged in most countries. Since the 1930s, most Latin American regimes have relied on corporatist strategies to manage their relations with business. By the 1980s, however, it was clear that corporatist organizations were increasingly unable to control a rapidly changing and now restive business class.

Brazil provides one example of these trends. Under the "New State" (1937-45) of Getulio Vargas, a corporatist framework was imposed on an existing system of business associations. Despite the creation of peak associations for industry, commerce, and agriculture, regional and sectoral associations retained their independence and influence, as exemplified by the regionally based Sao Paulo Federation of Industries (FIESP), which continues to overshadow the power of the national associations. Associational fragmentation became even more pronounced over time as entrepreneurs established independent private associations (as opposed to "official" corporatist organizations) in the I 950s and 1980s.6' The motivation for creating new organizations was to provide an alternative to corporatist associations that were seen as elitist, corrupt, and unwilling to confront the government. One result was that Brazil ended up with one of the most fragmented systems of business representation in Latin America.

Given the absence of a strong peak association, Brazil's substantial business class has rarely been able to shape national-level policy. Instead, regional and sectoral associations have devoted their energies to influencing the details and implementation of existing policies, often very successfully.62 In several periods of crisis, however, the business community has been able to unite behind a common national program. In 1964, business association leaders used ad hoc organizations (such as the infamous Institute for Economic and Social Research




[IPES]) to mobilize support for a coup against the Goulart regime and the subsequent reimposition of authoritarian rule. By the 1 970s, however, business had become disenchanted with the military regime, and particularly with its heavy intervention in the economy and its refusal to institutionalize private- sector participation in the policy process. These concerns were reflected in the desestatizafao or "antistate" campaign of 1974.63 Since the return to democracy, business leaders have initiated several high-level efforts to create an encompassing peak association for business, notably during the 1988 Constituent Assembly and in 1989 in response to proposed economic liberalization. Neither effort proved particularly durable.-

Business associations in Mexico can be divided up into two types: semiofficial and independent organizations.65 The semiofficial associations were established before 1941, but unlike other interest groups of this period (e.g., the unions and farmer organizations), they were not formally incorporated into the governing Institutional Revolutionary Party (PRI). Nevertheless, they are subject to significant corporatist controls such as mandatory membership. While the govemment has been reluctant to use its powers to intimidate these associations directly, over time many entrepreneurs began to feel that the semiofficial chambers could not act as vigorous representatives of their interests.

These concerns prompted business people to establish several independent associations. The pioneer independent association was the Monterrey-based COPARMEX (Mexican Employers' Confederation), formed in 1929. COPARMEX was distinguished from the semiofficial associations by its hostility to state intervention in the economy and its determined autonomy from the government." In 1962, 30 of Mexico's wealthiest families formed the elite CMHN (Mexican Businessmen's Group). Through the 1960s, however, these groups never achieved the power of the semiofficial groups. By the 1970s Mexican entrepreneurs were becoming more assertive, and when the populist Echeverria regime (1971-77) was perceived to be enacting "antibusiness" policies, COPARMEX took the lead in articulating a strident antigovernment position. Echeverria's policies had the further effect of radicalizing the semiofficial associations, which eventually endorsed COPARMEX's criticisms. These trends converged with the formation in 1975 of the Coordinating Council of Entrepreneurs (CCE), which was created as an umbrella organization uniting the semiofficial and independent business associations. The antagonistic relationship between business associations and the state increased markedly with the bank nationalizations of 1982, and the two groups were not reconciled until the CCE was included in the negotiation of the 1988 Economic Solidarity Pact.67 The conclusion of this pact represents an acknowledgment of the power of business in the Mexican system. In 1995, in response to the peso crisis, an attempt was made to revive the pact under the renamed Alliance for Economic Recovery, but it is too soon to assess the results of this new program.68

The Mexican experience is typical of that of other Latin American countries where antibusiness government actions have prompted a breakdown of the state- business pact. The most dramatic instances of business mobilization have occurred



86 John Lucas

where populist regimes have posed a serious threat to business interests. In Ecuador, for instance, a system of business associations created by the state in 1930s was successfully mobilized to defeat populist reforms in the 1970s.69 In Peru, the threat to private property posed by bank nationalizations in 1987 galvanized support for a newly formed peak association (as it had in Mexico in 1982).' In Bolivia, it was the economic crisis resulting from populist policies in the early 1980s that precipitated the modernization of the peak business association.71 But even in cases where the government retained a procapitalist orientation, as in Brazil under the military, business was often alienated by excessive government intervention in the economy. In the 1980s, business associations in both Colombia and Venezuela organized against the expansive government roles in their respective economies.72

Africa: State Decline and Associational Assertion: In Africa, the pattern differs from the patterns existing in Asia and Latin America insofar as the emergence of a new class has been less significant than the decline of the state. This statement should not be taken to mean that the business class is insignificant in Africa; a number of studies have documented both its productivity and its influence.7" Nevertheless, business in most African countries lags behind that of other regions in terms of resources, clout, and coherence. For this reason, business-association activity in Africa tends to be concentrated in the more prosperous countries (Nigeria, Kenya, Senegal, C6te d'Ivoire, Zimbabwe) and has recently been driven by state decline rather than capitalist breakthrough.

Shortly after gaining their independence in the 1 960s, most African countries put in place a system of semiofficial interest groups. Such strategies had more to do with authoritarian political control than any systematic attempt to manage the different sectors of the society. Given the fragmented nature of state authority, they were at best partially effective. By the late 1 960s and continuing through the 1970s, business associations became the primary organizations lobbying for indigenization programs, whereby the government would reserve certain economic activities for indigenous entrepreneurs. Campaigns by business groups played a major role in bringing about indigenization programs in 1967 in Kenya, 1969 in Senegal, 1970 in COte d'Ivoire, and 1972 in Nigeria.74 While these successes indicated the influence of business, they also confirmed its dependence on the state.

By the early 1980s, the effectiveness of the state in many African countries had declined to dangerously low levels. This prompted two developments that served to enhance the power of business associations. First, as government capacity declined, business associations became involved in public functions such as the construction of infrastructure, collecting statistics, setting standards, and maintaining security.75 The movement toward private-interest government was often encouraged by state officials and was advocated by the World Bank in its 1989 report on Africa.76 Second, the various failures of interventionist states prompted economic liberalization programs, shifting the balance ofpower between the private and public sectors. The role of businessmen in the economy has been increased by privatization, deregulation, and overall greater reliance on the




market. Business has responded by invigorating private-sector organizations. Nevertheless, the effectiveness of these associations has the potential to be undermined by ethnic fragmentation and rivalries.

Nigeria is the country in which the development of business associations has progressed the furthest.7 The chambers of commerce (which were not Africanized until the 1 960s) are represented by the peak organization, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), which was established in 1960. The other important peak association is the Manufacturers' Association of Nigeria (MAN), which was established in 1971. These associations are complemented by about 90 sectoral associations registered at the national level, and numerous regional associations.78 As in Venezuela, the oil boom of the 1970s financed a rapid expansion of the public sector and gave the government little incentive to consider private-sector interests. Following the decline of oil prices and the onset of recession in the mid-1980s, the Babangida regime elevated the position of business associations in the policy process under an arrangement dubbed "Nigeria Incorporated." As the role of the organized private sector expanded, businesses turned their lobbying efforts to influencing general policies (interest rates, budget deficits, trade) rather than securing firm- specific advantages and favors.79 In several limited areas, business associations began to impose accountability on a notoriously corrupt and inefficient bureaucracy.80

These advances on the part of business were interrupted by the seizure of power by General Sani Abacha in a 1993 coup. Abacha's regime represents the most brutal dictatorship yet imposed on Nigeria, and it has been much less receptive to the lobbying activities of traditional business groups. To some extent, this declining influence has been mitigated by the emergence in 1994 of the annual Nigerian Economic Summit, a forum organized by elite business leaders in Lagos, including foreign MNC representatives. Its recommendations carry a lot of weight, and many Nigerian businesspeople credit it with crafting the strict monetary policies successfully carried out by the Abacha regime since 1994. The forum's ideas have also been very influential in the formulation of the government's Vision 2010 plan, which is intended to serve as an agenda for economic policy into the next century.8'

In Senegal, the business associations have enjoyed several brief periods of influence only to be co-opted or disempowered by the government. The first important local initiative was the formation of the Union of Senegalese Economic Groups (UNIGES) in 1968.82 Entrepreneurs used UNIGES to criticize foreign domination of the Senegalese economy and to demand government assistance. Govemment responded by increasing its assistance to indigenous entrepreneurs and Africanizing certain sectors of the economy. It also absorbed UNIGES into the government-created and -controlled Economic Groups of Senegal (GES) in 1970. By the mid-1980s, however, many businesspeople had begun to feel that GES was too closely linked to the government to champion their interests."3 Spurred by the government's economic liberalization program, two significant independent business associations had emerged by 1990. Industrialists created



88 John Lucas

the National Council of Senegalese Managers (CNPS) to influence the emerging industrial policy. Even more significant was the National Union of Merchants and Manufacturers of Senegal (UNACOIS), drawn primarily from the small merchants belonging to the economically powerful Mouride brotherhood.84 UNACOIS established itself as a strong and vocal critic of government policies in the early 1990s, and helped contribute to a paralyzing confrontation between the public and the private sectors.85

Recent research in Zimbabwe and Tanzania has documented many of the same trends found elsewhere. In Tanzania, Bruce Heilman has recorded the development of a dynamic, if still emerging network of business associations with the abandonment of that country's socialist model in the mid-1980s. Given the rudimentary state of the private sector in Tanzania, business associations engaged as much in "social-movement" type activities such as demonstrations and public relations campaigns in defense of capitalist institutions and practices as they did in conventional lobbying. The effectiveness of the movement, however, has been diluted by the division existing between wealthy Asian businesspeople and African entrepreneurs." In a very different context, Tor Skalnes has uncovered the powerful role played by the peak business associations in Zimbabwe. Skalnes finds that these associations have grown more powerful under the Black majority government of Robert Mugabe than they were under the previous White minority regime. This is surprising given that their membership is almost entirely White. The influence of the associations is best illustrated by their prominent role in the design of the economic liberalization programs of the late 1 980s and early 1 990s, but given the political position of Whites in the country, their status is likely to remain precarious until they are able to recruit more prominent Black members.87

Several lessons arise from these regional cases. First, the growth of a dynamic entrepreneurial class has been reflected in stronger and more active business associations. Second, attempts by governments to control business associations, primarily through corporatist strategies, have not been sustainable. Third, these developments both reflect and reinforce a movement away from statist development policies.

Implications and Prospects

The rise of business associations reflects an ongoing shift from insulated, interventionist states to embedded, limited states. As argued previously, this has a number of implications for the capacity and integrity of official institutions. But what is the likely impact of business associations on movements for political and economic liberalization? And what factors will determine the capacity of business associations to play an effective, vigorous role?

Political and Economic Liberalization. There are two areas in which the character of society is said to affect the democratic prospects of a country. First, it is argued that the development of a market economy increases a country's prospects for democracy.88 This position has been revived in recent years in the form of the aphorism (frequently applied to China) that economic liberalization necessarily leads to political liberalization. Second, the maturation of a strong




civil society is seen as crucial for democratic transition and consolidation. Civil society constitutes institutional alternatives to the state. It thus provides independent bases for challenging authoritarianism. Given that business associations are connected to both the spread of market relations and the evolution of civil society, one might expect them to be at the forefront of democratic struggles.

In fact, it has been rare to find business associations openly endorsing, let alone leading a prodemocracy movement. This does not mean that they are pro- authoritarian, but rather that they are in the words of Leigh Payne, "pragmatic."5' This pragmatism indicates an indifference to regime type, so long as the policies of the government are supportive of (or at least not hostile to) the private sector, and channels have been established to provide representation for business. Theoretically, an authoritarian regime could meet these criteria as well as a democratic one. Similarly, a statist authoritarian regime would probably be no greater threat to these goals than a democratically elected radical regime. As a result, business associations have rarely committed themselves to a particular regime type, preferring instead to lobby for inclusion and policy reform within the existing system.'" Nevertheless, by definition the emergence of associations serves to "pluralize" the institutional landscape and impose some level of accountability on the state.9" Their growth is consistent with democratic goals, although they are unlikely to assume prominent leadership roles in prodemocracy movements.

Attempts to implement economic liberalization policies, also referred to as "structural adjustment," are now widespread throughout the developing world. The impact of business associations on efforts to liberalize can be interpreted in two ways. One group of theorists has emphasized that liberalization challenges vested interests, and thus can only be implemented by a state that is insulated from social pressures and is therefore capable of imposing unpopular policies.92 Accordingly, business associations could be seen as one more vested interest undermining the coherence of a liberalization program. A second school of thought argues that even a liberalizing regime needs a base of support within the society. Among existing interest groups, business associations are the ones most likely to endorse a liberalization program. In fact, there is evidence that over the past 20 years, business associations have increasingly adopted anti-interventionist positions.93 The support of business associations is further enhanced if they are given a regular role in the policy. process.

Economic liberalization is likely to augment the influence of business associations. It is sometimes suggested that state intervention can create a business class that is dependent upon the govemment and as a result is reluctant to aggressively challenge it. Quite understandably, entrepreneurs who might have their import licenses or access to credit arbitrarily revoked will avoid antagonizing officials. Case studies of Brazil, South Korea, Taiwan, and Nigeria have suggested that the dependence of business on an interventionist state has led to an initially acquiescent business-association structure.'4 Liberalization takes away this leverage on the part of the state and thus facilitates a movement by associations away from their previously passive role. This in turn opens the door



90 John Lucas

for a more equal partnership between business and the state, and an alliance in support of economic liberalization. In each of the four cases just mentioned, economic liberalization in the 1 980s was accompanied by a more forceful role on the part of organized business.

Threats to Business Associations: Government Resistance, Politicization, and Communalism. While business associations have prospered in recent years, maintaining their vitality requires that they confront several potential problems. First among these is the ambivalent stance of the government. While the current dependence of governments on the private sector has given business associations a certain amount of leverage, revived states might be less inclined to share power with business. The cases of Nigeria and Thailand illustrate the ease with which government can reverse a prior pattern of business-government cooperation.9 Maintaining a vigorous business-government partnership will probably depend on the forging of a long-run consensus between policymakers and entrepreneurs.

Business associations also face the threat of excessive politicization. Under democratic regimes, associations are used to mobilize supporters for electoral competition. In authoritarian regimes ambitious individuals might use associations to gain prominence that could later be converted to political influence. Taken to an extreme, this type of politicization is capable of compromising the integrity, commitment, and effectiveness of association leaders. Scholars have specifically identified this as a problem for associations in Egypt, Turkey, Thailand, Nigeria, and Mexico, but it is almost certainly an issue for associations in all countries.96 One way to minimize the problem is to ensure accountability in associations, primarily through regular and fair elections, thus allowing members to replace opportunistic officials. Another possible response would be to ensure competition. In an environment with many associations, members could be expected to gravitate toward the most effective representative.9"

Business can also be weakened when it is fragmented along communal lines. While this provides some basis for solidarity among different groups, it can hinder the influence and effectiveness of business as a class. In India, for instance, the segmentation of society according to caste is reproduced organizationally in divisions within the business associations.98 This fragmentation has helped contribute to a situation whereby the associations are unable to unite strongly behind a specific agenda.99 Similarly, in Southeast Asia the business community is frequently divided between Chinese and non-Chinese entrepreneurs, a fact which manifests itself in ethnically based associations. In Africa, business associations can become arenas within which communal rivalries are played out. In multiethnic associations (such as chambers of commerce) the ethnic composition of the leadership is a politically contentious issue. Other associations are used by specific ethnic groups to build themselves up in relation to their rivals, a classic example being Kenya's Gikuyu, Embu, and Meru Association (GEMA), which fought for the economic advancement of those groups until it was disbanded in 1982. 100 While ethnically exclusive groups present the danger that the effectiveness of associations will be diminished, they also provide a basis around which groups can organize. Whatever its divisive effects between groups, competitive modernization




can be a very effective tool for mobilizing in support of collective goals within groups.

Conclusion

As Lindblom pointed out 20 years ago, power in a market society is shared between business and government.'0' That each has a role to play is not in doubt, but rather the pertinent question concerns what the appropriate division of responsibilities is, and how the two should interact. Business associations have promoted a reorientation of responsibility from state to nonstate institutions. They have been used by business to place limits on the role of the state in the economy. They have assumed governance functions previously assumed by the state. Business associations are thus closely linked to a changing balance of power between the state and the society.

Associations have also had an impact on the qualitative nature of business- government relations. Associations comprise a type of interest representation that is distinct from the more oblique structural power of capital or the personalistic connections of clientelism. As a pressure group, they are in a position to demand accountability in government's interactions with business and they offer an alternative to the personal contacts that facilitate corruption. It is possible, but not certain, that movements for economic and political liberalization will benefit from a strong network of business associations.

The growing power of business associations, however, embodies important challenges to the political and social system as well. It is entirely conceivable that the political influence of business could reach a point whereby it threatens the ability of the state to govern. If the power of business begins to undermine the integrity of state institutions, then mechanisms must be found to contain it. The second threat posed by an assertive network of business associations is to the society. In a capitalist economy, the resources controlled by business gives it an enormous amount of leverage, unequaled by that of any other single group. If groups in the rest of the society are to avoid being marginalized by business, they need to develop the resources that they possess: civil organizations, citizenship rights, and the strength of numbers. If these dangers can be avoided, however, business associations appear likely to contribute to a more constructive business- government relationship.

NOTES

1. Stephan Haggard, Pathways from the Periphery: The Politics of Growth in the Newly

Industrializing Countries (Ithaca, NY: Cornell University Press, 1990). Recently Haggard has

qualified this position, and proposed that the business-government relationship be viewed as an

"ongoing negotiation." See Stephan Haggard, "Business, Politics, and Policy in Northeast and

Southeast Asia," in Business and Government in IndustrialisingAsia, ed. Andrew Maclntyre (Ithaca,

NY: Cornell University Press, 1994). 2. Andrew Maclntyre, "Business, Government, and Development: Northeast and Southeast

Asian Comparisons," in Maclntyre, Business and Government in Industrialising Asia, p. 6.



92 John Lucas

3. See for instance the special issue of World Development on patrimonialism in Africa (vol. 22, March 1994); and Thomas Callaghy, "Political Passions and Economic Interests," in Hemmed In: Responses to Economic Decline, ed. by Thomas Callaghy and John Ravenhill (New York: Columbia University Press, 1994).

4. Richard Doner, as cited in Gary Hawes and Hong Liu's "Explaining the Dynamics of the Southeast Asian Political Economy," World Politics 45 (October 1993): 629-60.

5. In fact, several scholars have reinterpreted the success of the Northeast Asian "strong states" to highlight the role played by coalitions with the private sector. See, for example, David Friedman, The Misunderstood Miracle: Industrial Development and Political Change in Japan (Ithaca, NY: Cornell University Press, 1988).

6. Richard Doner, "Limits of State Strength: Toward an Institutionalist View of Economic Development," World Politics 44 (April 1992): 431.

7. Evans's notion of autonomy differs somewhat from how the term is usually understood. He uses autonomy to designate "coherence," not independence or isolation from social forces.

8. Peter Evans, "The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change," in The Politics of Economic Adjustment, ed. Stephan Haggard and Robert Kaufman (Princeton, NJ: Princeton University Press, 1992), p. 151.

9. Ben Schneider and Sylvia Maxfield, "Business, the State, and Economic Performance in Developing Countries," in Business and the State in Developing Countries, ed. Sylvia Maxfield and Ben Schneider (Ithaca, NY: Cornell University Press, 1997).

10. John Lucas, "State and Society in Nigeria: A Study of Business Associations in Kano" (Ph.D. diss., Indiana University, 1993).

1 1. Andrew MacIntyre, Business-Government Relations in Industrialising East Asia: South Korea and Thailand in Comparative Perspective (Brisbane: Center for the Study of Australia-Asia Relations, Griffith University, 1990). Another example can be found in Colombia, where the president's alleged ties to drug traffickers came under fire from the peak business associations. See "Colombia's Economy Unsettled by Crisis Involving President," New York Times, 5 May 1996.

12. Sandbrook argues that strong bureaucracies are a function of disciplining agents within the society, usually a strong bourgeoisie. See Richard Sandbrook, The Politics of Africa's Economic Recovery (New York: Cambridge University Press, 1993).

13. Jose Edgardo Campos and Hilton L. Root, The Key to the Asian Miracle: Making Shared Growth Credible (Washington DC: Brookings Institute, 1996), pp. 101-3.

14. Merilee Grindle, "Policy Content and Context in Implementation," in Politics and Policy Implementation in the Third World, ed. Merilee Grindle (Princeton, NJ: Princeton University Press, 1980).

15. Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, NJ: Princeton University Press, 1995), pp. 63-65.

16. Richard Doner, Driving a Bargain: Automobile Industrialization and Japanese Firms in SoutheastAsia (Berkeley: University of California Press, 1991), pp. 242-45. See also Paul Hutchcroft, "Booty Capitalism: Business-Government Relation in the Philippines," in Business and Government in Industrialising Asia., ed. MacIntyre; and Cheng Tian Kuo, Global Competitiveness and Industrial Growth in the Philippines (Pittsburgh, PA: University of Pittsburgh Press, 1995).

17. Anek Laothamatas, Business Associations and the New Political Economy of Thailand (Boulder, CO: Westview, 1992), pp. 102-8.

18. Charles E. Lindblom, Politics and Markets: The World's Political Economic Systems (New York: Basic Books, 1977), p. 197.

19. Claus Offe, "Two Logics of Collective Action," in Disorganized Capitalism: Contemporary Transformations of Work and Politics, by Claus Offe, ed. John Keane (Cambridge, MA: MIT Press, 1985), esp. p. 213.

20. Nigel Harris, "New Bourgeoisies?" Journal ofDevelopment Studies 24 (April 1988): 237-49. 21. Bianchi for instance has argued that Turkish associations are more effective than Egyptian

associations as a result of a more developed capitalist class. See Robert Bianchi, "Businessmen's Associations in Egypt and Turkey," Annals of the American Academy ofPolitical and Social Science 482 (November 1985): 157.




22. Richard Doner and Ernest Wilson III, "Business Interest Associations in Developing Countries" (paper presented at the Annual Meeting of the International Political Science Association, Washington, DC, September 1988).

23. Evans, Embedded Autonomy. 24. Stephan Haggard and Robert R. Kaufmnan, The Political Economy ofDemocratic Transitions

(Princeton, NJ: Princeton University Press, 1995), p. 55. 25. Wyn Grant, "Introduction," in Business Interests, Organizational Development, and

Private Interest Government, ed. Wyn Grant (New York: Walter de Gruyter, 1987), p. 1. See also Wolfgang Streeck and Philippe C. Schmitter, eds., Private Interest Government: Beyond Market and State (Beverly Hills, CA: Sage, 1985).

26. Streeck and Schmitter's research in Western Europe shows that private-interest government arrangements are widespread in industrial countries. Research on Japan and America has shown that trade associations provide a number of collective goods for members, including standard setting, data collection, research and development, insurance, loans, and public relations. See Leonard H. Lynn and Timothy McKeown, Trade Associations in America and Japan (Washington DC: American Enterprise Institute, 1988).

27. Laothamatas, Business Associations and the New Political Economy, p. 91. Laothamatas also notes how the fiscal crisis of the state in the 1980s forced it to rely more on associations for the implementation of development projects (see ibid., p. 81). See also Richard Doner and Ansil Ramsay, "Competitive Clientelism and Economic Governance: The Case of Thailand," in Business and the State in Developing Countries, ed. Maxfield and Schneider, pp. 272-73.

28. David Himbara, Kenyan Capitalists, the State, and Development (Boulder, CO: Lynne Rienner, 1994), esp. pp. 94 and 194.

29. Some of these are described in John Lucas, "The State, Civil Society, and Regional Elites: A Study of Three Associations in Kano, Nigeria," African Affairs 93 (Winter 1994): 21-38.

30. Peter Katzenstein has been an advocate of corporatist arrangements in the smaller European states. See Peter Katzenstein, Corporatism and Change: Austria, Switzerland, and the Politics of Industry (Ithaca, NY: Cornell University Press, 1984).

31. For another critique of corporatism in the developing world, see Mick Moore and Ladi Hamalai, "Economic Liberalization, Political Pluralism, and Business Associations in Developing Countries," World Development 21 (December 1993): esp. pp. 1899-1901.

32. This could be seen as a problem as well as an opportunity. Sullivan, for instance, has argued that corporatist controls represent one of the most serious impediments to an effective system of business representation. See John Sullivan, "Democratization and Business Interests," in Economic Reform and Democracy, ed. Larry Diamond and Marc F. Plattner (Baltimore, MD: Johns Hopkins University Press, 1995).

33. Robert Bianchi, Unruly Corporatism: Associational Life in Twentieth-Century Egypt (Oxford: Oxford University Press, 1989), p. 173.

34. Leigh A. Payne, Brazilian Industrialists and Democratic Change (Baltimore, MD: Johns Hopkins University Press, 1994).

35. John Rapley, Ivoirien Capitalism: African Entrepreneurs in C6te d'Ivoire (Boulder, CO: Lynne Rienner, 1993).

36. Stanley Kochanek, Interest Groups and Development: Business and Politics in Pakistan (Delhi: Oxford University Press, 1983).

37. Andrew Maclntyre, Business and Politics in Indonesia (North Sydney: Allen and Unwin, 1991). In some sectors (such as textiles) rival associations were created as well. See pp. 125 and 246.

38. Harris, "New Bourgeoisies." 39. See the Spring 1995 issue of Daedalus (vol. 124), especially Vincent Cable, "The

Diminished Nation-State: A Study in the Loss of Economic Power," pp. 23-54; Susan Strange, "The Defective State," pp. 55-74; and Vivien Schmidt, "The New World Order, Incorporated: The Rise of Business and the Decline of the Nation-State," pp. 75-106.

40. It is also conceivable that globalization could increase the power of government by putting resources into state coffers (as it did during the 1970s, when large amounts of money were lent to governments in Asia, Latin America, and Africa) and thus providing an alternative to domestic



94 John Lucas

investors. Since the 1980s, however, the trend has been more in the direction of capital flows that bypass the government in favor of the private sector (as is the case in the growth of stock markets and direct foreign investment in developing countries). Furthermore, the policy preferences of these external investors are frequently opposed to state intervention. I am grateful to an anonymous external JDA reviewer for raising this issue.

41. Peter Evans has recorded an example of how local entrepreneurs involved in the Brazilian and Indian computer industries cultivated alliances with international partners in a way that freed them from their previous reliance on government support. Evans feels that this may be a mistake in the long run. See Evans, Embedded Autonomy, chap. 8.

42. In 1996, the Center for International Private Enterprise (CIPE) allocated program funds of over US $5,000,000 to more than 20 countries.

43. Crawford Young, The African Colonial State in Comparative Perspective (New Haven, CT: Yale University Press, 1994).

44. Haggard, Pathwaysfrom the Periphery. 45. Mark Clifford, Troubled Tiger: Businessmen, Bureaucrats, and Generals in South Korea

(Armonk, NY: M. E. Sharpe, 1994), pp. 40, 318. 46. Jung-En Woo, Race to the Swift: State and Finance in Korean Industrialization (New

York: Columbia University Press, 1991), p. I i 1; and Carter J. Eckert, "The South Korean Bourgeoisie: A Class in Search of Hegemony," in State and Society in Contemporary Korea, ed. Hagen Koo (Ithaca, NY: Cornell University Press, 1993), pp. 107-8.

47. Karl Fields, "Strong States and Business Organization in Korea and Taiwan," in Business and the State in Developing Countries, ed. Maxfield and Schneider, p. 138.

48. Jong-Chan Rhee, The State and Industry in South Korea: The Limits of the Authoritarian State (New York: Routledge, 1994), pp. 103, 137; Jung-En Woo, Race to the Swift, p. 200.

49. Cheng-Tian Kuo, Global Competitiveness and Industrial Growth in Taiwan and the Philippines (Pittsburgh, PA: University of Pittsburgh Press, 1995).

50. Yun Han Chu, "The Realignment of Business-Government Relations and Regime Transition in Taiwan," in Business and Government in Industrialising Asia, ed. Macintyre.

51. MacIntyre, Business-Government Relations in Industrialising East Asia. 52. Fred Riggs, Thailand: The Modernization of a Bureaucratic Polity (Honolulu, HI: East-

West Center Press, 1966). 53. Laothamatas, Business Associations and the New Political Economy, pp. 94-102. 54. Campos and Root, Key to the Asian Miracle, pp. 92-97; Anek Laothamatas, "From

Clientelism to Partnership: Business-Govemment Relations in Thailand," in Business and Government in IndustrializingAsia; ed. MacIntyre; Robert J. Muscat, The Fifth Tiger. A Study of Thai Development Policy (Armonk NY: M. E. Sharpe, 1994), pp. 183-84

55. Doner and Ramsay, "Competitve Clientelism and Economic Governance," p. 268. 56. Haggard and Kaufman, Political Economy of Democratic Transitions, pp. 243-48. 57. Doner and Ramsay, "Competitive Clientelism and Economic Governance," pp. 272-73;

Ansil Ramsay, "The Political Economy of Sugar in Thailand," Pacific Affairs 60 (Summer 1987): 248-70. 58. Campos and Root, Key to Asian Miracle, pp. 97-99. 59. Richard Robison, Indonesia: The Rise of Capital (Sydney: Allen and Unwin, 1986). 60. MacIntyre, Business and Politics in Indonesia. 61. Philippe C. Schmitter, Interest Conflict and Political Change in Brazil (Stanford, CA:

Stanford University Press, 1971), pp. 194-203; Kurt Weyland, Democracy without Equity: Failures of Reform in Brazil (Pittsburgh, PA: University of Pittsburgh Press, 1996), pp. 63-65; Payne, Brazilian Industrialists and Democratic Change, pp. 11 3-14.

62. Schmitter provides a telling example in Interest Conflict and Political Change in Brazil, pp. 302-5. For other examples see Weyland, Democracy without Equity,

63. Payne, Brazilian Industrialists and Democratic Change, pp. 16-38, 61-67. 64. Ben R. Schneider, "Big Business and the Politics of Economic Reform: Confidence and

Concertation in Brazil and Mexico," in Business and the State in Developing Countries, ed. Maxfield and Schneider.

65. The most important of these are CONCANACO (National Chamber of Commerce), CONCAMIN (National Federation of Chambers of Industries), and CANACINTRA (National




Chamber of Industries). See Dale Story, Industry, the State, and Public Policy in Mexico (Austin:

University of Texas Press, 1986); Roderic Camp, Entrepreneurs and Politics in Twentieth Century

Mexico (New York: Oxford University Press, 1989). 66. Luis Felipe Bravo Mena, "COPARMEX and Mexican Politics," in Monograph Series no.

20, Government and Private Sector in Mexico, ed. Sylvia Maxfield and Ricardo Anzaldua Montoya

(San Diego: Center for US-Mexican Studies, University of California, 1987). 67. Robert Kaufman, Carlos Bazdresch, and Blanca Heredia, "Mexico: Radical Reform in a

Dominant Party System," in Votingfor Reform: Democracy, Political Liberalization, and Economic

Adjustment, ed. Stephan Haggard and Steven Webb (New York: Oxford University Press, 1994), esp.

pp. 364 and 398; Blanca Heredia, "Mexican Business and the State: The Political Economy of a

Muddled Transition," in Business and Democracy in Latin America, ed. Ernest Bartell and Leigh Payne (Pittsburgh, PA: University of Pittsburgh Press, 1995). Ben Schneider lists the main business

representative in these negotiations as CMHN rather than CCE, but given the overlap in the leadership of the two organizations, this distinction might not be significant. See Schneider, "Big Business and

the Politics of Economic Reform." 68. Schneider reports that business association leaders were initially enthusiastic about the

Alliance, while most business people were ambivalent. See Schneider, "Big Business and the Politics of Economic Reform," p. 204.

69. Among the policies that were either defeated or substantially modified were proposals to

redistribute land, regulate foreign capital, and extend government control over privately held

industries. See Jorge A. Hidrobo, Power and Industrialization in Ecuador (Boulder, CO: Westview, 1992); Catherine M. Conaghan, Restructuring Domination: Industrialists and the State in Ecuador

(Pittsburgh, PA: University of Pittsburgh Press, 1988). 70. The association (CONFIEP) had been formed in 1984. See Catherine Conaghan and James

Malloy, Unsettling Statecraft: Democracy and Neoliberalism in the Central Andes (Pittsburgh, PA:

University of Pittsburgh Press, 1995); Francisco Durand, Business and Politics in Peru: The State and

the National Bourgeoisie (Boulder, CO: Westview, 1994). 71. This was the Bolivian Federation of Private Entrepreneurs, or CEPB. See Catherine

Conaghan, "The Private Sector and the Public Transcript," in Business and Democracy in Latin

America, ed. Bartell and Payne. 72. David G. Becker, "Business Associations in Latin America: The Venezuelan Case,"

Comparative Political Studies 23 (April 1990); Carlos Edward Juarez, "The Political Economy of Policy

Reform in Colombia: Technocratic Bureaucracy and Business-Government Relations, 1966-1992"

(Ph.D. diss., University of California at Los Angeles, Los Angeles, CA, 1995). 73. For a sampling of the best current work see Tom Forrest, The Advance ofAfrican Capital:

The Growth of Nigerian Private Enterprise (Charlottesville: University Press of Virginia, 1994); Bruce Berman and Colin Leys, eds., African Capitalists in African Development (Boulder, CO: Lynne

Rienner, 1994); Himbara,Kenyan Capitalists, the State, andDevelopment; Rapley,Ivoirien Capitalism. 74. In Kenya, the Kenyan Associations of Manufacturers opposed this move. See Himbara,

Kenyan Capitalists, the State, and Development, p. 67. For information on Senegal, see Sheldon

Gellar, Senegal: An African Nation between Islam and the West (Boulder, CO: Westview, 1982), esp.

p. 34; and Catherine Boone, Merchant Capital and the Roots of State Power in Senegal, 1930-1985

(New York: Cambridge University Press, 1992), esp. pp. 166-97. For C6te d'Ivoire, see Rapley, Ivoirien Capitalism, pp. 69-70. For Nigeria, see Thomas J. Biersteker, Multinationals, the State, and

Control of the Nigerian Economy (Princeton, NJ: Princeton University Press, 1987), pp. 65-69.

75. Himbara, Kenyan Capitalists, the State, and Development; and Lucas, "State and Society in Nigeria."

76. World Bank, Sub-Saharan Africa: From Crisis to Sustainable Growth (Washington, DC:

World Bank, 1989), esp. pp. 5-10. 77. See Lucas, "State and Society in Nigeria"; Ladi Hamalai, "Government-Business Relations

and Economic Liberalisation in Nigeria" (Ph.D. diss., Institute of Development Studies, University of Sussex, England, 1993).

78. See Moore and Hamalai, "Economic Liberalization, Political Pluralism, and Business

Associations in Developing Countries," p. 1903.



96 John Lucas

79. Hamalai,"Government-BusinessRelationsandEconomicLiberalisation inNigeria,"pp. 240-41. 80. My own research in Kano found that business associations were effective in securing

reforms in the telephone system, disbanding a corrupt system of mobile law courts, protecting property rights of traders in a local market, and preventing the seizing of assets of local Lebanese merchants.

81. Based on interviews by author with businessmen in Lagos, March 1997. 82. Gellar, Senegal: An African Nation between Islam and the West; Boone, Merchant Capital. 83. The following is based on Samba Ka and Nicolas van de Walle, "Senegal: Stalled Reform

in a Dominant Party System," in Voting for Reform, ed. Haggard and Webb. 84. The Mourides are an Islamic brotherhood known for its entrepreneurial orientation. 85. Sheldon Gellar, Senegal: An African Nation between Islam and the West, 2d ed. (Boulder,

CO: Westview, 1995). 86. Some of this research can be found in Bruce Heilman and John Lucas's "A Social

Movement for African Capitalism? A Comparison of Business Associations in Two African Cities," African Studies Review 40 (September 1997): 141-71.

87. Tor Skalnes, The Politics of Economic Reform in Zimbabwe: Continuity and Change in Development (New York: St. Martin's, 1995).

88. Note that I am lumping together two different arguments here: that market economies are associated with democracy, and that more developed economies are associated with democracy. For the former argument, see Lindblom, Politics and Markets; for the latter argument see Seymour Martin Lipset, Political Man: The Social Bases of Politics (New York: Doubleday, 1960).

89. Payne, Brazilian Industrialists and Democratic Change. 90. Business support for the 1964 coup in Brazil is one exception. See ibid., pp. 16-38. 91. Michael Bratton, "Beyond the State: Civil Society and Associational Life in Africa,"

World Politics 41 (April 1989): 407-30. 92. This seems to be the position of Andrew Maclntyre in his "Introduction" to his Business

and Government in Industrialising Asia. 93. To the examples described earlier, one might also add Turkey, Egypt, and Thailand. See

Bianchi, "Businessmen's Associations in Egypt and Turkey"; Laothamatas, Business Associations and the New Political Economy.

94. See Payne, Brazilian Industrialists and Democratic Change; Chu, "Realignment of Business-Government Relations and Regime Transition in Taiwan"; Chung-in Moon, "Changing Patterns of Business-Government Relations in South Korea," in Business and Government in Industrialising Asia, ed. Maclntyre; Hamalai, "Government-Business Relations and Economic Liberalisation in Nigeria."

95. Jamaica is another example of this. See Michele Garrity and Louis A. Picard, "Organized Interests, the State, and the Public Policy Process: An Assessment of Jamaican Business Associations," Journal of Developing Areas 25 (April 1991): 369-93.

96. Bianchi, "Businessmen's Associations in Egypt and Turkey"; Moore and Hamalai, "Economic Liberalism, Political Pluralism, and Business Associations in Developing Countries"; Laothamatas, Business Associations and the New Political Economy; Camp, Entrepreneurs and Politics in Twentieth Century Mexico.

97. Robert Dahl makes a similar argument to justify authoritarian elements of political parties. See Robert Dahl, After the Revolution, 2d ed. (New Haven, CT: Yale University Press, 1990).

98. Stanley Kochanek, Business and Politics in India (Berkeley: University of California Press, 1974).

99. For discussions of the weakness of business associations in India, see Robert Hunt, "Business Associations and the Small Manufacturing Sector in India," in Volunteers and Voluntary Associations in Development, ed. David H. Smith and Frederick Elkin (Leiden: E. J. Brill, 1981); and Krishnan Lal Sharma, Voluntary Business Associations in Organizational Frame (Punjab: Punjab University Press, 1981).

100. Himbara, Kenyan Capitalists, the State, and Development, pp. 94-95. The Kano State Foundation and the Kano Traders' Multipurpose Cooperative Society are two examples from Nigeria. See Lucas, "State, Civil Society, and Regional Elites."

101. Lindblom, Politics and Markets.



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The Politics of Business Associations in the Developing World