The Process of Economic Development

By James M. Cypher; James L. Dietz | Go to book overview
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The state as a potential agent of transformation

From neoliberalism to embedded autonomy
After studying this chapter, you should understand:
the neoclassical perspective on the role and nature of the state in the economy;
P.T. Bauer's critique of developmentalist theories and his case for spontaneous development;
the origins and importance of market failure versus government failure;
the nature of the so-called New Political Economy and DUP activities;
the importance of government leadership versus government followership;
how state activities can result in crowding-out or crowding-in of private investment;
the crucial role of a meritocracy of state employees to successful development;
the characteristics of the predatory, the intermediate, and the developmental state;
the meaning and significance of embedded autonomy; and
the four roles of the developmental state.


This chapter concentrates on one of the most disputed areas of development studies, the role of the state in the process of economic transformation. It begins by framing the discussion within the context of major socioeconomic realignments of the 1980s which set the stage for a renewed debate over the role of the state. It concludes with recent research which attempts to reaffirm the potential of the state as an agent of economic growth, a view widely held by the early developmentalists as well as the heterodox thinkers discussed in the previous two chapters.

While England was passing through the agonies and ecstasies of the Industrial Revolution (1750-1840), a group of industrialists, pundits, and economists urged unrestrained laissez faire as the best means to advance the wealth of the nation, and they made an impression in national political-economic debates of the period. Because many were located in the thriving industrial town of Manchester, they became known as the "Manchester Liberals." In their view, if the British government would only eliminate almost all regulations and constraints on market behavior, then England would forge ahead even faster. 1


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The Process of Economic Development


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