The role of government in economic development has been debated for a number of years. It has often been polarized into two extremes of either zero involvement or total involvement or intervention. One can use a simple scale of measurement to look at the role of the government. At the one extreme, Adam Smith, in his Wealth of Nations, writing in 1776, talked about the “invisible hand” and the free market. The doctrine of laissez-faire advocates that economic activities are best left in the hands of the private sector. In contrast, many argue that a lack of government intervention can lead to market failure. Keynes (1936) argued the case for government expenditure at a time of economic recession, and Samuelson (1954) discussed the important relationship between public services and market failure. In developing countries, the development of infrastructure by the government has eased industrial bottlenecks (Rodsentein-Radan 1943; Nurske 1953; Kuznets 1973). Government intervention in the form of economic planning has also been advocated. Economic planning “is to ensure the wholesale transformation of people's attitudes, values and institutions, and planning for development must aim at jerking the entire social system out of its low-level equilibrium and setting off a cumulative process upwards” (Myrdal 1968:1901). It has also been argued that government intervention in the form of public expenditure is justified because of the shortcomings arising from the disparity of the provision of private and public goods and services (Galbraith 1976:15 and 294).
Realistically, as long as there is the presence of government, there is bound to be some degree of intervention. The more likely danger is that people tend to consider the government as an ultimate provider, look for government action or support whenever economic difficulties arise, and blame the government if the economy performs poorly. The “instant” call for government to act has, at times, invited unnecessary government intervention, or has provided an excuse for the government to intervene. In an attempt to promote growth and development, the government performs six major functions (Wade 1990:11). The maintenance of macroeconomic stability and the provision of the components of the physical infrastructure, such as harbors, railways, and