State and Market in Development: Synergy or Rivalry?

By Louis Putterman; Dietrich Rueschemeyer | Go to book overview

12
Synergy or Rivalry?

DIETRICH RUESCHEMEYER & LOUIS PUTTERMAN

In this conclusion we attempt to develop further the conception of the role of states and markets in development that we see emerging from the previous chapters. We seek to move the discussion from an either-or format, however modified by sophisticated qualifications, to inquiries into how market and state can complement each other in furthering growth and development.

We discuss first the specific contributions of market and state to economic life as well as the complex conditions of both market creation and state building. This is followed by a review of major types of state policies. A third section looks at the special conditions of late industrialization. We then consider the features of the state and of state-society relations that are most conducive to developmental state action. The conclusion briefly restates the core of the argument.


Markets and States Are Not Natural Givens

The promise of the market can be simply stated. In principle, it accomplishes a number of things at once, many of them critical for economic efficiency. It smoothly coordinates the activities of a multitude of economic units and uses their varied knowledge and energy in ways that elude any form of administrative coordination. It signals supply conditions—shortage and abundance—as well as variable needs and wants, provided the latter are backed by purchasing power. It provides incentives for responding to changing demand and supply situations. And it channels resources required for such responses. Yet at the same time it also allocates income in disregard of prevalent notions of equity, leaving some needs unmet, and it creates concentrations of economic power that coexist tensely, at best, with democratic political life. At its best, finally, the market maximizes economic efficiency under given conditions; whether it also fosters growth and structural transformation is—even with ideal assumptions—open to further questions.

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