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Comparative Economic Development Strategies

This article contrasts Market-led development advocating minimal government intervention with State-led development emphasizing an active government role. Discusses main claims, development strategies, and their impact on resource allocation and global economic relations.

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Comparative Economic Development Strategies

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  1. Market-led development • Main claims • Minimal government • Provide order, protect property rights, enforce contracts, provide basic infrastructure, provide basic education • Government should not finance or own firms • Government should not use taxes to manipulate firms’ behavior • Free markets • Firms should be free to enter/exit the market • Prices should be free to reflect supply and demand • Government should not provide subsidies • Free trade Goods should flow freely across borders • Government should not employ tariff barriers, other obstacles to free trade • Government intervention inhibits growth Government intervention leads to unproductive rent-seeking

  2. State-led development • Main claims • State-led industrialization is key element in establishing an independent national state and economy • Active government • “Infant” industries require government assistance • Protection from competition • Assistance with capital accumulation • Assistance with technology acquisition • Technocratic bureaucracy • Effective government assistance requires competent bureaucracy • Historically conditioned, hard to build

  3. Development strategies • Definition • Sets of government policies that • Affect the domestic allocation of resources among industries and social groups • Shape a country’s relationship to the global economy • ISI and EOI are building blocks of development strategies

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