Financial Restraint and the Market Enhancing View

Abstract

Analysts of development have long discussed the proper role of the government in promoting economic growth. Although nuances differ, in general, two distinct approaches have dominated, one emphasizing the role of the market, the other emphasizing the role of the state in promoting development. The Market Friendly View (World Bank, 1993) presumes that — in the absence of inefficient government intervention — the market generally functions efficiently, and so the government should act to ensure secure property rights and competition, but otherwise not interfere in economic activity. In contrast, the Developmental State View (Johnson, 1982; Amsden, 1989; Wade, 1990) presumes that market failure is pervasive and thus government intervention is necessary to mobilize savings, allocate resources efficiently and promote technological catch-up.

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