The Role of the State in Economic Change

Abstract

The role of the state has occupied centre stage in the development of economics as an independent discipline and is one of the most contentious issues addressed by contemporary economists and political economists. The immediate post-war years saw a swing in economic theory towards interventionism, motivated by the urgent need for reconstruction in advanced capitalist countries, the establishment of socialism in parts of Asia and Eastern Europe, and the liberation of many developing nations from colonialism. After a quarter of a century of interventionist policies, a vigorous backlash against state intervention began with the discrediting of welfare statism in advanced capitalist countries, grew through the spread of liberalisation programmes among developing nations during the 1980s, and culminated in the dismantling of socialist central planning since 1989. This book examines patterns of interventionism and anti-interventionism in a wide variety of historical, political and institutional contexts and within different theoretical traditions. The primary focus is on the internal factors which shape the role of the state and determine its effectiveness in promoting economic change. It explains the growing disenchantment with the neo-liberal, anti-interventionist programme. Although one can talk of certain general principles, there is no hard and fast rule to determine the optimal degree and the desirable areas of state intervention, which can only be determined in the concrete historical, institutional, and geographical context. The challenge is to form a new synthesis in which the valid insights of neo-liberalism are stripped of their ideological baggage and intergrated into a wider and more objective intellectual framework.

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