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Development and the State: A Changing Vision

Development is a topic that can’t be dealt with without referring to the role of state intervention. The debate over state intervention, its goals and the extent of its application, has been a recurring one for more than three centuries. As far back as the 18th century, there have been several conflicting visions: was it necessary to let an unregulated market follow its natural course (resulting in an optimal allocation of resources), as some economists, like J-B. Say or A. Smith, recommended? Or rather, was it necessary that the state intervene, in particular so as to protect infant industries? (cf. F. List).

Pierre Judet, January 2001

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Summary :

With the accelerated growth of Southeast Asian countries a new concept arose: the state could permit a real economic takeoff while guiding economic choices, while remaining close to firms, while implementing selective industrial policies and while manipulating interest rates in a manner profitable to firms. This concept has been dubbed the « Capitalist Developmental State » in order to underline the collaboration between bureaucracy and firms. The World Bank, though it advocated liberalism for many years, changed its position, declaring in 1997 that « an efficient and competent state is preferable to a minimum state », or « a development without the state will fail. »

However, the role of the state as an actor in development has often been looked down upon. The Eighties were marked by the implementation of structural adjustment programs in developing countries. The recommendations emanating from the World Bank and the International Monetary Fund (IMF) pointed to a necessary withdrawal of the state. In 1997, the consequences of the Asian crisis revealed the failures of the « Pro State » and of a development that was based on a collusion between the state, banks and firms. These relationships, though they had permitted a certain amount of economic development, were undermined by corruption, banks’ lack of independence with regard to government, and the laxity of companies that drifted toward overindebtedness and overinvestment.

Nevertheless, the general opinion is that the state is essential for development: the market cannot replace the state. However, we must redefine the role of the state, and in doing so insure that we arrive at:

A stabilizing state.

A state that is the guarantor of the transparency and the solidity of its financial systems.

A state that is always on the look-out for information.

A state that is the prospector of future orientations and activities.

A state that is the promoter of national solidarity, i.e., of all the great social infrastructures like health, education and formation. Thus, the state must not only promote technical innovations, but also social ones.

A state that is the promoter of North-South solidarity.

In addition to this restructuring, the state must confront two opposing forces: the rise of global issues and of civil society, both engendering a significant anti-establishment force.

Therefore the state is today at a crossroads. It must face: an internal redefinition, the conflicting pulls emanating from local, regional, national and international levels; increasingly crucial global issues (climate change, environment, drugs, famine, debt…), and the pressure of civil society (which can no longer be ignored).

These are the challenges that the state must meet at the beginning of the 21st century.