Chapter 10: Government Provides the Context: Motivation and Policies
. . . few policies lead to good outcomes and many lead to bad outcomes. All happy countries are alike, but there are many ways to be unhappy. (Kremer, Onatski and Stock 2001: 340) There are three possibilities concerning the role of government in modern economic development. The government pursues policies inimical to economic development and by its actions creates obstacles to economic success. Secondly, its strategy is neutral, designed to have the government provide a framework for others to make the appropriate decisions while stepping back from deliberate intervention. Thirdly, the government adopts policies directly promotive of modern economic development – it intervenes actively. The first is only too common; the second is the stance recommended in economics textbooks for governments; and the third is, in the view of the author, a key factor in the successful inception of modern economic development. This chapter develops a number of important points: first, that the role of government is critical to successful modern economic development in a number of ways; secondly, that a significant degree of government intervention in the operation of the market has been universal for economies which have developed successfully; thirdly, that successful intervention reflects both commitment and the expression of that commitment in an appropriate strategy; fourthly, there are no policies which are effective in all places and at all times: the policies adopted must be specific to conditions in a particular country at a particular time; fifthly, that a policy of picking winners is often pursued successfully. The first section...
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