Understanding Economic Development

Understanding Economic Development

A Global Transition from Poverty to Prosperity?

Colin White

This fascinating book considers one of the most important problems in economics: the inception of modern economic development. There is at present no satisfactory explanation of the inception of modern economic development; an excessive focus on either pure theory or on unique histories limits the explanatory power. This book realises the need to integrate the two approaches, moving beyond the proximate causes of economic theory to review the role in an analytic narrative of significant ultimate causes – geography, risk environments, human capital, and institutions.

Chapter 10: Government Provides the Context: Motivation and Policies

Colin White

Subjects: development studies, development economics, economics and finance, development economics


. . . 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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