Managing Change in the Twenty First Century
Chapter 2: Institutional Foundations of a Developmental State
As discussed in Chapter 1, a modern developmental state is an initiator and a facilitator of a country’s dynamics of development. Before we discuss the relevant enabling institutions for the state to initiate and propose the development process, we will make some general comments on the state’s need for institutions. In our discussion, we define institutions as those formal and informal rules by which a society operates, as well as the authorities and agencies that formulate, implement, and ensure the sanctity of these rules (World Bank, 2001, 2002; Roy and Sideras, 2006). The state may have to modify existing regulations or policies and also to create new ones as the situation demands in the process of the implementation of state policies. It also requires institutions to ensure an equitable distribution of gains resulting from economic growth among wider sections of the community. While appropriate institutional foundations to promote economic growth by creating greater employment opportunities for people will, ipso facto, reduce inequality in income distribution in the country, new institutions targeted at redistributing the national income may also have to be created. Since the size distribution of income, which shows the amount of income received by the poor, middle class and the rich, and which is regarded as a direct measure of welfare, depends on ownership patterns of productive factors including the value of labour services, then any institution that enhances the return to labour will in general lead to a more equal distribution. This is because the large majority...
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