State—market relations in late development — the East Asian experience and its relevance to developing countries

Abstract

The role of the state in development occupies an important, though highly controversial, position in political economic scholarship and debates. The ‘Keynesian revolution’ provided a respectable recipe for state intervention to resuscitate an ailing market economy, stabilize it and accelerate its growth. Keynes was convinced that state intervention was essential for a capitalist economy to weather its inherent cyclical tendency towards crisis. He regarded ‘laissez–faire a legend, a bit of metaphysical thinking’ (cited in Mattick 1969). In western countries, state intervention acquired even greater importance and legitimacy in the post–war period in order to meet the challenges of reconstruction, regulate the economy and provide the institutional arrangements for administered wages and social security. However, the origins of state intervention to restrict or stimulate the market forces and to direct or influence the development process in western countries predate the Keynesian revolution (Pol-anyi 1957, Gerschenkron 1962).