The Debate Around the Role of the State in Promoting Economic Development

The chapter focuses on the decline of the role of the state in the economy since the 1980s. In Western countries, any reference to full employment and industrial policies to support economic growth disappeared. In developing countries, the Washington Consensus model prevailed. The economic policy 'recipe' was basically the same in all latitudes, and the effects were the same. For Western countries, this meant a gradual slowdown in economic growth, growing dualism in labour markets, declining labour productivity and growing inequality. For developing countries, the liberal 'therapy' has generally led to lower economic growth and political instability. Focusing on three issues: (i) the debate over the microeconomic policy approach; (ii); the interpretations of the Chinese development ‘miracle’ and (iii) the recent analysis of industrial policy, it is sustained the futility of the state-market dichotomy and the need to revise past interpretative models.