STRONG STATE VERSUS THE MARKET DEBATE:
There has been a constant debate as to what shall be the instrumental influencing factor for the economic arrangement and economic development of a organised state. This is very important because economic development has a very big impact on the development of a nation.
There is a question as to whether the Market as in western countries should take the lead to do so or should the neutral and just State be the leader as in developing countries. A State led economic arrangement consists of planned social and economic development through five year plans,etc whereas the Market led mechanism on the other hand is associated with increased economic enterprise/industries and better quality of products and services.
Thinkers have supported both ideas and thus there is no synonymous decision on the same. Lets discuss this further in order to understand how exactly both of them are important. A State led mechanism according to scholars,is very necessary as it will be determined in its objective to achieve equitable and all round development in society whereas the Market is only profit driven and it may lead to a disparity in people’s status as those who cannot afford the products and services would be further pushed down into unjust social conditions. Market will not invest in new ventures and areas where the profits are not visible thus leading to stagnation and no development,thus a State is required to intervene.
They will keep competing among themselves for the same kind of products and services thus leading to unnecessary supply and wastage of natural resources. Even countries who are champions of market driven mechanism have been forced from time to time to bring in the State to intervene and regulate them for the benefit of the people and economy,examples of these are the ‘New Deal’ arrangement during The Great Depression in the 1930’s and in the recession period in 2008.
On the other hand if we take a purely State led mechanism to drive economic arrangement and development in a society then scholars fear that it will lead to a rigid arrangement where even developmental and necessary economic decisions may become victims of routine and rigid rules and regulations and corruption in the name of socialistic perspective and will be pushed back thus leading to no development and ineffectiveness and inefficiency.
Market is a very efficient and quality provider of goods and services and they create an arrangement of competition and betterment through the forces of demand of supply.
Therefore,in between these counter views in the era of Liberalisation,privatisation and globalisation post 1990’s there has been a sort of compromise between the two schools of thought and we have as a result the arrangements of Public Private Partnership,etc and it has been suggested the State should be present to provide an indicative framework with sufficient free play to market forces in enterprises within that framework.
Which means simply that the State shall regulate and create a framework with necessary objectives and goals for development of society and the production of products and services shall be given to the market for proper competition and efficient,quality products and services that will be distributed equally by the State as per its policy framework established. So,both factors will be playing and driving the economic arrangement and development in a society(mostly in developing countries).
State v/s Market whom to choose
During the 1990s, although the market paradigm was dominant in economics and public policy, a new literature stressing the importance of the role of the state in industrialization rose to fame. We can mention Alice Amsden’s Asia Next Giant (1989), Robert Wade’s Governing the Market (1990) or Peter Evans’ Embedded Autonomy (1995). This literature dwelled on the East Asian miraculous industrialization and showed with empirical and historical evidence how the state apparatus was necessary to spark the economic take off. More recently, these academic attempts multiplied (for instance in the developmental state literature with Ha-Joon Chang’s Kicking away the Ladder, 2002) and gained new interest after the 2008 financial crisis. Yet, this literature is not novel and draws its inspiration from previous economists and social scientists, who for a long time warned us of the danger of disintegrating the state from the economic sphere. On the other hand, mainstream theorists tend to undermine, if not ignore, state intervention and consider it as an exogenous variable to economic growth (see for example Bela Balassa, Lord P. T. Bauer, Anne Krueger and Deepak Lal). The post-1980s era had provoked academic debates around the role of the market versus the role of the state for developing countries: the claim made by mainstream economists and politicians was that countries which pursued a state-led industrial policy failed greatly and that the Latin-American debt crises was an illustration of this (see for example the 1983 World Development Report). On the contrary, it was observed that the East Asian newly industrialized countries (the so-called ‘four tigers’) ‘miraculously’ developed by pursuing market-oriented policies (see for example the World Bank). As heterodox economists, such as Amsden, Wade, and Evans, retaliated by stating the exact opposite, the extent to which the state could be an industrial actor or not become a new agora for both camps.
However, what if the terms of the debate were problematic at the conceptual level from the beginning? Is the dichotomy “state vs. market” as evident as it appears to be in policy debates? A theoretical detour going back to Karl Polanyi might help us shed some light on this issue.