Market and State

Abstract

The question of what kind of institutional set‐up would be appropriate for promoting economic development is approached in terms of combination between market and state. The traditional debates on the choice of development strategy between free trade and infant industry protection is examined with reference to the historical experiences of developed economies as well as recent confrontations between import substitution industrialization and the IMF–World Bank structural adjustment policies. The nature and significance of market failures versus government failures are illustrated in terms of comparisons between the Latin American Debt Crisis in the 1880s and the Asian Financial Crisis in the 1990s.