Market-led development – Main claims Minimal government – Provide order, protect property rights, enforce contracts, provide basic infrastructure, provide basic education » Government should not finance or own firms » Government should not use taxes to manipulate firms’ behavior Free markets – Firms should be free to enter/exit the market – Prices should be free to reflect supply and demand » Government should not provide subsidies Free trade Goods should flow freely across borders » Government should not employ tariff barriers, other obstacles to free trade Government intervention inhibits growth Government intervention leads to unproductive rent-seeking

State-led development – Main claims State-led industrialization is key element in establishing an independent national state and economy Active government – “Infant” industries require government assistance » Protection from competition » Assistance with capital accumulation » Assistance with technology acquisition Technocratic bureaucracy – Effective government assistance requires competent bureaucracy » Historically conditioned, hard to build

Development strategies Definition – Sets of government policies that Affect the domestic allocation of resources among industries and social groups Shape a country’s relationship to the global economy – ISI and EOI are building blocks of development strategies