The Role of the State in Economic Development: Theory, the East Asian Experience, and the Malaysian Case

Date: December 1993
Type: Papers and Briefs
Series: Economic Staff Papers



The proper role of the state in promoting economic development is an issue that has attracted the attention of an unusually broad range of individuals and institutions with a professional interest in economics. At the theoretical level, the neoclassical orthodoxy has long established a presumption in favor of the non-interventionist state, largely based upon the ability of freely functioning markets to achieve Pareto efficiency in general equilibrium. More recently, however, the neoclassical paradigm has come under assault from a variety of new theoretical departures. The most important of these have been the so-called new growth and new trade theories. Among the more empirically minded economists and those with an interest in economic history, a fierce debate has developed concerning the appropriate classification (relatively free-market or relatively dirigist) for the small sample of success stories in economic development. This discussion has been dominated by analyses of Japan and the East Asian newly industrializing economies (NIESs).


  • Foreword
  • Introduction
  • The Academic Debate
  • The East Asian Development Experience
  • Malaysia: A Case Study in the Effects of Government Intervention on Economic Development
  • Conclusion