Economic Development: Do Governments matter?

Abstract

Since the Washington Consensus of the early nineties, there has been an attempt to define the role of governments in development. After the laissez faire market solution of the Consensus there was view that the success of the dirigiste economies of East Asian economies suggested that the government should play an activist role. The east Asian crisis of the late nineties once again turned attention to the role of the government with attention turning to India and China and the Beijing Consensus. In this paper, the development experience of India, China and east Asia is explored in detail over the last fifty years. The paper concludes that the experience suggests that governments do no better than the markets particularly as much of the development of these countries was based on exogenous ?shocks? which no government could have anticipated. The paper concludes that the traditional neoclassical view that governments should restrict their role to providing basic public goods like health and education is probably well founded.