| Abstract: | Economic liberalisation has been advocated as universally valid for developed and developing countries alike, and, as a result, the role of the state has been disparaged in favour of unrestricted markets and free trade. The neo-classical proposition is by no means fully justified from a theoretical point of view, and there exist powerful, countervailing arguments why government intervention and market coordination, especially during a nation's initial stage of industrialisation, can achieve improved resource allocation and greater competitive advantage. By helping to explain the very creation of industrial capacity, as well as the enhancement of long-term growth rates, institutional economics can provide clearer insights into the complementary roles of state and market. These theories are, moreover, supported by empirical evidence from East Asia, where government has been a contributory but not dominant factor in the achievement of economic success. |
