Relationship And Role Of State And Market In The Developing Country

The role of state in the economy and the relationship between market forces and state intervention with regulation is one of the fundamental issues of political economy. Since the 1980s, neoclassical ideology has dominated the economic theory, while neo-liberalism has become the prevailing doctrine of most developed countries. On the other hand, the collapse of the Soviet Union and experience of the countries of South America and Africa, as well as of (South) Eastern Europe, backs up the attitude of the advocates of neo-liberal doctrine that statism usually results in economic, political and social instability. It can be concluded that at that time the prevailing theory and real experience justify the acceptance of attitude that a successful economic growth and development of a country require the role of state to be limited to a maximum and its economic functions to be reduced to a minimum. However, there are countries that have based their development strategies on a good relationship and cooperation between a strong state and free market. In literature, developmental states is the name for these countries with such approach to the organization of economic system. The aim of this paper is to give a summary of development of idea and concept of developmental state, as well as to explain its characteristics and on that ground try to define the relationship and role of the state and market in such a state.