Rethinking the State

The agenda for reform that has emerged in the course of this Report calls for governments to intervene less in certain areas and more in others for the state to let markets work where they can, and to step in promptly and effectively where they cannot. In many countries this calls for a stronger orientation toward the market and a more focused and efficient public sector role. History suggests that this is the surest path to faster growth in productivity, rising incomes, and sustained economic development. Judging by their recent activities, many governments in industrial and developing countries have come around to this view. But economic policy cannot be implemented in laboratories; it has to be made to work in the real world. Reformers face a variety of political constraints on their actions. In many developing countries, one of the obstacles to reform has been its political costs, actual or potential. Political instability and other political considerations go a long way toward explaining why, in the first place, many of these countries adopted, to their economic disadvantage, the policies they did. And they underline the difficulty many countries face in changing course swiftly. So it is important to ask whether sufficiently broad support for the sorts of reforms that have been recommended can