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Singapore became a modern nation-
state in 1965. Government policies
attracted foreign investment and the
state thrived on its export industries,
such as refined petroleum.
The way forward was to roll back
the boundaries of the state, remove
rent-seeking, and let the price
mechanism take over.
In the 1980s this revision in
thinking led to the rise of free
market development policy. The
World Bank and the International
Monetary Fund (IMF) introduced
“structural adjustment programs”
to inject market principles into
African economies. The so-called
“shock therapy,” used in Eastern
Europe by these institutions after
the fall of communism, was aimed at
rapidly establishing market systems.
However, these free market
experiments eventually came under
attack for making poverty worse
while also failing to build dynamic,
diversified economies.
Market-friendly policies
Today, disillusionment with
structural adjustment has led to a
new consensus, fusing the insights
of the early development thinkers
with a more sanguine view of
markets. Markets are now seen as
vital in poor countries for creating
incentives for mobilizing resources
in a profitable way. At the same
time economists such as American
Joseph Stiglitz have pointed to
market failures at the small-
business level that commonly
restrain developing countries. For
instance, profitable investments
can’t be made when small
firms can’t get loans. The state may
have a role to play in correcting
these failures, and in this way help
the price mechanism to function
more smoothly. This consensus,
sometimes called the market-
friendly approach, sees the state
and markets as complementary.
However, at the start of the 21st
century, there was a resurgence of
more explicit big push ideas. In
2000, the United Nations drew up
development targets for 2015, which
included universal primary education,
the eradication of hunger, and the
reduction of child mortality rates.
This involves promises by donor
countries to keep up aid flows
and requires large, coordinated
investments across a range of sectors
and infrastructure projects. ■POST-WAR ECONOMICS
Post-war development
in Latin AmericaAfter World War II many
Latin American governments
intervened in their economies
to promote industrialization
across a broad range of sectors.
They restricted imports and set
up new industries to produce
the same goods, imposing
tariffs and exchange controls
to stifle foreign competition.
Governments also invested
directly in the infrastructure
that industry needed, helped
by foreign aid and technical
assistance. This process was
known as Import Substitution
Industrialization, and it was
most successful in countries
that had internal markets that
were large enough to allow
heavy industry to sit alongside
consumer-oriented enterprises
in a viable way, such as Brazil
and Venezuela.
Critics argue that Latin
American countries should
have focused on strengthening
the sectors in which they had
a comparative advantage,
encouraging firms to become
internationally competitive
and to export their products.Bolivia’s oil industry enjoyed
record investments from its
government in 2011. Privatized
in the 1990s, the industry was
renationalized in 2006.