The ‘stage of development’ is the bigger precursor, which determined the countries’ industrial development policy. Historically, 18th century Britain was the one of the forerunners of free market capitalism- it had the advantage of being highly industrialized with the industrial revolution springing in the country itself. Hence, the development finance for the country came in the form of stock markets and retained earnings of large ventures. On the contrary, Russia which was a relatively much more backward economy had to rely on a central state to drive their industrialization.

A LESSON FROM HISTORY

Introduction of Laissez Faire into an underdeveloped society, which is not ready for such a huge change from the traditional ways, can be catastrophic. The Indian famine of 1876-78 is one such example. Where erstwhile India had historically learnt how to insulate themselves from a famine, in the form of a surplus stock kept aside which could be rationed out. The British however, introduced ‘free-market’ policies during this famine. In theory, the free-market policy applied was supposed to lead food to flow to these areas. But, on the contrary Madras saw that the grain prices rose dramatically and instead of additional supplies as dictated by the theory, the result was that millions of local laborers and artisans were unable to afford their daily subsistence. (Stahl, RM 2016).

STATE OWNERSHIP AS AN ALTERNATE TO LAISSEZ FAIRE

Late Development is inherently a risky design. But as Economics dictates through the risk return trade off- higher the risk, higher the return. These countries have a high potential growth rate. Coupling this with the advantages of cheap labour, being able to acquire technology versus spending time and money on developing it and following compass policy making i.e. learning from the mistakes and success of other developing economies before them (Gerschenkron, A., 1962) makes late developing countries a very promising space.

However, low level of skill in the workforce, little manufacturing experience and dictated comparative advantage in a market led by competition would be a recipe for disaster for the economy. Combining these reasons and the aforementioned risk involved, with the situation of hard currency shortage in the developing world, government intervention became a necessity. (Amsden, A, 2009, 96-99)

THE STATE AND PROPERTY RIGHTS

The State is the single body that has the potential and power to dictate a country’s growth direction – economically as well as politically. The State in a Late Developing economy has many problems to tackle- the premier one being ‘insecure property rights’. Adam smith noted in Wealth of Nations, “tolerable administration of justice to secure property rights and allow investment and exchange to take place will see economic progress take place