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”.

In the state of Kerala, India, land reforms that were introduced post independence in an effort to secure said property rights, were widely considered successful as it accounted for 22.88 per cent of the total number of tenants conferred ownership rights (or protected rights) up to 2000, despite being home to only 2.31 per cent of India’s population. (Ghatak, M. and Roy, S., 2007).

Agrarian reforms as a result of secure property rights would ideally lead to the increase in productivity. With most of the unskilled labor affixed to agriculture in LDCs, the high increase in productivity means the country would be able to export primary goods and in turn gain access to foreign exchange* i.e hard currency. We will discuss the use of foreign exchange at a later stage in the essay.

INDUSTRIAL POLICIES