Saturday, April 20, 2024

AS I SEE THINGS: The entrepreneurial state – Part 1


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THE HISTORY OF ECONOMIC THOUGHT is replete with discussions about the role of governments versus the business community in transforming the financial landscape of countries all around the world. That debate in the literature goes as far back as the 17th century with the works of pioneers and great thinkers such as Adam Smith.

In the contemporary era, that discussion once again took centre stage a mere eight years ago following the 2008/2009 global financial and economic crisis that has wreaked havoc on many countries, including those here in the Caribbean. 

The real issue at hand ought to be the role that governments and the private sector can play in not only managing economies, but also in the reconfiguration of our socio-economic architecture to make our societies more responsive to the needs of present and future generations.

Some pundits have cleverly argued that the private sector has to be the engine of economic growth and development, with the government providing the necessary infrastructure to facilitate expansion of business activities, despite the failures in monitoring and supervisions that took place within the housing industry in the United States that led eventually to the most recent global recession. 

One of the strongest arguments in favour of allowing private enterprises to drive economic expansion is the notion that governments do not create jobs; the private sector does.

An alternative view is that the presence of market failures in the free marketplace makes it inevitable that the role of governments in managing and reshaping economies must be enhanced for the good of all, including the private sector.

While such an idea often meets with stiff resistance by those who promote free enterprises as the way forward, there are numerous examples of countries throughout the world that support the idea of governments leading the way of rebuilding economies. This writer wishes to classify such actions by governments as those of the entrepreneurial state.  

Those success stories have been captured succinctly in Stephen S. Cohen and Bradford J. DeLong’s book Concrete Economics: The Hamilton Approach To Economic Growth And Policy, a highly recommended must-read for all.

As a sample, this is what the authors had to say in reference to the role that can be played by governments in economic transformation: “It is not wrong to say that the east Asian development model was invented in the United States. Central to it is the concept of the development state, and, in the words of Financial Times columnist Martin Wolf: ‘It was America and Hamilton that invented that idea.’ Pioneered by Hamilton, implemented in the late-nineteenth century by Bismarck’s Germany, transplanted to east Asia by Japan, adopted by Korea, and then – with significant variations and at world-reshaping scale – by China, the east Asian development model has delivered unprecedentedly rapid growth and transformative development.”

How often have we in the Caribbean been presented with the “Asian miracle” as a success story pertaining to economic growth and development that we should embrace? Have the proponents of this model ever seriously highlighted the critical role that governments have played in bringing about economic changes in those countries? Are we in the Caribbean prepared to accept and implement this notion of the developmental state in order to reconfigure our ailing economies?



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