Modified State Intervention Essential For Growth

The World Development Report released yesterday focuses on the role of the state in furthering development. BS reporters highlight the World Banks recipe for change

The World Bank has highlighted the role of an ``effective state as a vehicle for fuelling economic development in its World Development Report 1997. The report, titled The State in a Changing World, was released yesterday.

Experts believe that the thrust of the report clearly indicates that the Bank is veering towards recognising both the increased role of the state in the growth process and the need to employ increased state intervention, albeit in a modified form, as a tool to fuel the development process.

 

The reports overview concedes that the role of the state in the development process was recognised nearly 50 years ago, but at that time the term meant that development should be provided by the state.

The experience of several countries throughout the world has now led to a redefinition of the term. According to the report, the term now means that ``the state is central to economic and social development, not as a direct provider of growth but as a partner, catalyst and facilitator.

The report cites the dazzling growth of East Asia, and even the Industrial Revolution, as examples of rapid growth made possible by an effective state. This growth was made possible by the state to harness the energy of private business and individuals, and by acting as their partner and catalyst, instead of restricting their partnership.

``The issue of the role of government is high on the agenda in developing and industrial countries alike, and for many, the lesson of recent years has been that the state could not deliver its promise, writes World Bank president James D Wolfensohn in the foreword to the report.

``Many have felt that the logical end-point of all this was a minimalist state. Such a state would do no harm, but neither could it do much good. The report explains why this extreme view is at odds with the evidence of the worlds development success stories, he adds. The report not only pinpoints the need for state intervention but also highlights the fact that state intervention has been growing the world over. However, the report simultaneously focuses on the fact that the quality of state intervention has changed, with greater emphasis now being placed on decentralisation and mass participation.

The report points out that the redefinition of the states role will include strategic selection of the collective actions that states will try to promote, coupled with greater efforts to take the burden off the state by involving citizens and communities in the delivery of core collective goods.

The report does not discuss India specifically while measuring the level of state intervention. However, a table in the report indicates that state intervention (total government expenditure as a percentage of gross domestic product) in 1995 was as high as 48 per cent in Organisation for Economic Cooperation & Development (OECD) countries. Experts believe that by this measure, state intervention in India would not be more than 30 per cent.