Business Ethics and Corporate Governance, Second Edition

STATE INTERVENTION IN A DEVELOPING ECONOMY

State intervention is inevitable in developing countries to break the (i) vicious circle of poverty—a circular constellation of forces that keep the poor country in a stationary state of underdevelopment and (ii) to usher in economic growth through comprehensive government planning. The economic rationale for state intervention in the process of economic development of poor countries is briefly discussed further:

1. Simple market forces cannot ensure high rate of investment and growth in output. Economic rigidities and structural disequilibrium hinder free operation or even the normal process of growth. Since economic development is not an automatic or spontaneous process, government should interfere with ...