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Genre = Economic Development
Intriguing Connections: Capitalism, Socialism, their Alternatives and Critiques
Countries can govern their markets to support the country's need. To provide more employment opportunities or obtain the resources needed for proper infrastructure, the government can encourage the desired sector’s growth. Governing the market means to incentivize the mobilization of capital to where it is needed.
In a standard opportunity cost model, a country should only produce the goods that it has a comparative advantage in. This book shows that any country can change their current comparative advantage. At times, private enterprise does not want to enter a market due to lack of capability and/or there is an existing dominant producer, but the government can mobilize capital to those markets by providing a variety of supports or protections to the firms. The supports and protection help the firms gain profit and become capable producers. That means that the previous comparative disadvantaged good, can now be produced at a lower opportunity cost or at par with the world market producers.
The implications of the book can be substantial, but there are few counterarguments made. Some in passing, others given a small number of pages. No effort was shown in reviewing the countries that used governing the market and have not succeeded.
Governing the market strategy implications depend on having access to products and knowledge from other countries, export market for the product, and few countries producing the product. A country that wants to develop an industry, requires information about that industries products for which the government can provide incentives to create. Governments can provide research and development funds, but development happens more in products that already exist which the government wants to be able to produce internally. When a product is introduced to a country, there is usually only a small internal market, which means that the initial level of production is rarely enough to provide profits for the firm’s existence. Governments tend to provide incentive the export of the product so that the firm can sell more products and cover their costs. After the firms start to sustainably produce the products, development of the sector can come to a halt should other countries start to produce the same product.
A problem of governing the market that is provided is the limited rights of the people. In the examples given, any government dissidents or opponents are jailed or worse. There are huge controls on media and what can be discussed openly. For more than 2 people to meet, they must first register with local authority to approbate the meeting. The authors counterclaim to this problem is that the people care less for freedoms when they need employment.
The book is fairly well written and a lot of data to support the governing the market theory is provided. The initial chapters and the last two, provide an overview of the rise of East Asia. But in terms of specifics for governing the market argument, only one country is used. That country is Taiwan. It would have helped a lot for the author to provide a larger variety of countries and to provide examples where governing the market strategy was used and failed or abused.
Pages to read: 436
1st Edition: 1990
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