ABSTRACT
This chapter makes a critique of orthodox investigations of economic growth. First, it shows that the use of averages hides an important empirical reality of the growth process in developing countries. These are the periods of stagnation, growth, structural breaks, volatility and instability that actually characterise growth in developing countries. The second section notes that policy provides the most straightforward explanation for episodes of growth and stagnation. If the policy-growth hypothesis were true, we would expect to see episodes of growth and stagnation correlated strongly with changes in policy and that the results were causal. In practice, there are severe empirical and theoretical problems with uncovering any link from policy to growth through crosscountry regressions. These include complementarity among policy variables, the relation between different theories of growth, the question of growth itself as an endogenous process, hysteresis effects, growth regressions and dynamics and the assumption of universalism in cross-country regressions. The final section outlines an alternative model to explain episodes of growth and stagnation, emphasising the role of the state and relating it to these theoretical and empirical problems.
