ABSTRACT
In large parts of the developing world, the role of the state in the management of the economy has moved from one extreme to the other. In the late 1940s and early 1950s, when many countries achieved freedom from colonial rule, the main thrust of economic policies was on greater initiatives by the state in economic management, on encouragement of the public sector and regulation of the nascent private sector. Reasons for this policy stance could be well appreciated. Accelerating the process of industrialization was one of the major objectives of the newly independent countries. The Soviet Union had shown that it was possible to rapidly industrialize an underdeveloped country with instruments of central planning and by according a leading role to state enterprises. In any event, the private sector that existed during those times was not capable of setting up large industrial units due to huge start-up costs, or infrastructure development projects because of the public goods character of these projects. Besides, newly independent countries placed emphasis on equity and the private sector was identified with vested interests and profiteering. The political environment was also not conducive to the private sector, since many of the private entrepreneurs had sided with the Imperial powers. All of these factors led the state to adopt a commanding stance in the economic arena.
