ABSTRACT
Orthodox economic prescriptions assume a minimal economic role for the state is essential to successful adjustment. Implicit in the orthodox approach to stabilization and adjustment is the view of the state as predatory and interventionist. The reduction of the political protection of the economy should increase its openness to trade as reflected in a positive rate of change in the relative export openness ratio. The growth in openness to trade should contribute significantly to the appreciation of the real exchange rate. High transaction costs impede economic gains regardless of industrialization strategy or political capacity. A strong state can use society's political and economic institutions and the market to transfer resources from one sector to another. Public-sector agencies and the domestic industrialists and vendors who supply and service them can become politically mobilized interest groups to resist or deflect state objectives.
