ABSTRACT
This chapter highlights the differences between the process of state formation and market-building in advanced and late-developing economies and it offers a conceptual framework for the political economy of market-building in late-developing countries. Whereas the consolidation of advanced market economies was based on bottom-up and inside-out processes, in which domestic market actors played an active role as drivers of change, the consolidation of late-developing market economies, this chapter argues, is best captured as a top-down and outside-in process, in which domestic governing institutions and external actors play the decisive role in shaping the economies. The chapter outlines two key concepts which are essential for the analysis of the political economy of state formation and market-building in late-developing and emerging economies: local policy paradigms and patterns of links between state and non-state actors. Both concepts will be examined and applied so as to comprehensively explain the continuities and transformation of Israeli capitalism from the 1930s to the 2000s.
