This essay discusses variation in economic development. It addresses the literature by seeking what various theories argue is beneficial for a developing state and how this has this changed over time. It analyzes specific cases to provide practical examples to the theories addressed. Further, it highlights the Middle East to determine whether or not these theories can apply to the region. It then discusses what explains the Middle East's lack of economic development.
Initial scholarship on state development was steeped in Behavioralist and Marxists thinking which focused on society rather than the state. Major theories of the time consisted of Modernization, Dependency, and World System Theory (Lipset 1957, O'Donnell 1979). Studies which did include a role for the state typically assumed the state had a strictly distributional capacity instead of its own agency and resources (Krasner 1984). Further, scholarship that incorporated the state tended to paint it in a very negative light; highlighting state economic involvement as deleterious to development. For example, Olsen (1982) argues that states whose economies prospered following World War II were those that had abolished trade unions and other distributional groups that were in collusion with the government -- West Germany, France, and Japan - whereas states whose interest groups and trade unions remained entrenched did not advance as rapidly post World War II. Olsen is not merely arguing against the state's role in the economy but also against a democratic state's involvement in the economy.
However, studies of non-democratic, under-developed states also came to the same conclusion about the state's role in the economy. Based on his study of Africa, Bates (1981) advocates limiting the state's role in economics because politicians will make policy choices that are politically useful rather than economically so. First, it is important to note that Bates' study does not grant the state its own agenda but is reduced to the goals of political figures. Second, Bates understands the state as being distributional; understanding the states' interests, which are in effect societies' interests, as oppose to a market economy. Bates argues that in under-developed countries political leaders make a decision to de-invest in market forces for the sake of political forces.
This approach along with the findings of Olsen and other scholarship at this time gave rise to the Washington Consensus. They are the policy-makers and political pundits working for the World Bank, IMF, etc. who encouraged and ...