State intervention approaches for promoting development, Business Economics

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Explain the state intervention approaches for promoting development.

State intervention can result within:

• Large bureaucracies staffed through friends and relatives of the ruling elite

• State rules and regulations which burden business along with paperwork and slow down decision-making. For example, registering a modern business can take a year; importing components requirements a government certificate and promotes a bribe for licence corruption.

• Price rules-regulation distorts prices resulting within a misallocation of resources

• State funding of unsuitable capital projects

• Crowding out private investment like the bulk of accessible domestic savings is assigned by the state

• No profit motive implies no risk taking resulting into minimal product development and innovation.

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