Economic Policy, Institutions and Entrepreneurship

Economists have debated the issue of state intervention in the economic process in capitalist economies intensively for decades. Often, however, without considering the effects of state intervention on entrepreneurship. In this paper we undertake a critical analysis of the institutionalist theory of state intervention developed by Ha-Joon Chang. He identifies two key roles for the state in facilitating structural change, namely, firstly, to pronounce a vision for the future (state `entrepreneurship') and, secondly, `management of conflicts' which arise during the process of structural change. We also examine how well the Swedish model of state intervention fits into Chang's model as well as possible drawbacks with the Swedish model not least in terms of reducing the incentives for entrepreneurship. Thirdly, we examine the possibility that, because of radical changes in its economic and political environment, the Swedish model has become less successful in carrying out the two key roles outlined by Dr Chang in the last three decades. Finally, we discuss the implications of these changes for the Chang style interventionalist state. Is there any room left for `structural change management' by the state in the global era? If so, what are the appropriate measures and policy levels for this type of intervention? And, in particular, how can proper institutions and incentives for entrepreneurship be used to facilitate the structural change process?