By Dr. Ahlam Nasser
Since the early eighties of the last century, neoliberalism has shaped the intellectual framework dominating economic policies worldwide. The idea was based on reducing the state's role, deregulating markets, and letting the forces of supply and demand drive development. This approach is associated with the works of economist Milton Friedman, and with political shifts in the times of Ronald Reagan and Margaret Thatcher, then globally generalized through reform programs supported by international institutions such as the World Bank and the International Monetary Fund.
It is undeniable that this model has achieved tangible results in some economic aspects, as trade liberalization has contributed to increased growth rates in several emerging economies, especially in East Asia, and has enhanced competition and lowered the cost of some goods and services. World Bank reports on global development have indicated that trade openness was a significant factor in accelerating growth in several developing countries during the nineties and early millennium.
Then came the COVID-19 pandemic, which completely reshaped the scene when supply chains were disrupted and entire sectors collapsed. The markets could not save themselves, governments intervened by injecting unprecedented stimulus packages, and the state regained its role as an investor and rescuer at this stage, as reports by the United Nations on the global economic prospects confirmed that the post-pandemic phase is leaning towards a greater role for the state in health, energy, and food security.
The question today is no longer whether neoliberalism has failed, but rather, can the market alone achieve sustainable and equitable development? Experience suggests that a market without a strong regulatory state opens the door to monopolies, and a state without a dynamic market creates stagnation and reduces market efficiency.
The ongoing global shift does not mean a return to central planning, but rather to a more balanced model, a flexible state able to intervene when the market fails to function well, investing in strategic sectors and moderating competition without stifling private initiative. This is what is now known in modern literature as "the modern developmental state".
In the end, we are not simply witnessing the fall of past ideas as much as a recalibration of them. Economic history teaches us that models do not disappear suddenly; they are reshaped under crisis pressures. The issue is not a struggle between the market and the state, but the search for a smart balance that achieves growth and preserves justice together.
To understand the scene accurately, it is essential to distinguish between two models of the state's role. The regulatory state sets rules and regulates the market through supervisory bodies that prevent monopolies and address market failures, ensuring public goods like security and education without directly intervening in economic activity.
The developmental state, however, goes beyond protection; it initiates stimulation, supports emerging industries, and directs investments towards strategic sectors, managing structural transformations between traditional and new sectors through thoughtful industrial policies.
The fundamental difference is that the former corrects the market's course, while the latter contributes to shaping its future. Herein lies the real question, do we want a state that only regulates and monitors, or a state that leads transformation within strong and accountable institutions?
