Governing the Formal Economy:The Convergence of Theory and Divergence of Practice

In this chapter, I ask what contemporary development studies tell us about state-market relations. I argue that, although the 1980s and 1990s were synonymous with neoliberalism and the supposed retreat of the state, this was the period when institutional analysis - not least, of the state itself - began to make its mark on development studies. I suggest that institutionalism is now providing the basis for a convergence of sorts between orthodox and heterodox theories, with respect to issues such as the origins of private property rights, norms of democratic transparency and accountability, the importance of bureaucratic autonomy, elite consensus and state capacity. From this perspective, I argue, the rise of the ‘BRICs’ signifies the superiority of neither state- nor market-oriented development; rather, it is the idiosyncratic institutional characteristics of individual nation-states that ultimately accounts for variation in outcomes between those that achieve development success and those that do not.