The recent globalization of markets and the accompanying intensification of international competition have been associated with extensive deregulation of economies as well as with measures to reduce taxes and government expenditure. This liberalization, taken together with the abandonment of public ownership in both the former socialist and mixed economies, has created a widespread impression that the market system has triumphed and that state intervention in the economy has been shown to be impotent. As has been argued elsewhere, the market-oriented reforms of the 1980s have created pressures that lead in various ways to the neglect or undervaluation of assets and structures that are vital for long-term development. The theoretical basis of this debate is reconsidered and the implications for government intervention in the context of innovative processes that require variety and experimentation are drawn out.
