What should be the state's role in the development process? Why has there been a neoliberal backlash against government involvement in development?
In theory, the role of the state in development should be a small one. Instead of following outmoded socialist central planning policies akin to those of the Eastern bloc in the twentieth century, poor countries should emulate the West and open up its markets to international trade; encourage the development of a vibrant and dynamic private sector; ensure that government spending is kept to a minimum; privatise all manner of inefficient and wasteful state-owned industries and overall, let the free market do its job. At least, that is the theory.
But it may not be that simple. Many historians correctly point out that the West was hardly the epitome of the free market and small government back in the eighteenth and nineteenth centuries when it was first industrialising. If anything, government intervention was the norm for quite a long time. The state played a role in shielding domestic manufacturers from the corrosive effects of trade, which (in their eyes) kick-started the Industrial Revolution in Great Britain; channelling capital to budding industrialists to invent and improve upon new and existing technologies; funding long-range expeditions to faraway lands like India and China to open up trade links, which, in absence of a guaranteed profit, would have turned away private investors; and finally, regulating and standardising all manner of industry as to ensure efficient and organised operation.
However, it takes negligible intellectual effort to simply use the post hoc ergo propter hoc logical fallacy and cherry pick evidence to suit one's world view. The same line of reasoning was used by racists in the 1800s to argue that Western Europe developed because it was made up of whites and Africa stagnated because it was made up of blacks. Such a position is, of course, absolutely ludicrous, and yet the same thought process is used by many who would argue that the state was the main reason that poor countries are now rich. It is one thing to say that the state intervened during the development phase of these countries, but it is quite another to say that its intervention caused such development.
Therefore, historians must pinpoint a single trend within the developed economies that led to the initial development phase. The United States, Great Britain, South Korea and Japan all had state intervention and have been highly successful nations, but there were plenty more failed states, like the Soviet Union, pre-revolutionary France, Argentina and countless African basket-cases, in which the state also heavily intervened, but destroyed the economy instead of invigorating it. Hence, the successes throughout history of state intervention leading to economic development are sporadic at best and hardly vindicate the causality arguments put forward by many of the historians mentioned earlier.