Putting the matter differently, if under a controlled regime there is surreptitious outflow of finance capital, it does not follow that the removal of controls, merely by legalising financial outflows, would eliminate them. On the contrary, such legalisation would merely compound the problem, and squeezing the poor in the economy and destroying its extant productive base in the hope of building up the "confidence" of international creditors and potential direct foreign investors, would merely amount to chasing a chimera.
 
The second strategy which is quite different from the above, though the difference is usually glossed over by the proponents of the above, is a strategy of neo-mercantilism, such as has been followed in many East Asian countries, notably South Korea. Here we do not have a move towards "free trade" and the "free market"; the State remains highly interventionist though the nature and mode of intervention from what prevailed over much of the Third World earlier; the entry of imports into the economy is controlled, as is the capital account of the balance of payments; at the same time, strenuous efforts are made, under State patronage, to push out as much of exports as possible (which is why the term "neo-mercantilism" is so apposite); the sheer magnitude of export growth enables the economy to borrow from abroad, not for financing indiscriminate import liberalisation, but for stepping up the investment ratio; this together with very high domestic savings rates permits the maintenance of phenomenal investment rates, which in turn lead to such impressive growth rates as contribute to the maintenance of foreign creditors' confidence.

Much has been written by way of analysis of this strategy: about the nature of the State that can be so interventionist without being "dirigiste" in the old sense, about the necessity of land reforms as a pre-condition for such a strategy, about the role of near-universal literacy in making this strategy a success, and so on, and we need not repeat all that here. But there are at least two factors which put a question mark on the viability of this strategy, and these deserve a discussion. The first of these is the international context. There can be little doubt that for such a neo-mercantilist strategy to succeed, there has to be a deliberate policy in other countries, especially the advanced countries, of accommodating exports from these countries. The neo-mercantilist policy pursued by Germany around the turn of the century was so successful because other countries, notably Britain which was interested in preserving the Gold Standard, were willing to absorb large amounts of German exports. Like- wise, the post-war Japanese miracle could not have occurred, if the United States, for strategic reasons (having to do with the containment of Communism) had not provided such substantial market access to Japanese exports. And the same can be said of the other successful East Asian countries.
 
The second problem relates to internal opposition. A neo- mercantilist strategy is necessarily associated with a degree of suppression of workers' rights, a shift in income distribution against the working class and in favour of business profits, and, in a large economy, a growth in regional disparities. All these are difficult to accommodate within a framework of representative democracy. Such a strategy therefore, no less than the Fund-Bank strategy, is associated with bureaucratic-authoritarian forms of government. This however only suppresses internal opposition but does not reduce the degree of its hostility. In a society where the legitimacy of governance is founded upon the legacy of a revolutionary struggle, or even of a mass anti-colonial struggle, such an economic strategy runs the serious risk of succumbing to an internal upheaval. Moreover whether or not it so succumbs, one can legitimately question the desirability of any strategy that requires for its success the suppression of workers' rights, and hence, by implication, of democratic rights in general. And finally, since "outward orientation" (though of a neo- mercantilist sort) is an essential component of this strategy, its viability in the context of the emerging world capitalist recession is open to serious doubt.
 
The question which immediately arises is: does an alternative viable economic strategy exist for the Third World, which, while not taking us back to the earlier "dirigisme", can avoid both the Fund-Bank trap, as well as the temptations of an authoritarian neo-mercantilism. In one sense of course the question is absurd, though in another sense it is not. Economic strategies are not chosen like one chooses a shirt or a pair of socks; they emerge out of a complex social reality, and reflect the interplay of different classes and social groups within that reality. So the question is not one of picking out some sort of an optimal strategy. Nonetheless a discussion of possibilities, whether or not they realise themselves, does constitute an important intellectual task. Before we can even think of changing the world, we should have some preliminary idea of the direction in which we should be changing it.
 
The main problem highlighted above, namely the outflow of finance from the Third World in an international economy characterised by great capital fluidity, derives its strength from one basic fact mentioned above: given the pattern of income distribution and tastes in the Third World country, there is a wide divergence between the extant structure of production and the structure of demand, and this divergence is never bridged. This necessarily means a one-way flow of innovations: the Third World is all the time trying to catch up in the production of those commodities which are currently being produced in the metropolitan countries and for which a demand exists within the Third World as well. This perpetual product cycle, in which the Third World is lagging behind the metropolitan countries, is the primary cause of the pressure on its external payments, which gets compounded by the fluidity of capital mentioned above.
 
To get out of this syndrome, while controls over imports and over the capital account of the balance of payments are essential, they are obviously insufficient. There has to be a sufficient growth of exports. While the relentless export drive characteristic of neo-mercantilism need not be endorsed, there is no gainsaying the fact that most "dirigiste" regimes earlier tended implicitly to discriminate against exporting. This anti- export bias is counterproductive. Export-led growth, which, whether the proponents of the Fund-Bank strategy admit or not, is logically inherent as the central thrust of their strategy, offers no solution to the Third World; but pushing out sufficient exports inter alia to ensure that the balance of payments are not put to undue strain is essential for any development programme.
 
At a more fundamental level however the need is to break out of the grip of this peculiar product cycle. Greater equality in the pattern of asset and income distribution is a necessary condition for this, since the ex-ante demand for metropolitan goods per unit of income is likely to be greater for the upper income groups than for the poor. This calls not just for the use of the fiscal instrument, but for a reorientation of the development strategy. Land reforms, the provision of minimum employment and basic amenities, health and education facilities, the development of rural infrastructure etc. must take precedence over the setting up of large import-intensive projects on the basis of borrowed technology with negligible employment-generating effect upon the domestic economy.
 
Income redistribution alone however would be insufficient. In the long-run there is no getting away from the need for a change in tastes and a self-liberation, not a State-imposed one, from the culture of Western-style consumerism. This is not to argue for a turning of one's back upon modern technology, but for a selectivity in the import of technology and an effort at an independent trajectory of innovations.
 
For all this of course the role of the State is absolutely essential, but as the experience of the earlier "dirigiste" regimes suggests, it is equally essential to enforce accountability of the State. This of course is a big issue in itself. But the need for accountability is by no means obviated, as is often erroneously thought, by the mere substitution of a "market-friendly" economic regime for a "dirigiste" economic regime. Perhaps the very alteration in the development strategy suggested above, with greater emphasis upon the immediate provision of better living standards for the poor, would throw up new institutions (for more decentralised decision-making) as well as new levels of consciousness and popular participation that would make greater accountability of the State a meaningful reality.

Notwithstanding the constraints imposed by the international economy there exists a path of sustainable democratic development for the Third World. But the combination of social forces required for arriving at this path and remaining on or near it is not easy to organise.