The global economic order is going through a period of sustained uncertainty. The rivalry between the United States and China has moved to the centre of world politics, reshaping trade policy into an instrument of geopolitical competition. Tariffs, export restrictions, and regulatory uncertainty now disrupt the predictability of the post-Cold War trade regime.
It is tempting for analytical and policy attention to be consumed by this endless geopolitical drama, starring Donald Trump. But there are still important problems in the world, and chief among them for me is how countries still trapped in poverty can become relatively richer. For developing countries, the current state of international affairs is more than a diplomatic headache. It further complicates the difficulty of industrialisation and income growth. National leaders must manage both domestic economic transformation and a shifting, sometimes hostile, external environment. Economic statecraft is now a core function of development policy.
Beyond the Market–State Binary
The standard post-1970s development narrative depicts the era as a triumph of market liberalism: the smaller the state, the greater the prosperity. Yet the most successful late-industrialisers — Japan, South Korea, Taiwan, Singapore, and China — did not follow the Milton Friedman-styled laissez-faire script of free trade, free markets, and getting out of the way of private enterprise. They combined market incentives with active state participation by steering investment, shaping industrial structure, directing credit, and protecting infant industries until they could compete internationally. They did not climb the development ladder through the standard trope of "leaving markets alone."
The 2008 global financial crisis eroded whatever confidence was left in the commonly misunderstood and mischaracterised neoliberal doctrine. Industrial policy, which had lost popularity and influence in many policy circles in the 1990s, was revived - so much so that it has become the new orthodoxy. Advocates of state intervention in the economy took it as a moment of long-sought vindication. But both neoliberal triumphalism and statist revivalism miss the central lesson of the past half-century, which is that sustained development requires marketcraft — the deliberate design, governance, and continual adaptation of markets.
Marketcraft
Marketcraft is a term I encountered in the work of political economist Steven Vogel1, and fell in love with because it captures how I have always read and understood how development happens. It describes the deliberate design and governance of markets so they function efficiently, fairly, and in alignment with public goals. It rejects the notion that markets emerge fully formed when government retreats. Markets are human-made systems. They depend on laws, regulations, norms, and institutions that structure incentives and coordinate expectations.
This insight itself is not new. It builds on the work of scholars like Douglass North, Elinor Ostrom, and Robert Wade — all of whom have a detailed body of work on the importance of rules and governance of markets. Property rights, contract enforcement, and competition rules are not just necessary interventions of the state; they are the architecture within which price signals operate. They are tools of marketcraft because they deepen trust, grow economic exchanges, manage expectations and facilitate coordination.
Marketcraft also departs from the assumption (common in both neoliberal and statist ideologies) that governance is something external to markets. Governance is constitutive: every functioning market is already embedded in a web of legal authority and social norms. The choice is never between "markets" and "government" but between different designs, each privileging certain actors, transactions, and outcomes.
The Political Economy of Market Design
The role of the state is often defined as that of neutral arbiter and adjudicator. In the context of development, this is a misguided conception of the state. The state is not a referee who maintains credible neutrality. The state is often also a player, albeit one with the power to write and rewrite the rules. Reducing the role of the state to a neutral third-party can make it succumb to Gresham's law, where the state is not a stakeholder in market outcomes but a gatekeeper whose job is to extract from other stakeholders for the right to play. Effective marketcraft aligns the incentives of the state with those of firms and citizens within the market system.
Critics can also object that marketcraft is just a fancy byword for good old-fashioned central planning. This critique goes to the heart of an informal debate I have been having with classical liberals in my circle, who see markets purely as emergent phenomena. Trade and certain forms of economic exchanges are as old as humanity. But markets are a design phenomenon, and not an evolved one. Land, labour, and credit markets (to name some examples) all grew out of formal rules and institutions or systems of enforcement. Describing markets this way should be uncontroversial. The subdiscipline of mechanism design in economics has long embraced the design paradigm, leading to many innovative discoveries and results. Mechanism design treats markets explicitly as engineered environments, crafted to align private incentives with social objectives. Marketcraft is broader in scope, but has similar goals. In economic development, this means building the institutional and incentive framework that allows markets to deliver economic growth, technological capabilities, and inclusive prosperity.
China and the United States
Nowhere is marketcraft more evident than in the two once developmental states that grew to become superpowers, whose duelling is now threatening to blow up the global economy — China and the United States of America. In 1978, China decided to change course after decades of crushing poverty and anguish wrought by Mao-era central planning. The reforms proceeded with radical political and economic decentralisation. China had to adapt its institutions to develop an internal market that could deliver economic growth. Perhaps it was a stroke of political genius that all these happened without the ruling party losing political control, earning China plaudits as the shining example of "State Capitalism". However, this should invite some caution. It is the deliberate and intense blurring of economic policy objectives with the geopolitical goals of the CCP (sometimes at the expense of the progress and freedom of the Chinese people) that has brought it into direct conflict with the U.S.
The United States, on the other hand, is often cast as the standard example of a market-oriented economy. But it has a long history of active market design. From the New Deal through the Second World War, public agencies shaped credit allocation, coordinated supply chains, and invested directly in productive capacity2. Post-war policies such as the GI Bill, FHA mortgages, and federally funded R&D extended this market-enabling role. It was not all smooth sailing and without challenges. The history also shows that narrow special interests can capture state-led coordination.3
Marketcraft for Development
In a seemingly fractured global economy, embracing marketcraft thinking can help policymakers strategise for development. Developing countries cannot rely on passive spillovers from trade and foreign investment. Sustained catch-up growth depends on the institutional capacity to absorb, adapt, and internalise productive knowledge.4 Marketcraft here means embedding learning incentives into the legal, financial, and organisational infrastructure, including procurement rules that reward capability gains, FDI frameworks that mandate technology transfer, and standards bodies that diffuse technical know-how.
Joining global value chains is also not enough. The developmental payoff comes from upgrading - moving from low-value tasks to higher-value tasks.5 Marketcraft thinking supports this by ensuring domestic firms have the infrastructure, skills, and bargaining power to capture more value. Upgrading to higher-value tasks may require SME linkage programs, competition policy to prevent monopsony dependence, and reciprocal market-access rules.
The world is a strange place. There have been rapid improvements in the lot of humanity over the past couple of centuries. But this progress is uneven. There are still wide disparities in living standards, infrastructure, technological capabilities, and human capital. On the other hand, new digital technology is flattening the world at a pace unseen in history, and the world appears to have achieved equality in cultural consumption. Ideas matter now more than ever. Marketcraft thinking is a useful open-source code that countries can use to build their custom software for economic policy and governance. It strips ideas on economic development of dangerous lulls like "democracy without growth" and its equally toxic siblings like "authoritarianism is better for growth". It enables countries to develop, not just at their own pace, but in their own way, without feeling the need to emulate China or America.
Marketcraft: How Governments Make Markets Work - Steven K. Vogel
Marketcrafters: The 100-Year Struggle to Shape the American Economy - Chris Hughes
Deconstructing the Monolith: The Microeconomics of the National Industrial Recovery Act - Jason E. Taylor
How Nations Learn - Arkebe Oqubay and Kenichi Ohno
Harnessing Global Value Chains for Regional Development: How to Upgrade Through Regional Policy, FDI and Trade - Oliver Harman and Ricardo Crescenzi