Our future economic success rests on the balanced sum of state and market

The more I study the Indian and Chinese growth models, the more I realise that the debate over the state versus the market is a false dichotomy. Both the state and the market are inseparable, interactive and interdependent social institutions.

Human development is a complex interaction between the two. In the words of Small is Beautiful author E.F. Schumacher, 'maybe what we really need is not either/or but 'the one and the other at the same time''.

India and China could not have become global powerhouses of growth without the state's leading role in planning for development. But those states that have worked with markets have done better than those that worked against them.

London Business School professor John Kay defines the market as a relatively transparent, self-organised, incentive-matching mechanism for the exchange of goods and services. In other words, the market helps to match willing buyers with willing sellers under certain rules to determine market price. Market failure happens when the market is imbalanced.

Kay reminds us that capitalism is less about ownership than 'its competitive advantages - its systems of organisation, its reputation with suppliers and customers, its capacity for innovation'.

Because of globalisation and technological change, the national state is not in total control of our destinies, and state policies on money, exchange rates and trade cannot be independent of what is happening globally.