Policy makers in the developing world are grappling with the new dilemmas created by openness to trade and capital flows. What role, if any, remains for the state in promoting industrialization? Does openness exacerbate inequality, and if so what can be done about it? What is the best way to handle turbulence emanating from the world economy, and the fickleness of international capital flows in particular? This book argues that successful integration in the world economy requires a complementary set of policies and institutions at home. Policy makers have to reinforce their external strategy of liberalization with an internal strategy that gives the state substantial responsibility in fostering the accumulation of physical and human capital and in mediating social conflicts. - Excerpted from abstract.