Foundations of Contemporary Economics: Gunnar Myrdal, the Welfare State and Economic Development

Europe, he strived to keep communication intact between the Eastern and Western blocks through facilitating trade relations in the Cold War. Myrdal is most known for his impact on development theory. He was one of the first economists to address the topics of development, modernization, and integration of the newly set-up states after the Second World War. His development theory rejected the traditional neoclassical approach, which focused mainly on economic growth through capital accumulation and free trade. Instead, Myrdal stressed that reforms in developing countries must structurally transform the whole society and those institutions that hinder development. In Myrdal’s theory a strong state plays a central role in such transformations. Myrdal was also among the first who addressed endogenous problems of development. He (together with Hayek) received the Nobel Memorial Prize for Economics in 1974 for his work in the theory of money and his contributions to institutional analysis.