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Why have many Third World governments pursued economic policies that manifestly reduced the welfare of their countries? This book argues that one major factor was the nature of the political structure of these countries: political clientelism. This strategy involved a program of import-substitution, and more generally, the expansion of the government and a comprehensive regulation of the private sector. The author argues that political clientelism accounts for the adoption and persistence of this strategy in a wide variety of circumstances. Such a political structure consists of an aggregation of patron-client networks bound together by the exchange of material benefits for political support. This can lead to factionalism, politicization, a high level of administrative corruption, a low degree of legitimacy, and to a weak state that is exposed to increasing demands for goods and services and privileges by political supporters. The inward-looking development then results from attempts to satisfy these demands. The analysis suggests that a permanent transition to a superior development strategy hinges on changes in political processes such as the behavior of voters. Structural reforms in an unchanged political environment are therefore likely to be unsuccessful.