State sector: Stepped into this social chasm to attempt to ameliorate this capitalist contraction.
- State became an important employer, regulated more by availability of positions rather than by wage rates.
- Both the urban and state sectors came to generate a modern middle class across the region.
- State evolved to play the role of economic and social stabilizer. Done through expenditure policy:  to encourage economic growth and  to foster political legitimacy and social stability.
- Encouraged economic growth by raising profitability and stimulating production through ISI initiatives. Often accomplished by taking on infrastructure projects (e.g. roads, power, communications) and subsidized imports and credit, provision of education, favorable tax treatment and control of labor.