Gunnar Myrdal’s principal works on development issues focused on South Asia. His analysis emphasized the role of institutions and the cumulative process in development. However, criticisms include his failure to recognize the development potential in an open economy. Myrdal’s concept of the “soft state” was relevant to India’s 1960s economic policies, but broader economic openness and market reforms in Asia led to unexpected rapid growth, especially in Southeast Asian “tiger” economies and China and later also in India. Modern institutional theory, that reminds of Myrdals analysis, highlights the interplay between state capacity and civil society, necessary for developing inclusive welfare states. Countries with strong state and civil society capacities tend to form virtuous circles of development, while those with weak institutions often face stagnation. Myrdal’s holistic perspective on development anticipates modern social research, underscoring the dynamic interplay between a strong state and a strong civil society.