United Nations Research Institute for Social Development
30 papers prepared for the discussion at the UNRISD meeting on
The Need to Rethink Development Economics:
7-8 September 2001,
Cape Town, South Africa.
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1.-
A Brief Note on the Decline and Rise of Development Economics
By Jayati Ghosh - 2001
Economics as a discipline has always been concerned with
development. The early economists, from the Physiocrats through Smith and
Ricardo to Marx, were essentially concerned with understanding the processes of
economic growth and structural change: how and why they occurred, what forms
they took, what prevented or constrained them, and to what extent they actually
led to greater material prosperity and more general human progress. And it was
this broader set of "macro" questions which in turn defined both their focus and
their approach to more specific issues relating to the functioning of capitalist
economies. It is true that the marginalist revolution of the late 19th century
led economists away from these larger evolutionary questions towards
particularist investigations into the current, sans history. Nevertheless it
might be fair to say that trying to understand the processes of growth and
development have remained the basic motivating forces for the study of
economics. To that extent, it would be misleading to treat it even as a branch
of the subject, since the questions raised touch at the core of the discipline
itself.
But of course, what is now generally thought of as
development economics has a much more recent lineage, and is typically traced to
the second half of the twentieth century, indeed, to the immediate postwar
period of the 1950s and 1960s when there was a flowering of economic literature
relating to both development and underdevelopment. While some of this became the
basis for subsequent "structuralist" analysis, much of the standard literature
of that time was still very much within the mainstream of the discipline, and
retained the fundamentals of the mainstream approach even while altering some of
the assumptions. Thus, the economic dualism depicted by Arthur Lewis, the
co-ordination failures inherent in less developed economies described by
Rosenstein-Rodan, the efficacy of unbalanced "big push" strategies for
industrialisation advocated by Albert Hirschman, all in a sense dealt with
development policy as a response to the market failures which were specific to
latecomers
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15.-
On Rethinking Development Economics
By C.P.Chandrasekhar - 2001
Do we need to rethink ‘development
economics’? An answer to that question must begin with a delineation of its
subject matter, consisting of a specific set of stylised facts that are its
starting point, leading to a set of assumptions and a mode of reasoning that
help address and answer a range of questions.
In my view development economics starts from the fact that
integration through the market does not ensure that the developed countries
provide the developing an image of their own future. The transformation wrought
through such integration, while triggering some capitalist development in the
less developed world, also generated structures that rendered the process
gradual, incomplete and adverse for growth and welfare. Development economics was concerned with understanding the specific
structures, global and national, generated by the process of integration of
economies with varying initial conditions into the world capitalist system, with
analysing the mechanisms by which those structures constrained the process of
development and with deriving from that analysis the policy options available to
redress the adverse consequences of integration. In this sense it shared with
the Keynesian tradition the project of making the abstract world constructed for
economic analysis correspond more closely with the world as it exists, and of
making the aim of economic analysis the generation of appropriate
policies.
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2.-
An Agenda for the New Development Economics
By Joseph Stiglitz - 2001
The seeming disappearance of development economics as a separate discipline some quarter century ago
could not have come at a more inopportune time. Some of the criticisms made by mainstream economists
of development economics as it was often practiced at the time are valid: for instance, it
underestimated the role of markets and rationality. But their argument that developing countries are
just like more developed countries, only lacking as much physical (and later, it was emphasized, human)
capital and their assumption that competitive equilibrium theorem can be applied in a
straightforward way is, if anything, even more misguided.
In the last two decades, there has been
a growing awareness of the limitations of the competitive paradigm, with its assumptions of
perfect information, perfect competition, and complete markets, and with the correlate
that distribution and institutions do not matter. Much of the theoretical and empirical work
in developed countries has focused, for instance, on agency theory (how information imperfections
affect firm behavior and labor markets), the new industrial organization (how imperfections of
competition affect corporate behavior), finance (viewed as centering on the information problems
associated with allocating capital and monitoring its usage), and R & D.
Yet, in this same period, the reigning paradigm in development economics was the
Washington consensus, which ignored these considerations, despite the fact that they
are even more important to developing countries.
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3.-
Beyond Macroeconomic Concerns to Development Issues
By Delphin Rwegasira - 2001
This note, by outlining the research and
capacity-building experience of the African Economic Research Consortium (AERC),
argues that renewed interest in development economics can be assisted in part by
the development of locally-based responsive and empirical knowledge. This
process can be substantially aided by international networking and
dissemination, which in turn would lead to a broader expansion of knowledge on
development. The evolution of AERC beyond a macroeconomic network to embrace
wider questions of development policy is seen as rooted in Africa’s own
realities of searching for substantially higher growth and ways of reducing
widespread poverty.
There is consensus based both on theory and on the
development experiences of many countries that on the whole, macroeconomic
stability is essential for long-term economic commitments that contribute to a
healthy and sustained saving-investment process. The latter is in turn
necessary, though by no means sufficient, for the sustained growth needed to
underpin significant changes in average well-being. Thus, in situations where
reasonable macroeconomic stability cannot be assumed to exist, such stability
would be an important concern in respect of promoting development. The African
economic crisis of the 1980s—that saw the United Nations General Assembly, for
the first time, devoting considerable attention to the economic plight of a
particular region, (Sub-Saharan Africa)—was in part reflected in clearly
worsening macroeconomic conditions in many countries of the region.
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4.-
Challenges of Economic Development
By Alexandre R. Barros - 2001
In recent times, the world has experienced
important changes, both ideologically and in relation to the economic
environment. These changes have posed serious challenges to the analysis
of economic development and to its policies proposals.
Some previously well settled conceptions have completely fallen
apart. Historical evidences and empirical investigations
made conceptions previously considered opposite to one another go to
the same side of debates. Many ideas were placed
upside down. Four theoretical
developments have been quite important in promoting such changes in conceptions
and in the analysis of economic
development:
1.- the New Growth Theory, which reached
conclusions on economic development that were reasonably different from those
obtained from traditional Neoclassical Growth Theory.
2.- the idea of Rent Seeking.
3.- the idea of the role of clustering on efficiency.
4.- the new conceptions on social capital.
This paper summarises the major consequences of these theoretical developments to the ideas
about economic development and the proper strategies
to its promotion. The major hypothesis is that the best path to economic
development, which all these notions point to, is in
fact a combination of some recipes stressed by Structuralists and by Liberals in
the early stages of economic development.
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5.-
Development Economics: A Call to Action
By Roy Culpeper - 2001
The primary challenge confronting
development economists in the 21st century is not that of creating a new
theoretical framework to understand, and respond to, the development problems
and opportunities facing the world community. Rather, their challenge is to
deploy their skills as applied economists, heeding the circumstances unique to
each country, in order to help eradicate poverty, reduce inequities, and advance
sustainable development. In other words, development economists should address
the development policy agenda in the real world, in all its untidiness and
diversity.
Democratization has opened up a political space in which
this challenge must be met, but democracy is itself a work in progress. The
frontier that development economists must explore and help to settle is that of
democratizing economic policy-making. With greater inclusion and popular
participation in economic policy-making, development economists will be called
upon to work with their fellow-citizens, partly as experts, partly as educators
and facilitators. Their tasks will include identifying the social welfare
function, translating it into a series of social choices or possibilities
constrained by available resources, and determining the set of fiscal, monetary,
exchange-rate, trade and other policies that are both consistent and politically
viable.
In other words, economic planning is on
its way back, but this time it will be planning from below. Poverty Reduction
Strategy Papers (PRSPs) are a manifestation of the shape of things to come. An
important question is what difference PRSPs will make to policies actually
adopted and to real outcomes. An increasingly globalized economy limits (and, to
some extent, also enhances) the choices and possibilities open to each society.
Planners must take into account the mobility of factors of production,
particularly that of capital and skilled labour, in determining what policies
are consistent and politically viable.
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6.-
Development Economics: Coping with New Challenges, Especially
Globalization
By Jomo K.Sundaraman - 2001
As is well-known, development economics fell
into disrepute in the West, especially in the USA, with the rise of
neo-liberalism from the late seventies. This coincided with the denunciation of
Keynesian economics with the simultaneous occurrence of inflation and slow
growth, seemingly contradicting the Philips’ curve trade-off associated with the
‘neoclassical synthesis’ or cooptation of Keynes.
The eighties began with Carter appointee US Federal Reserve
chief Paul Volcker’s sharp reversal of developing country growth of the
seventies, with the UN promise of a New International Economic Order, following
the 1973-5 oil price hike, subsequent commodity price booms and low real
interest rates, thanks to Anglo-American commercial bank recycling of petroleum
revenue to lend to developing country governments and high
inflation.
Thus, the Reagan-Thatcher decade began
with the debt crises of Latin America, Africa, Eastern Europe, Korea and the
Philippines, enabling the post-Bretton Woods International Monetary Fund (IMF)
to take over macroeconomic policy with its stabilization policies and the World
Bank to require indebted governments to abandon development policies in favour
of economic liberalization through structural adjustment policies.
In the World Bank, the McNamara era associated
with the intellectual leadership of Hollis Chenery gave way to the appointment
of Anne Krueger as Chief Economist and Deepak Lal as head of research soon after
the publication of his Poverty of Development
Economics.
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7.-
Development Studies or Development Economics: Moving forward from TINA
By Gita Sen - 2001
Rethinking is not resuscitation. Too much
breast-beating at this stage about the all too well known sins of commission and
ommission of neo-liberalism and the Washington Consensus or, more broadly, of
neoclassical economics, may divert attention from the actual weaknesses of
development economics on the one hand, and on the other, the critical issues
ahead that urgently call for understanding and action. So much intellectual
energy has been spent on combatting the TINA syndrome with respect to SAPs and
financial liberalization that, with a few exceptions, our analysis has not
adequately recognized the changes in both the regimes of accumulation and the
modes of regulation that underpin the neoliberal thrust. Understanding these
changes as the basis of neoliberalism does not mean falling into the TINA trap;
instead it should help to more precisely locate what is possible.
In my note, I would also like to shift focus from
development economics (more narrowly understood) to development studies, because
I believe that one of the weaknesses of development economics arises precisely
from its inability to integrate the richer understanding based on development
studies more broadly. And indeed, at quite the same time that traditional
development economics was reeling from the onslaught of the neoliberals, our
analysis and understanding of participatory approaches to rural development, the
importance of sustainable livelihoods, and the need for a gendered analysis of
development (to name only a few) have been growing and flourishing. It is
important to remember that development studies is certainly not dead regardless
of the obituaries that have been written for development economics over the last
two decades.
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8.-
Economic Development and the Revival of the Classical Surplus Approach
By Franklin Serrano and Carlos Medeiros - 2001
In this note we describe how we have been
trying to rethink development economics in our own research programme and
teaching (both graduate and undergraduate) practice in the Instituto de Economia
at the Universidade Federal do Rio de Janeiro, Brazil.
In our view, traditional development economics , in spite of
its great achievements, suffered from two serious problems. First of all,
development economists had a chronic tendency to jump too quickly to the
normative dimension, to suggesting policy interventions while perhaps not having
clarified sufficiently how the developing economies actually functioned. This
tendency was so deeply entrenched that often some of the best development
economists fell into the habit of treating the developing capitalist economies
as if they were planned or socialist systems (witness Kalecki’s treatment of
what he called “mixed economies” or the widespread use of “Say’s Law” in Latin
American Structuralist literature).
The other,
very much related, basic shortcoming of development economics was the fact that
development economists did not in general engaged themselves into a detailed
discussion of the normal operation of the market mechanism , of what it could or
it could not realistically achieve. That often led to some underestimation of
the difficulties of planning on the product markets and , more importantly, to
enormous confusion and ambiguity concerning what happens in the markets for the
so called factors of production (i.e. how distribution, labour employment and
capital utilisation are actually determined).
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9.-
Enclavity and Constrained Labour Absortive Capacity in Southern African
Economies
By Guy C. Z. Mhone - 2001
The fact that the majority of the African
labour force continues to be either openly unemployed or under-employed
continues when many other developing countries that were similarly placed about
three decades ago have made the crucial turn toward more inclusive growth and
development continues to be one of the most vexing issues in economic policy
analysis. This problem has continued to fester under all kinds of policy regimes
thereby belying the usual optimistic assumptions by economists about the long
run. Indeed the persistence of this problem remains the Achilles heel of current
economic reforms, which appear to have been uncritically embraced as the
panacea.
The problem of unemployment and under-employment that
afflicts many of the countries in Africa is in this paper being referred to as
the problem of the low labour absorptive capacity of African economies with
special reference, to Southern African countries. While there may be sufficient
consensus regarding the efficacy of certain packages of measures such as
stabilisation and structural adjustment programmes in promoting growth, there is
still much debate, if not scepticism about the ability of any measures or
policies attempted so far, to resolve the perennial problem that afflicts the
majority of the labour force in Africa.
The
problem of the low labour absorptive capacity of African economies strikes at
the heart of the growth and development problematique and should not be
dismissed lightly by appealing to the long run impact of trickle down effects or
the possibility of people lifting themselves up by their boot-straps as a result
of the efficacy of market mechanisms. It is necessary that the debate about the
paradigms informing various policy stances be opened anew.
This paper resorts to an earlier paradigm initially mooted by Arthur
Lewis [Gersowitz, 1983] in a number of his writings within the context of
neo-classical analysis but also propagated in various forms by Marxist inspired
political analysts of under-development. More recently, the Structuralism school
has continued this line of argument but often at the margin of the policy
debates. This paradigm is one that looks at African economies as being afflicted
by a legacy of enclave growth and development which is partly a legacy of the
manner in which capitalism penetrated these countries as late comers on the
global development scene; and partly as a consequence of the failure of various
policy regimes of both the socialist and market oriented types to address the
structural roots of the problem through policies of omission and commission.
The
paradigm of enclavity would link the problem of the low labour absorptive
capacity of African economies to the a structural legacy of economic dualism
that is in part self perpetuating, even within a market context that is ideal in
terms of current structural adjustment programmes, and in part policy induced,
even if inadvertently. The implications of this is that proactive polices are
needed in addition to the usual market friendly measures to undo the vicious
circle of perpetual under-employment that afflicts the majority of the labour
force.
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10.-
For an Emancipatory Socio-Economics
By Diane Elson - 2001
I would like to take as my starting point
the need to rethink all of economics, not only the kind of analysis and policy that is
applied to the ensemble of countries in Asia, Africa and Latin America that are
often labelled ‘developing’. The problem is not that neoclassical economics
works well for ‘developed’ countries while not fitting ‘developing’ countries,
but that it does not work well for any country.
In rethinking what kind of
economics is needed for ‘developing’ countries, it is important to make links
with currents of thought that are also challenging the hegemony of neoclassical
economics in ‘developed’ and ‘transition’ countries. If neoclassical economics
is allowed to appear (even by default) as the appropriate economics for rich and
powerful countries, then any reconstituted ‘development economics’ will continue
to be marginalised, both in the policy arena and in the curriculum.
There are several currents of thought that contain
challenges to the dominance of neoclassical economic thinking- structuralist,
post-keynesian, evolutionary economics among them. My remarks draw in particular
on two -the human development current and the feminist economics current . They reflect a belief in
the importance of pluralism in thinking about economies.
Unlike the World Bank’s World Development Report, the UNDP Human
Development Report examines issues of poverty, inequality and growth in all
countries. The human development approach challenges the merely instrumental
treatment of human beings as ‘factors of production’ in the service of economic
growth no matter where it takes place. Similarly, feminist economics (as
exemplified, for instance, in the journal Feminist
Economics, and in special issues of World Development on gender, trade, and
macroeconomics, Vol 23, No 11, 1995 and Vol 28, No.7, 2000) challenges the
validity of ‘rational economic man’ for rich countries as well as for poor ones;
and argues that unpaid time spent caring for family, friends and neighbours is
an economic issue, not just a personal issue, all over the world. This does not
mean that human development and feminist economics try to force all countries
into a ‘one size fits all’ straitjacket. Rather they have rejected straitjackets
as an appropriate way of dealing with intractable reality.
Of course, any social science has to engage in abstraction. The
problem is to choose the forms appropriate to the question in hand. ‘Horses for
courses’, as Joan Robinson was fond of saying. Rethinking cannot avoid some
grappling with methodological issues.
There is a
need for thought experiments at high levels of abstraction to think through
possible regularities in interconnections and linkages; but in applied analysis,
there has to be scope for investigating particularities that may subvert those
generalities. The same set of stylised facts will not fit the whole world. This
was indeed the premise of ‘development economics’. However, there is no longer,
if indeed there ever was, a neat bifurcation between a set of stylised facts
that fit ‘developed countries’ and a set that fit ‘developing countries’. A much
richer typology is needed.
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11.-
Inequality and Poverty as the Condition of Labour
By Marc Wuyts -2001
The 1980s witnessed a radical break (at the
level of theoretical discourses) with both Keynesianism and structuralist
development economics, concurrent with the re-assertion of neo-classical
economics. What tied Keynesianism and structuralist development economics
together, however, was not just they shared critical views of neoclassical
economic theory, but also a number of shared premises concerning economic
analysis. While it is true that the most of the early development economists
argued that the economies of the Third World were supply- constrained, not
demand-constrained this did not mean that development economics not deeply
influenced by the mainstream economic discourse at the time with its explicit
focus on the macroeconomics of employment and the dynamics of unemployment.
On the contrary, they acknowledge that in developing
countries large-scale hidden or disguised unemployment prevailed, but argued
that this problem could not be remedied by boosting effective demand. Instead,
what was needed – they argued – was a protracted transformation of the
developing economy to absorb surplus labour through the expansion of wage labour
in the process of industrialisation fuelled by investment.
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International Economic Policy
By Manuel Montes - 2001
The struggles of the new nations that
emerged in the previous century to develop their peoples and the stressful link
between these struggles and their integration into the international economy
constitute the basic ground for the context and recent history. These struggles
involve overcoming “structural” disadvantages in the sense that there are basic
socio-economic barriers that have to be overcome and that there has been no
continuum of development like an escalator that countries can smoothly ride up
to higher levels. The term “developing country” in this text is used as a
short-hand for the set of countries also called “less-developed,”
“middle-level,” and “transition” which must overcome socio-economic constraints,
political, institutional, and private sector weaknesses to develop themselves.
Whether or not increased dependence on the international economy assists these
aspirants in overcoming these obstacles is part of the intellectual fabric of
the past and the unfinished weaving of future policy innovation.
In the 1950s, during the era of the disassembly of colonial
systems, the question of how to reduce poverty and redress the imbalance against
developing countries was answered through programs of national development,
including extensive state intervention to create modern industries and a marked
disengagement of the domestic economy from international markets. The
configuration of international markets and institutions, such as the
International Monetary Fund (IMF) and the World Bank, set in place based on the
lessons learned from the worldwide depression of the 1930s, conformed to the
theories and practices of the new field of development economics, which emerged
in this period.
The initial post-War global
financial system, managed through the IMF under fixed exchange rates, for
example, provided national governments with the means to independently inflate
or deflate their economies, as appropriate. This system began to break down in
1971, when the United States suspended the convertibility of dollar into gold.
Failures in many national development programs
and the developing country debt crisis of the 1980s instigated a rethinking of
the old approach. Beginning in the early 1980s, the World Bank, instead of
focusing solely on financing investment projects in developing countries, began
to assist these countries in undertaking policy reform packages under the rubric
of “structural adjustment programs.” This new approach sought to promote greater
productivity (and consequently development) by permitting economic pressures,
including those from international competition, to determine which industries a
developing country would retain.
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Lessons from Transition Economies: Strong Institutions are More Important
than the Speed of Reforms
By Vladimir Popov - 2001
Ten years ago, on the eve of transition,
economic discussion in the profession was dominated by the debate between shock
therapists, who advocated radical reforms and rapid transformation, and
gradualists, justifying a more cautious and piecemeal approach to reforms. Shock
therapists pointed out to the example of East European countries and Baltic
states – fast liberalizers and successful stabilizers, that experienced a
recovery after 2 to 3 years fall in output, while their CIS counterparts were
doing much worse. Gradualists cited the example of China, arguing that the lack
of recession and high growth rates is the direct result of the step by step
approach to economic transformation. Shock therapists were arguing that “one
cannot cross the abyss in two jumps”, that rapid liberalization allows to avoid
painful and costly period, when the old centrally planned economy (CPE) is not
working already, while the new market one is not working yet.
As time passed, there appeared statistics that allowed to
test the predictions of theories. Quite a number of studies were undertaken with
the intention to prove that fast liberalization and macro-stabilization pays off
and finally leads to better performance (Sachs, 1996; De Melo, Denizer, and
Gelb, 1996; Fisher, Sahay, Vegh, 1996; Aslund, Boone, Johnson, 1996; Breton,
Gros, and Vandille, 1997; Fisher, Sahay, 2000). To prove the point, the authors
tried to regress output changes during transition on liberalization indices
developed by De Melo et al. (1996) and by EBRD (published in its Transition
Reports), on inflation and different measures of initial conditions.
The conventional wisdom was probably summarized in
the 1996 World Development Report From Plan to Market, which basically stated
that differences in economic performance were associated mostly with "good and
bad" policies, in particular with the progress in liberalization and
macroeconomic stabilization: countries that are more successful than others in
introducing market reforms and bringing down inflation were believed to have
better chances to limit the reduction of output and to quickly recover from the
transformational recession. “Consistent policies, combining liberalization of
markets, trade, and new business entry with reasonable price stability, can
achieve a great deal even in countries lacking clear property rights and strong
market institutions” – was one of the major conclusions of the WDR 1996 (p.
142). The conclusion did not withstand the test of time, since by now most
economists would probably agree that because liberalization was carried out
without strong market institutions it led to the extraordinary output collapse
in CIS states. Liberalization may be important, but the devil is in details,
which often do not fit into the generalizations and make straightforward
explanations look trivial.
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28.-
Thoughts and Proposals on Reviving Development Economics
By Joseph Y. Lim
There are three main factors that caused the
decline of development economics, especially during the eighties and nineties.
These reasons are:
1. As explained well in the other papers in this conference,
the hegemony of the neoclassical non-interventionist and monetarist/rational
expectations schools in mainstream economics during the seventies and eighties
succeeded in removing from the mainstream literature developmental and
interventionist approaches to economics. This included the almost successful
attempt to kill Keynesian theory and to convert it into a theoretical oddity.
2. The core of development economic theories
embodied in a) Lewis’, Ranis-Fei’s and the dependency theorists’ debates on the
dual economy, b) works on ‘big push’, ‘balanced and unbalanced growth’ and
‘import-substitution strategy’ by Rosenstein-Rodan, Nurkse, Hirschman, etc. –
all did not employ the ‘elegant’ ‘rational’, optimizing and comparative statics
framework and methodology of neoclassical economics. It is interesting to note
that the ‘big push’ and ‘learning by doing’ (or ‘picking winners’ in the
technology and knowledge-intensive sectors) theories were able to become
fashionable when presented in the neoclassical style of comparative dynamics in
the endogenous growth models of Lucas, Romer, Schlifer and Vishny, etc. The
methodology mattered, but we must remember that the historical conditions that
brought about the rise of the endogenous growth models in the eighties and
nineties precisely involved the lack of empirical validity of the traditional
neoclassical growth model, especially with the rise of the East Asian
‘miracles’. (They had to turn to the disgraced theories of development economics
to partly find the right answer.) Another point is that the ascendancy and
dominance now of new Keynesian and new institutional theories that allow ‘market
failures’, institutions and governance structures to enter the mainstream is
their use of neoclassical models and tools as well as the increasingly
fashionable game theory approach.
3. A third
reason which we should not ignore is the entry in the sixties and seventies of
so many other topics in the realm of development economics, which merely
duplicated existing fields in economics but applying them in a ‘Third World’
context. Areas and topics in the fiscal, monetary, exchange rate arenas, labor
economics, international trade, agricultural economics, education and social
sector (population, health, etc.) – just take a quick look at the contents of
Todaro’s textbook whatever edition – were all included as part of ‘development
economics’. This ‘borrow from mainstream theory and apply to a Third World
context’ scheme, plus the lack of an elegant neoclassical model (described in
no. 2 above), naturally relegated development economics to a status of ‘soft’
economics indistinguishable from sociology, psychology and other social
sciences, and unbefitting of true ‘hard-core’ scientific and analytical
(neoclassical) economics.
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29.-
Towards Developmental Democracy: A Note
By Adebayo Olukoshi - 2001
Some two decades of neo-liberal ascendancy
in socio-economic policy making and management have taken their toll on the
development process around the world generally and in developing countries
especially. Coming into the developing countries under the rubric of
International Monetary Fund (IMF) and World Bank structural adjustment
programmes, the neo-liberal policies that were promoted encompassed virtually
all aspects of economic and social life, with the attendant consequences,
including political ones, that have been widely observed in the literature.
Whether it be with regard to the exchange rate, prices, interest rates,
subsidies, the entire trade and industrial policy regime, the budgetary
framework and public expenditures, investment policy, taxation and revenue
mobilisation, infrastructure development, or in such areas as social policy
(encompassing health and education), labour market policy, and the management of
public enterprises, the accent over the last two decades has been placed
emphatically on the promotion of a market-driven system side by side with the
retrenchment of the state and curtailment of state intervention. The policies
that were at the heart of the structural adjustment programmes were presented as
the core of a new "consensus" on the management of the economy to which no
(viable) alternative exists; in fact, they were more reflective of the hegemonic
influence exercised by the key Western regimes and the multilateral
financial/economic institutions which they control. These governments and
institutions served as the springboard for the spread of neo-liberal policies
around the world, using an array of conditionality and cross-conditionality
clauses to compel developing countries to embrace their preferred options for
the reform of ailing national economies.
Yet, as has been acknowledged even by the World Bank,
structural adjustment has generally failed to achieve the results which its
authors promised it would deliver. (It bears pointing out though that even with
the repeated acknowledgement by the Bank about the shortcomings of its policy
prescriptions, orthodox structural adjustment measures continue to be
administered on developing countries as the panacea to their economic
difficulties).
Amidst the on-going discussions about the limitations of the
neo-liberal philosophical and policy underpinnings of IMF/World Bank structural
adjustment, and against the backdrop of the serious concerns which have been
raised, both before and since the recent East Asian crisis, about the massive
and rapid trade and financial liberalisation measures associated with the
current processes and structures of globalisation, various alternatives to
neo-liberalism are beginning seriously to be considered. At the heart of some of
these alternatives is a concern to bring development back into the mainstream of
economic and social policy-making. This note is intended to contribute to this
discussion by suggesting that the quest, which is highly welcomed, for a new
developmentalism should be imbued with and undertaken in a framework that is by
definition democratic. It will draw on the specific African experience for this
purpose.
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30.-
Women, Politics and a Development Economics Renaissance
By Ritu R. Sharma - 2001
I come to this discourse from the
perspective of an advocate, a lobbyist to be more precise, working to open the
minds of U.S. policy makers to alternative thinking on development, including
the role of gender in development. I think there are roughly four steps required to mainstream
a new development economics theory and policy—empirical research, theory
formulation and testing, education of technical experts in the use of new
theory, and the ultimate adoption of the new theory by policy decision makers.
Of these four steps, Women’s EDGE focuses its work on the last: to get U.S.
policy makers to abandon the “Washington Consensus” and embrace a new formula
for development, one which includes gender in its basic equation. Therefore, I
will focus my contribution on how we might “close the loop” between researchers,
economists, and decision-makers. And, as you
have already gathered from the name of my organization, I will offer some
thoughts on how the neo-liberal model has affected women and why any new
thinking on development economics must ground itself in the most basic social
organization humans have—male and female.
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On Development Economics
The Future of Development Economics
The New Economy in Development
The Need to Rethink Development Economics
Development Economics
Economic Literacy
Basic knowledge on economics
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14.-
Notes on Development Economics
By Lance Taylor - 2001
It has been accepted, even by the
mainstream, that macroeconomics in "developing" and "transition" economies needs
its own special treatment - witness the recent publication of new, fat textbooks
by Agenor/Montiel and Jha (and for all I know, possibly others). In the
mainstream fashion, they try to homogenize critical ideas into rational actor
goo, but the fact that the books were written and sell indicates that a long
effort on the part of people doing macro in non-industrialized countries to
point out that they do
have special features has in part paid off. I'll try to sketch below how this
intellectual beachhead might be extended.
The point (based on non-formalized historical/institutional
reasoning by people like Amsden, Wade, and Chang) that hands-on interventionist
policies have played an essential role in supporting industrialization and
growth in both now-rich and poor countries has also sunk in. This is not to say
that analyses of industrial policy and sensible protectionism dominate
mainstream discourse - of course they do not - but that conventional wisdom has
been on the defensive at least since the Bank's East
Asian Miracle report. Again, there is a beachhead to
be expanded.
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16.-
Opening Space for Development
By Stephany Griffith-Jones - 2001
In the past, countries had national
development strategies. Even though the external sector could play an important
role, the basic dynamics for development was seen to come from within countries
(Sunkel, 1993). In the 1990's, the new development strategy became
liberalisation, and in particular integration into the global economy. The basic
indicators for a "successful" development strategy became how much the trade and
capital account had been opened up, how much the financial sector had been
liberalised, how much the economy had been privatised. Indeed, globalisation and
liberalisation became the new development agenda.
To some extent, this new development strategy arose from
external pressures. A particularly high profile in the analysis has been given
to influence via IMF and World Bank conditionality. However, perhaps more
important - and increasingly so - is the pressure arising from "financial
markets," which heavily influence both development strategies and macro-economic
policies. Governments increasingly follow policies that are not necessarily the
best for their economies or their peoples, but that are "acceptable to the
markets" because if they do not do so, they will be implacably punished by those
markets (Eatwell, 1997). However, the shift towards a rather pure liberalising
and globalising agenda by most developing countries arose not only from external
pressures, but also reflected the widespread view in many of the developing
countries (and particularly amongst their governing elite) that market reform
and, particularly, opening the economy to global links would lead to faster
growth and higher investment and employment. Implicitly, there was a belief that
countries which reformed well would significantly increase their exports and
attract large and stable external capital flows, which would complement domestic
savings and help increase productivity.
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Producing a New Generation of Practising Development Economists
By Susan Joekes - 2001
This note addresses a secondary question
posed in Thandika Mkandawire’s scene setting paper -Thandika Mkandawire (2001)
“The Need to Rethink Development Economics”, Geneva, UNRISD) - for this
conference: How to produce a new generation of development economists. I choose
this topic (rather than the primary one of the essentials for a new development
economics per se
because it is of particular concern to the International Development Research
Centre (IDRC). The IDRC’s mandate is to support the growth of expertise in
development by supporting research and the generation of evidence based
knowledge for development policy across many fields, including economic
development. In this paper, I will present some ideas on the kind of economic
development research that is needed for successful capacity building in
research, making special reference to IDRC’s programme experience in
international economic relations.
The IDRC has a remit to nurture the growth of expertise in
economic development primarily among citizens of the developing world itself,
working in the south. There are two main reasons for this mandate, which does
not of course signify any inherent prejudice against the scholarship and
insights of those based in the north. Channelling our resources in this way does
something (on however small a scale) to redress biases in resource
availabilities for research efforts as between the north and the south. More
importantly perhaps, in a world governance perspective, it is intended to
contribute toward the authenticity and autonomy of southern voices in
development policy making. Just as local priorities should be determining in aid
allocations, so the policy positions espoused by developing countries in
international fora should be locally generated and informed by local research.
When policy formulation is driven by outside forces and outside knowledge, the
credibility of policy positions is always questionable and international
agreements entered into may not be fully respected down the line.
The presumption that support for research
translates into a better informed - and therefore more credible and effective -
southern voice in international policy fora is of course questionable and
certainly not something IDRC takes for granted. In recent years IDRC has tried
to develop a better understanding of the relationship between research and
policy, fuelled by consideration of, among other things, events and processes
related to the international economic system. We are confident that, despite
many complicating factors and the presence of other determinants, there often is
positive relationship between research activity and policy, and that, moreover,
there are practical ways of enhancing this relationship.
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18.-
Reclaiming the Right to Development
By Kari Polanyi Levitt - 2001
In 1986, the United Nations adopted a declaration on "The
Right To Development" as an inalienable human right, embracing "all civil,
economic, social, cultural and other human rights enumerated in the Universal
Declaration of Human Rights". Since this Declaration was adopted,
"globalization" has devalued sovereign equality and stripped states of monetary,
fiscals and administrative policy instruments essential to the formulation and
implementation of pro-active strategies of economic and social development.
The authority of the United Nations has
declined. Private global capital flows have displaced official development
assistance as a major source of external finance. Market criteria of
profitability (cost-recovery) have prevailed over egalitarian social criteria in
the provision of public goods directly affecting the well being of people.
International inequalities have escalated. Domestic disparities have widened in
most countries Commodity prices continue to fall. Finance has been privileged at
the expense of productive activity and countries open to capital flows have born
the full economic, social and human costs of adjustment to ever more frequent
and damaging financial and economic crises. Primary commodity exporters have
always been price-takers. They have always been forced to adjust to business cycles in the
industrial centers by pro-cyclical policies.
Thanks to twenty years of "structural adjustment", they have also become policy-takers.
Development as a national
and social project supported by the international community is in suspense- in
large regions of the world in regression. A rising tide of outrage at global
inequities has attracted the attention of the world. There is a growing sense
that "globalization" is a non territorial form of imperialism, imposed on
developing countries by legally binding obligations of compliance with rules
favouring capital, enforced by trade sanctions and denial of access to finance
Additional conditionalities relating to "governance", some at the insistence of
influential international NGOs further constrain policy autonomy. Scores of
countries have been encouraged - sometimes bullied - into excessive dependence
on export earnings and foreign credits by programmes designed by the staffs of
the Bretton Woods Institutions The International Monetary Fund has become a
foreign policy instrument of the United States. Crises have been used as
opportunities to radically restructure economies - most scandalously in the case
of South Korea.
Since the end of the cold war,
the only remaining super power has acted as self-appointed global policeman.
Military interventions targeted at physical and social infrastructure have
punished civilian populations for the alleged misdeeds of their leaders. The
George W. Bush administration has flaunted an extreme posture of unilateralism,
with disregard of the views of even the closest allies. The influence of
financial and corporate power at the highest levels of government calls for new
initiatives to protect populations and societies of the developing world from
exploitation and societal collapse.
There is a
crying need for creative thinking and new initiatives to protect the gains of
development from devastation by financial hurricanes fed by institutional
investors who freely move funds in and out of countries at the tap a keyboard
with no responsibility for the impact of their operations on ‘host" countries.
The IMF, BIS, G7, G 20 etc., are captive to the overriding interest of
protecting the value of global financial investment; regardless of collateral
damage to shattered lives and hopes of millions. Consensus of developing
countries in international negotiations with the Bretton Woods institutions and
the WTO is hostage to policies which pit country against country in competition
for export markets and foreign investment.
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Reflections on the Restoration of Development Economics
By Jeff Faux - 2001
The restoration of development economics is
not solely an intellectual task. If this were the case, the world’s policy
makers and their academic advisers would have acknowledged long ago the failure
of neo-liberal policies to deliver on the acceleration of global growth promised
by neo-liberal theory. And the animal spirits of careerist economists would have
motivated a rush to new intellectual ground.
Instead, the economics profession’s reaction to the
accumulating evidence of failure has been, at best, to concede that progress
along the neo-liberal path takes a little more time – and that there will, of
course, be some casualties. (“Didn’t we mention it? Sorry about that!”) We are
assured that there is no need for policies to promote social equity or
democracy. Those will come as a by-product of more rapid sustained economic
growth, which, if we are patient, will arrive in due course. Any renewed
interest in the public sector and civil society institutions is limited to
assigning them to the task of caring for the “losers” whom the deregulated
market has left behind.
This reaction reminds us
that the triumph of neo-liberalism in academic as well as policy circles was not
entirely an intellectual exercise either. Its rise to hegemony is a part of a
wider conservative political agenda. All
economic theories, like all economic systems, come with a politics. Indeed,
political science itself has been defined as the practice of “who gets what.”
Neo-liberal economic thought is, as most of us know, connected to the
multinational political and financial forces that currently dominate the
post-Cold War global economy. This does not mean that all neo-liberal
scholarship is politically motivated. It simply means that the rich and powerful
typically support the scholarship that reinforces their view of the way the
world should work. It would be odd if it were otherwise.
Over the years, these multinational interests have created a global
“echo chamber” through which ideas that support their agenda resonate among the
policy-making institutions, the media, universities, think tanks, and the larger
literate public. They particularly targeted journalists and the media, who
represent “gatekeepers” to the global policy debate.
The effect of this echo chamber on the policy debate is to drown out
dissent based on empirical research with second-rate research and analysis
rationalizing de-regulation, short-term investment horizons, and the increased
commodification of human values. An examination
of the economic motivations and behavior of those institutions (and their
clients) that determine development policy needs to be part of any serious
effort to resuscitate development economics. As Amartya Sen recently observed.
“The whole power structure underlying the institutional architecture itself
needs to be reassessed in the light of the new political reality.”
Another implication is that the arguments for a
new development paradigm must be consciously organized. By itself, quality does
not necessarily prevail in the marketplace for ideas.
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20.-
Reviving Development Economics: Eight Challenges and Dilemmas
By Kamal Malhotra - 2001
Reviving Development Economics is both
crucial and full of challenges and dilemmas which are particularly acute in this
era of economic neo-liberalism led globalisation. First and foremost, it implies
reviving the developmental role of the state in leading economic and social
policy making. This does not, however, mean a return to the total dominance of
the role of the state to the exclusion of all other actors, especially civil
society but also the market. In fact, quite the contrary, because it implies
creating space for a plurality of organisations, each playing roles at which
they are best. It does mean, however, that there should be a socially activist
state that leads society’s development efforts---a state that creates an
enabling environment both for civil society which is committed to a
democratization and development project and for a vibrant market which is also
committed to contributing to society’s overall developmental efforts.
The biggest obstacle to such a revival is the neo-liberal
economic climate that has informed global economic policy making since the early
1980s----and in particular the policy prescriptions that the US and UK
governments have championed both at home and overseas since then and the role of
the international financial institutions (IFIs) and World Trade Organisation
(WTO) which are heavily influenced by them. The United Nations system also
appears increasingly constrained by the policies of these governments both for
financial and other reasons.
Economic
neo-liberalism has also unsurprisingly coincided with or even caused the death
of development economics as a serious academic course of enquiry particularly in
the US but also in the UK where it had traditionally had a much longer and
vibrant history. Without a revival of development economics in both these
centres of industrialized power, especially in the US, it is hard to imagine a
global economic climate which will be conducive to a strong developmental
socially activist state in the South or useful and relevant international
financial and other multilateral institutions.
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Some Issues in Development Economics
By Gerry Helleiner - 2001
I suspect that it may not be productive to
try to resurrect the "grand theorizing" of the early "greats" (Lewis, Nurkse,
Rosenstein-Rodan, Hirschman, etc.) in development economics or to try to build
upon the "new growth" literature. This material is far too general to have much
policy influence. In my postgraduate development economics reading list I used
to incorporate it all under a heading of "What every student of development
economics should know but is most unlikely ever to use"! My instinct is to try
to build greater respect for and competence in applied economics - in a variety
of fields (public finance, money, trade, open-economy-macro, health, etc.) -
with particular reference to developing economies, in all their institutional,
cultural, political and historical variety.
Good "development economics", in
practice, is good applied economics in a variety of different specialisations
and contexts. And recognition of and allowance for the variety of contexts is
what distinguishes the good development economist from the weak one.
It seems to me that one needs to attack the current problem
at its root - which is the traditional mainstream postgraduate economics
programmes, which train the teachers and practitioners of most development
economics today. I believe we must try to reduce the relative importance
assigned in current mainstream postgraduate economics programmes to purely
abstract reasoning; rebalance the core economic theory courses so as to place
the traditional neoclassical assumptions into their appropriate context; restore
economic history and history of economic thought to the core curriculum; and
insist upon greater relative emphasis upon empirical and policy analysis in
these programmes.
No less important, there must
be conscious effort to win back the socially motivated students who are at
present completely "turned off" by current postgraduate programmes. Current
screening mechanisms for postgraduate studies in economics discourage many of
those that the profession now most requires and attracts instead those with a
predilection for abstract reasoning, mathematics, and avoidance of political or
"value" judgments. Obviously, one cannot attract the "right kind" of student
with the "wrong kind" of programme. This effort is therefore inextricably bound
with the previous one.
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Some Thoughts on the Agenda for Development Economics
By Brian van Arkadie - 2001
The meeting seems to be about three things: high theory
(what should academic development economists write and think about), pedagogy
(what should be taught in graduate school) and policy (what should governments
do or be advised to do). These are inter-related but separate subjects.
This note is written from the standpoint of an
ex-academic economist, who for some years has been working in the ambiguous
milieu of advisory work for governments, typically funded by donor agencies,
playing a role, which may be more part of the problem than the solution. As
such, I am not very aware of what now gets taught in graduate school and only
occasionally am able to touch base with academic literature. On the other hand,
working in both Africa and Asia, I do get to see the impact of economics at the
national level in a number of Third World countries. The following reflections
respond to that experience.
The influence of
neo-liberal economics on policymaking during the past two decades has extended
not only to current orthodoxies regarding foreign exchange, trade and
macroeconomic policy regimes, but also to views regarding social policy and
social service delivery, and the dismantling of State owned
enterprises.
The extent of this influence is, of
course, based on the decisive neo-liberal victory in the Anglo-Saxon world
during the 1970’s and, perhaps even as important, the euthanasia of social
democracy in the industrialised world, as it has more or less co-opted the
neo-liberal agenda. In Africa, the victory of neo-liberal thinking (the Berg
Report and its impact) came as a result of the coincidence of political events
in the First World and the deep and pervasive economic crisis in the region –
fundamental issues to be faced by African development economics continue to
include analyses of the origins of that crisis and of plausible alternatives to
the neo-liberal response.
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Some Thoughts on the Implications of Increasing Returns for Economic Development
By Renee Prendergast - 2001
This paper argues that the economics of
increasing returns has shed important light on our understanding of various
aspects of development. What it has not done so far, however, is generate a list
of prescriptive remedies parallel to those advanced by the proponents of
neo-liberalism. The paper suggests that this is in part because the
effectiveness of its analysis depends on its being place and time specific and
contingent on a range of institutional and cultural factors. This, it is argued,
should not be allowed to prevent a fuller consideration of its implications for
policy. However, given that simple rule based intervention is likely to be
inappropriate, it is important to think of ways in which collective action can
be organised so as to economize on entrepreneurial and organisational
ability.
A quick glance through some
recent issues of Finance and Development uncovers much advice recommending openness, greater
reliance on the private sector and a restricted role for the state in developing
countries. On closer scrutiny, the advice does not always stack up. For example,
in an article on adjustment and growth in Sub-Saharan Africa, Calimitsis (March
1999:p. 6) argues for the promotion of private investment on the ground that has
a larger impact on growth than public investment. However, he immediately goes
on to acknowledge that, in much of Sub-Saharan Africa, the growth of private
investment is constrained by high transactions costs as well as high levels of
uncertainty.
In similar vein, in an article on private capital flows and growth
published in the June 2001 issue, Mishra, Mody and Murshed make the point that
when a country is poor and saves little, additional capital from outside the
country can help it realize investment opportunities. However, they go on to
acknowledge that ‘little foreign investment is directed to Africa and that is
largely limited to a few countries with significant natural resources’ (p.3).
These are just two of the many examples one can find in which positive
assessments of the contribution of private capital to development are qualified
by an acknowledgement that conditions of underdevelopment do not provide an
attractive environment as far as private capital is concerned.
It is usual in
these circumstances to acknowledge a role for ‘careful but limited government
activism’ as long as this addresses failures in the working of markets
especially co-ordination failures. The notion that underdeveloped economies
provide an unattractive environment for private investment comes as a surprise
only if the implicit vision of the economic process is one in which diminishing
rather than increasing returns are the norm. In the older classical vision of
the economic process, the emphasis was on increasing returns. Growth was seen as
being driven by the division of labour which itself was regarded as a function
of development that had already been achieved. This way of thinking about the
division of labour and development in turn implied that, in certain
circumstances, growth would be self-reinforcing.
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The Developmental Agenda in the Age of Neoliberal Globalization
By Erinç Yeldan - 2001
“Is this the end of economic developmental
state?” was the opening title of a modeling exercise by Adelman and Yeldan in
the Global Trade Policy Analysis meetings of Odense, June 1999. Referring to the recent Asian crisis
as a point of reference, the authors utilized a smooth-functioning neoclassical
model with fully flexible commodity and financial markets to show how the
neoliberal global agenda severely restricts the autonomy of the developing
countries to pursue strategic policies to attain development targets.
Accordingly, with the recent attempts towards full liberalization of the capital
account under pressures from the US and the IMF (the so-called Washington
consensus), governments lost their autonomy in designing a strategic mix of the
exchange rate and interest rate instruments for promotion of industrialization
targets.
Thus, in Grabel’s words:
“These changes, coupled with the ensuing investor euphoria,
led to a general speculative appreciation of asset prices, extremely high real
interest rates, and an overall shift in aggregate economic activity toward
financial trading and away from industrial activities” (Grabel 1995:
128).
The assessment that the process of
neoliberal globalization is associated with successive financial crises has
further been a recurrent theme in much of the literature on international
finance and open economy macroeconomics. Notwithstanding the original
proposition of a (Tobin’s) tax on short term capital flows, the detrimental
effects of unregulated flows of financial capital have been the topic of active
debate in Stiglitz (2000), Rodrik (1997), Calvo, Leiderman and Reinhart (1996),
Grabel (1996), Diaz-Alejandro (1985), and Velasco (1987); and also constituted
one of the main themes in all of the last five annual Trade and Development Reports of
UNCTAD.
In this paper, I attempt to address to
the ideas provided in this literature and try to deduce implications for a
renewed development policy. After a brief conceptual introduction on the
distinguishing characteristics of the recent wave of globalization in the next
section, I discuss the development concept as distinct from that of growth in
the context of late 20th century financial liberalization and market orthodoxy
in section 2. In section 3, I highlight the main mechanisms of how unfettered
workings of the global financial transactions restrict the autonomy of the
states to pursue indigenous development objectives and deprive them from the
classic tools of austerity. Finally in section 4, I sketch some concluding
comments.
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The Need to Rethink Development Economics
By Thandika Mkandawire - 2001
Up until the 1970s, problems of welfare and
unemployment in the developed countries, and those of poverty and
underdevelopment in the developing ones, were interpreted through the lenses of
the corpus of knowledge recognized as Keynesian economics and “development
economics” respectively. But the oil crisis, “stagflation” and subsequent
indebtedness of the developing countries severely put to test the models and the
theories that had underpinned their welfare and development policies.
Although there was little in common between the actual
analytical content of Keynesian doctrine and that of development economics, the
two approaches shared critical views of neoclassical economic theory, and the
related acceptance of state intervention. They also had in common the
understanding that the economy described by neoclassical economists was a
“special case”, and there were many other economies that could be “stylized” by
entirely different models because they were characterized by different
structural features. Furthermore, they shared the view that the state could play
an important role in addressing these structural features, which often resulted
in “market failures”. Both were induced by the need to solve policy problems and
were not merely formal theoretical disciplines whose modelling was based on
“real economies” trapped in a particular equilibrium (unemployment or
underdevelopment) from which they had to be extricated. These positions opened
them to attack from neoliberalism.
It is perhaps
not surprising that the neoclassical counterrevolution and the ascendancy of
monetarism in the advanced industrial countries during the late 1970s and early
1980s led to the rejection of development economics in the South. For the
neoliberal economists, development economists falsely denied the universality of
rational economic behaviour and, by their focus on perversions of standard
economic theory, opened doors for dirigisme. For some, the whole enterprise of
development economics was a futile one, and the dirigisme associated with it was
blamed for poor economic performance.
For two decades, starting from the
beginning of the mid-1970s, the status of development economics in both academia
and policy circles was not enviable. The titles of some of the articles
published in the 1970s and 1980s clearly suggest that all was not well with the
discipline: “In Praise of Development Economics” (Thirwall, A.P. 1978), “The
Birth, Life and Death of Development Economics” (Seers, Dudley 1979), “The Rise
and Decline of Development Economics” (Hirschmann, Albert O. 1981), “The Poverty
of Development Economics (Lal, Deepak 1983), “The State of Development Theory”
(Lewis, Arthur 1984). The beleaguered discipline of development economics found
itself hounded out of economics departments, development finance institutions
and journals as what Albert Hirschman has called “monoeconomics” spread itself.
The “pioneers” of development economics were forced into a defensive posture as
they fended off accusations of providing the intellectual scaffolding for
dirigisme, which had failed, as well as of downplaying the role of the market.
The “death” of development economics was not
merely an academic “paradigm shift”. It was given official sanction by the
United States government. The US representative to the Asian Development Bank is
reported (Newsweek 13th May, 1985) to have announced that the “United States
completely rejects the idea that there is such a thing as ‘development
economics’” (cited in Toye, John 1987: page 73). Development economics became,
as John Toye remarks, “an Orwellian un-thing” in the eyes of the most powerful
nation. The Spartan certainty of the ascendant neoliberalism as to what was
required left no room for specialized knowledge of the problems of development.
Mrs. Thatcher’s strident “There is no alternative” was echoed in international
financial organizations through a standardized set of policies that was
applicable to all economies.
Aside from the
attribution of the causes of the crisis of the 1970s and 1980s, and the
ideological ascendance of neoliberalism in leading OECD countries and financial
institutions, the demise of development economics had a lot to do with
interpretation of the development experience of the postwar period. Up until
1997, the spectacular economic performance of the East Asian countries stood out
sharply against the poor performance of most countries in Latin America, Asia
and Africa, and the transition economies. As with all successes, these successes
aroused many claims of paternity. From the mid-1970s, through a series of OECD
studies (Little, I., T. Scitovsky, and M. Scott 1970), the “counter-revolution”
of neoclassical economics claimed that success was evidence of the wisdom of
relying on market forces. In contrast, the “lost decades” of much of Africa and
Latin America were blamed on “development planning”, which distorted prices and
led to slower growth. Indeed, the experiences of the quintessential development
states were evoked as evidence against development economics.
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26.-
The Neo-Liberal Doctrine and the African Crisis
By Machiko Nissanke - 2001
The core model of Structural Adjustment Programmes (SAPs)
undoubtedly reflects a revival of neo-liberal orthodoxy in mainstream economics
as well as in popular global economic policy debates in the 1980s. In this
sense, SAPs are an application of the neo-conservatism of the Thatcher-Reagan
era to development economics- a product of the neo-liberal ’counter-revolution’.
The legitimacy of ’development economics’ as a distinct subject discipline was
seriously challenged in the process.
The
ascendancy of the neo-liberal school in development economics has not only
impoverished the development policy debate with its monolithic understanding of
the essentially multi-dimensional process of socio-economic development, but
also inflicted irrecoverable costs and pains to low-income countries by imposing
its doctrine in the form of conditionality to Structural Adjustment Loans. While
its supremacy as applied to developed and emerging market economies has been
gradually questioned after a series of global financial crises in the 1990s, its
application to low income developing countries has been surviving as the core
component of loan conditionality.
Drawing on my
recent papers on the topic noted in the bibliography attached, this brief paper
examines the effects of application of neo-liberal policies on the continuing
fragility faced by most low-income countries in Sub-Saharan Africa
(SSA). Indeed, since the early 1980s, the
economic policy and development debate in SSA have been singularly dominated by
SAPs. The debate concerning the appropriateness of SAPs for SSA countries
continues to be unabated despite nearly two decades of ’adjustments’. The
accumulated evidence generally points to the weak link between adjustment and
performance in Africa (UNCTAD, 1998). After 15-20 years of reform efforts, the
region’s growth performance remains far too low to lead the economies along a
path of economic development, which would counter growing levels of poverty. The
incidence of poverty is estimated to be in the range of 40 to 66 percent. In
short, much of Africa today is still mired in ’a crisis in development’, i.e.,
an economy seized by the general incapacity to generate a sustained improvement
in the standard of living.
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27.-
The "Washington Consensus" and Development Economics
By Mark Weisbrot - 2001
The disappearance of development economics,
and replacement of economic development strategy with a simple code for
liberalizing international trade and capital flows, has undoubtedly contributed
to the economic failure experienced by the vast majority of low to middle income
countries over the last two decades. Thandika Mkandawire and others have
summarized some of the analytical capacity and tools that were lost in this
neo-classical and neo-liberal resurgence. In many ways it is similar to the loss
of knowledge in the natural sciences due to clerical influence during the Middle
Ages; so it is a great thing that the UNRISD has taken up this project not only
to recover lost knowledge but to lay the foundation for real progress in both
practice and theory.
I would like to reverse the natural order of such a
discussion and begin with the specific rather than the general, to focus first
on the political and strategic aspects of reviving Development Economics. To
move away from the extremist position that now dominates economic thinking and
practice on these subjects will require simultaneous battles on a number of
fronts. We will need to create the political, intellectual, and media space for
a more honest discussion of very crucial economic issues - a discussion that
barely exists, in the most prominent forums, at present. This could take a long
time, but some of it can be done piece-by-piece: there are certain strategic
reforms that may be winnable in the near future, that could bring us much closer
to these goals.
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