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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12.-
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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13.-
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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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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17.- 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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19.- 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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21.-
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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22.-
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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23.- 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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24.-
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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25.- 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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Applying Behavioral Economics to International
Development Policy
Paper prepared for the UNU-WIDER Jubilee Conference
C. Leigh Anderson and Kostas Stamoulis, June 2005
cla@u.washington.edu and kostas.stamoulis@fao.org
Reforms and Confidence
Pertti
Haaparanta and Jukka Pirttilä
Helsinki School of Economics,
Labour Institute for Economic Research - March 21, 2005
Abstract
We examine the choice of economic reforms when policymakers have
present-biased preferences and can choose to discard information
(maintain confidence) to mitigate distortions from excess discounting.
The decisions of policymakers and …firms are shown to be
interdependent. Confi
dent policymakers carry out welfare-improving reforms more often, which
increases the probability that firms will invest in restructuring.
While pol
icymakers in diferent countries can be equally irrational, the
consequences
of bounded rationality are less severe in economies with beneficial
initial
conditions. We also examine how present-biased preferences influence
the
choice between big bang versus gradualist reform strategies. Our
…findings
help explain diferences in economic reform success in various
countries.
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