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On Planning for Development: Development Economics
Editor: Dr. Róbinson Rojas Sandford
The Developmental State The state, civil society and development The neoliberal state Sustainable development

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.

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

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.

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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Applying Behavioral Economics to International Development Policy
Paper prepared for the UNU-WIDER Jubilee Conference
C. Leigh Anderson and Kostas Stamoulis, June 2005 and
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.
RRojas Databank is a member of Development Gateway hosted by The World Bank

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