Constitutionalism and credibility in reforming economies1

There has been relatively little investigation of the effect of constitutional transformations on the economic transition in post‐communist countries. We develop a simple signalling model in which constitutionalism – a commitment to limit political power and provide judicial defence of basic rights – reinforces the credibility of pro‐market candidates’ electoral promises and boosts public support for economic reforms. These findings are tested using opinion poll data on public support for reform in Central and Eastern Europe, and in the former Soviet Union, in the 1990s. In a two‐stage procedure we show that public support for market reforms is higher in countries where incumbents have taken deliberate steps to increase political accountability and judicial independence. Public support also spurs actual economic reform.     

Productive and Unproductive Capital: A mapping of the New Zealand system of national accounts to classical economic categories, 1972‐95

New Zealand has gained considerable international attention for the neo-liberal economic reform programme it enacted from the mid-1980s; this programme has served as a model for similar reform elsewhere. Within the neoclassical framework of the reformers, the programme has produced many improvements to the economy. Such fundamental indicators as lower inflation, lower budget deficits and higher economic growth are cited as evidence of the improved economic conditions. Yet unemployment remains high, real interest rates are among the highest in the world, nominal interest rates and business confidence fluctuate considerably, and the balance of payments is deteriorating. Using a classical framework, this paper examines the neo-liberal reform of the New Zealand economy to see if there are alternative explanations for the persistence of these problems. The methodology developed by Shaikh & Tonak (1994) is used to map official national accounts data to classical economic categories for the 1972 to 1995 period. This approach is compared with earlier attempts at estimating classical economic categories for New Zealand. This classical view of the economic reforms is compared with the conventional view. The paper's main results are that there was a large increase in unproductive economic activity associated with the economic reforms in New Zealand; that the improvement in economic fundamentals emphasised by the reformers reflects this growth of unproductive activity; and that the persistence of other economic indicators is related to the ongoing weakness of productive activity.     

Where are we in the political economy of reform?

We review the experiences of developing countries with market-oriented reforms, using the tools of modern political economy. We impose intellectual discipline by requiring that actors behave rationally using available information and that basic economic relationships such as budget constraints be accounted for. We attempt to integrate two approaches, one based on dynamic games played by interest groups, with one that focus on limited information and the dynamics of learning.

We describe the “starting point” as the set of “old” policies and we attempt to explain the dynamics (political, economic and informational) that lead to reform (section II). We analyze strategies for reformers subject to political constraints (section Ш). We evaluate the aggregate and distributional costs of reforms, emphasizing the importance of looking at the right counterfactuals (section IV).

We conclude by pointing to the challenges ahead: the second-stage institutional reforms necessary to take off from underdevelopment.     

Reforming the public administration: The role of crisis and the power of bureaucracy

The need to balance austerity with growth policies has put government efficiency high on the economic policy agenda in Europe. Administrative reforms that boost the internal efficiency of bureaucracy can alleviate the trade-off between consolidation and public service provision. Against such a backdrop, this paper constructs (and makes available) a novel reform indicator to explore the determinants of public administration reforms for a panel of EU countries. The findings support political-economic reasoning: An economic and fiscal crisis is a potent catalyst for reforms, but a powerful bureaucracy constrains the opportunities of a crisis to promote reform. Furthermore, there is some suggestive evidence for horizontal learning from other EU countries, and for vertical learning associated with a particular type of EU cohesion spending.     

GORBACHEV'S PERESTROIKA

In its broadest sense, perestroika may encompass economic reforms or restructuring, openness to criticism, and democratization. One may attribute perestroika significantly to low performance, if not failure, in the Soviet system—notably, the need to modernize and to rectify lagging growth rates. The economic content of perestroika embodies fairly radical and comprehensive changes—notably, expanding enterprise autonomy and price mechanisms, reducing the scope and intensity of centralized planning, and allowing a larger role for individual and cooperative enterprise. Soviet experience supports the view that economic and political reforms are connected. Glasnost (openness) and democratization have expanded, partly as means to foster public support for economic restructuring. Such support is crucial, due to competing factions within the Communist Party and to the Party's opposition to more radical or democratizing reforms. Mikhail Gorbachev, after rejecting both Stalinism and post-Stalinism, has turned to pre-Stalinist sources—the Bolshevik Revolution, Lenin, Bukharin—for intellectual inspirations. Obstacles to reforms are substantial, and one may identify several alternative scenarios.     

Balkanization and assimilation: Examining the effects of state-created homogeneity

Charles Dickens was a reformer who sought to reform economic conditions. Convinced that the reforms proposed by the economists of his day would not benefit those victimized by the Industrial Revolution, he also sought to reform economics. Dickens' prime targets were McCulloch, Malthus, and Nassau Senior. Reviewing Dickens's efforts at social reform, Chesterton made the distinction between pessimistic reformers, who describe how bad people are under bad conditions, and optimistic reformers, who describes how good people are under bad conditions. The author draws similar parallels between mainstream economists and social economists.     

Growth and Transition: Why Has China''s Performance Been So Different?

This paper explains the differences in performance between the Central and Eastern European countries (CEECs) since 1989 and China since its 1978–1979 reforms by the differing goals of economic reformers in China and in the CEECs. In China reforms were intended to promote growth rather than to create a market-based economy. Eastern European reformers’ main goal has been the creation of a market-oriented economy. The paper focuses on policies toward foreign trade, foreign investment, and foreign exchange since these highlight the differences in goals.J. Comp. Econom.,December 1997,25(3), pp. 422–440. University of Adelaide, Adelaide, South Australia 5005, Australia.     

Economic and Monetary Union – Current Fiscal Disturbances and the Future

At the moment of its setting up the Economic and Monetary Union did not meet the criteria of the optimum currency area. Neither does it today. The crisis of public finance in the eurozone results from the abandonment public finance reforms, lack of consistency in enforcing the decision of the Stability and Growth Pact and, additionally, economic recession and financial crisis. Further functioning of the eurozone will depend on radical reforms of public finance and structural reforms enhancing efficiency of the market as an adjustment mechanism, and competitiveness of economies. The very establishment of the European Stabilization Mechanism and European Financial Stability cannot make up for the above mentioned necessary undertakings. It is important to change the socioeconomic model existing in the EU member countries.     

Welfare Analysis of Pension Reforms in an Ageing Japan

This paper uses a computable general equilibrium model with overlapping generations to explore the effects of different public pension schemes on economic welfare, and intergenerational and intragenerational equity. Besides the benchmark case based on the 2004 public pension reform, the present paper considers two alternative reforms: financing the basic pension benefit through a consumption tax, and eliminating the earnings‐related pension benefit. The simulation results suggest that even the consumption‐tax financing of only the basic pension, namely, the combination of both reforms, might not improve overall economic welfare, although it increases economic output by inducing capital formation.     

The year of commissions.

Despite mutterings that today's political climate is unreceptive to health care reforms, would-be reformers are inching forward under several high-powered commissions and task forces.     

Democratic institutions and regulatory reforms

We use a sample of 144 countries over the period 2003–2013 to investigate the link between democratic institutions and regulatory reforms. Democracy may be conducive to reform, as politicians embrace growth-enhancing reforms to win elections. On the other hand, authoritarian regimes may not worry as much about public opinion and could undertake reforms that are painful in the short run but bring long-term benefits. We test these alternative hypotheses, using data on regulatory reforms from the World Bank’s Doing Business database. The results provide mixed support for the hypothesis that democracy is good for regulatory reforms. We also show that regulatory reforms are more likely just after parliamentary elections in poor and middle-income countries.     

Interest rate reforms,financial deepening and economic growth in Tanzania: a dynamic linkage

In this paper we examine the dynamic relationship between interest rate reforms and economic growth in Tanzania using two tests. In the first test, we examine the impact of interest rate reforms on financial deepening using a financial deepening model. In the second test, we examine whether the financial deepening, which results from interest rate reforms, Granger‐causes economic growth – using a trivariate model. The empirical findings of our results reveal that there is a significant positive relationship between interest rate reforms and economic growth in Tanzania. However, the results fail to find any support for finance‐led growth.     

Path Dependence in Russian Policy Making: Constraints on Putin's Economic Choice

A decade after the introduction of economic transition in Eastern Europe it was starting to become clear that initial beliefs in one-size-fits-all reforms had been unfounded. While some countries had made the grade, others- notably so Russia- had failed to live up to expectations. This article explores the Russian roots of that failure, arguing that the Russian reformers failed to take into account a deeply rooted Russian path dependence. By focusing narrowly on changes in the formal rules of the game, they neglected pressing needs for broader institutional change, including a credible commitment by the Russian government to impartially enforcing a rules-based system. It is argued that the legacy left for Vladimir Putin in important respects is even more dire than that left by Gorbachev for the El'tsin team.     

A Note on Initial Conditions and Liberalization during Transition

Literature explaining variations in economic performance among transition economies places a high level of importance on the role of policy. Policy differences are measured via a liberalization index used to explain differences in performance. We find that this index may be endogenous to one performance measure, e.g., output decline, and may, therefore, overstate the role of policy. This paper performs an instrumental variables (IV) estimate of the relationship between liberalization and performance that also allows us to generate a relative index of reform progress. The relative index challenges some commonly held preconceptions about which transition economies are rapid reformers and which are slow reformers.J. Comp. Econom.,December 1998, 26(4), pp. 718–734. Macalester College, 1600 Grand Avenue, St. Paul, Minnesota 55105.     

A Spoonful of Sugar: Privatization and Popular Support for Reform in the Czech Republic

We analyze the role of privatization in creating a constituency for economic reform, markets, and democratic institutions, focusing on the Czech Republic. Drawing on a 1996 survey, we examine the 1,459 respondents' opinions on reforms, economic policies and systems, the legitimacy of transition, and democratic values. Using ordered probit estimation, we find that receiving property through restitution is strongly associated with support for reform and markets. Concerning voucher privatization, we find positive effects for participants retaining shares, but little impact of participation alone. Our simulations suggest that policy designs have substantial consequences for citizens' support of reforms, markets, and democracy.     

论政府供给偏好的短期决定:政治均衡与经济效率

本文以财政支出为主体,研究了我国政府供给偏好(规模与结构)短期决定问题。政治均衡而非经济市场均衡是理解这一问题的关键。在“有管理的竞争性政治市场”和政府追求政治支持最大化等假定下,我们考察了政治均衡决定政府供给偏好的过程及其效率属性,以及“政治价格”在两级“政治市场”上的形成机制。结论表明:政治均衡决定资源配置固有的低效率属性,因政府供给范围的“越位”和“缺位”而加剧。当前改革的重点应是推动经济市场化转轨的完成和公共财政的转型,而非完全的民主化。权威因素对“政治价格”的管理在利益分化严重的当前形势下具有建设性作用。推动渐进民主化,完善权力对等的“二级政治市场”则是长远之策。     

ASIAN DEVELOPMENT AND ENVIRONMENTAL DILEMMAS

Rapid economic growth in the Asian-Pacific region provides economic hope for the region's low-income countries but raises international environmental dilemmas and could be unsustainable. The strong international and Asian political support for Asia's economic growth often makes little mention of the environmental issues involved. The natural resources water, air, and soils as well as Asia's conservation of living resources and maintenance of biodiversity are important environmental issues. Tourism development—especially ecotourism—could combine economic development and conservation, but as Asian examples illustrate, it has limitations. Other environmental influences include the rapid urbanisation of Asia and the likelihood of increased international and transboundary conflicts over use of natural resources as economic growth in Asia proceeds. Markets and market reforms are not sufficient to deal with Asia's economic problems. Institutional and other reforms also are needed. One must reject the view that economic growth neglecting the environment is acceptable even in low-income countries. Polluting and degrading the environment now and repairing it later is a dangerous policy to follow, particularly for larger Asian countries. In fact, a strong case exists for high-income countries to support the environmental conservation efforts of low-income countries.     

Unemployment and the dynamics of political support for economic reforms

I analyze the dynamics of political support for economic reforms using a version of Rodrik's (1995) two-sector model of the transition economy. The key role is played by the pattern of flows between the state and private sectors and unemployment. It is shown that while the workers in the private sector always support rapid reforms, the workers in the state sector and the unemployed will support rapid reforms only at the outset of the transition. Later, state-sector workers and unemployed vote for a reduction in the speed of reforms.     

The dynamics of retirement saving — theory and reality

Pension problems and reforms are in the foreground of public interest and political action in many countries, yet economic theory offers inadequate support for finding viable solutions, because it is heavily loaded with simplifying concepts and unrealistic assumptions. These concepts and assumptions are briefly summarized in Chapter 1, while a generalized framework based on them is presented in Chapter 2. The basic stationary assumption is then relaxed in Chapter 3 what results in the conclusion that a profound, not just technical, but conceptual innovation is required. Chapter 4 outlines a few major issues and concepts for a more realistic pension economics. A summary is given in Chapter 5.     

美国预算和财政管理改革的演进及对中国的启示

一直以来,美国公共预算和财政管理的改革都是务实的、政治的、演进的,有时也不乏创新性。通过对美国公共预算和财政管理改革的历史进行回顾,可以得出一个理解公共预算和财政管理改革的理论框架,这将有助于理解美国现行预算和财政制度体系。这些改革经验对于包括中国在内的世界各国均具有一定的启示和借鉴意义。