The Washington Consensus: A post-mortem

After guiding development policies for nearly 20 years, the “Washington Consensus” lies in shambles. Although selected components remain relevant for development policies around the world, some specifics of the broader policy “package” and, more generally, the concept of a standardized package of policies applicable to all developing countries has clearly been discredited.Criticism has been directed at the assumed link from economic liberalization of international trade and financial flows to more rapid economic growth. Apart from a handful of developing countries, admittedly including some large and important ones, most of the world saw little of the promised economic benefit from widespread and on-going trade and financial liberalization, initially. Many countries actually regressed, when evaluated against broader socio-economic development goals, including income inequality. We conclude that differences in initial conditions (history, culture, geography and levels of industrial and institutional development) preclude any single development policy package from being universally effective.     

Economic liberalization, political pluralism and business associations in developing countries

Trends toward economic liberalization and political pluralism in developing countries would seem to presage a more active political and economic role for business associations. The evidence suggests, however, that business associations are unlikely to be such malleable instruments for the promotion of the private sector and of political pluralism as one might initially expect. They often act more in the interests of their own staff than in those of members. The potential for “unproductive” rivalry and conflict between competing associations is high. The more effective associations are those not financially dependent primarily on membership fees.     

Measuring differential forest outcomes: A tale of two countries

This paper empirically analyzes the growth/deforestation trajectories of El Salvador and Puerto Rico, two Latin American tropical developing countries which have witnessed widely different economic and forest scenarios since the early 1960s. Although both countries began the period with relatively abundant forest resources and similar levels of development, only Puerto Rico witnessed an increase in forest cover during this period. After briefly discussing each country's respective socioeconomic and land use changes, the paper empirically measures possible factors mediating these different deforestation outcomes. Empirical results presented here suggest that Puerto Rico's forest success has depended significantly on its rapid economic growth and development, in particular, its high levels of industrialization, social welfare provision, and domestic investment. Having successfully avoided the scarcity-induced forms of forest exploitation that have destroyed El Salvador's forests, Puerto Rico must now devote the considerable resources generated by this growth to protecting its forest cover from the negative effects of unrestricted urban and industrial development.     

Institutions and the Environmental Kuznets Curve for Deforestation: A Crosscountry Analysis for Latin America,Africa and Asia

The relationship between deforestation and income across 66 countries of Latin America, Africa and Asia is examined. Institutional characteristics as well as macroeconomic policies of each country are hypothesized to impact deforestation. Results show strong evidence of an environmental Kuznets Curve (EKC) relationship between income and deforestation for all three continents. Institutional structure and macroeconomic policy significantly affect the tropical deforestation process. Improvements in political institutions and governance significantly reduce deforestation. The factors leading to deforestation differ across regions, however, and there is no one-size-fits-all global policy recommendation for restraining the tropical deforestation process.     

Business Cycles in Developing Countries: Are They Different?

This paper demonstrates that developing countries differ considerably from their developed counterparts when focus is on the nature and characteristics of short-run macroeconomic fluctuations. Cycles are generally shorter, and the stylized facts of business cycles across countries are more diverse than those of the rather uniform industrialized countries. Supply-side models are generally superior in explaining changes in output, but a “one-size fits all” approach in formulating policy is inappropriate. Our results also illustrate the critical importance of understanding business regularities as a stepping-stone in the process of designing appropriate stabilization policy and macroeconomic management in developing countries.     

An impact of economic integration through trade: on business cycles for 10 East Asian countries

Many recent studies about East Asian countries discussed “natural” economic integration through trade, but there are few rigorous empirical studies on how their economies were affected by the evolution of economic integration within the region. This paper investigates the effect of bilateral trade dependence on the co-movement of business cycles for 10 East Asian countries. We find that economic fluctuations tend to be more synchronized within the region as trade interdependence among them deepens. This finding suggests the necessity of cooperative efforts to prevent or adjust unfavorable future economic crisis in East Asia.     

Mass democracy: The real reason that Brazil ended inflation?

“Populism” and expanded democratic participation often have been painted as the enemy of sane macroeconomics. Yet Brazil’s experience suggests possibly benign implications of stable mass democracy for national economic management in developing countries. Prior to 1930, agrarian elites ruled Brazil. As political participation gradually expanded, policymakers elaborated the regulatory framework of import-substituting industrialization (ISI). ISI not only generated strong growth but also chronically high and volatile inflation, with costs falling most heavily on the disenfranchised a poor majority. The advent of mass democracy in the mid-1980s gave the poor a political voice for the first time, and plausibly was the crucial cause for the demise of hyperinflation a decade later.     

IMF conditionality: Conceptual problems and policy alternatives

This paper argues that the main issue damaging relations between developing countries and the International Monetary Fund is the latter's position that external disequilibria are always a consequence of excess aggregate domestic demand, caused by excessive credit expansion. As a result, Fund sponsored stabilization programs center on demand contraction through a credit crunch and may establish stricter domestic performance criteria than necessary to attain the balance-of-payments objectives. The author suggests that the IMF establish a two-tier conditionality system, which he calls the “hands-off” approach, with one tier composed exclusively of balance-of-payments or foreign exchange denominated variables, and the other of domestic currency denominated variables. The two-tier system would allow more flexibility in compliance assessment and might reduce substantially the number of breakdowns of Fund programs.A revised “hands-on” approach for the Fund is also suggested. The author critiques the recessive biases of the currently used financial analytical exercises and makes specific proposals to introduce “growth exercises” to establish the foreign credit requirements of a growth-oriented stabilization program and thus to introduce performance criteria for creditor countries and banks — a form of “reciprocal conditionality.”     

Are Environmental Social Movements Socially Exclusive? An Historical Study from Thailand

Environmental social movements in developing countries are often portrayed as democratizing but may contain important social divisions. This paper presents a new methodology to analyze the social composition and underlying political messages of movements. Nearly 5 000 newspaper reports during 1968–2000 in Thailand are analyzed to indicate the participation of middle and lower classes, and their association with “green” (conservationist) and “red-green” (livelihoods-oriented) environmental values. Results show middle-class “green” activism has dominated forests activism, but lower-class “red-green” activism has grown for forests and pollution. Newspapers, however, portray all environmentalism as “democratization,” suggesting that the possible exclusiveness of some environmental norms is unacknowledged.     

American agricultural assistance and the new international economic order

Combining ethical, political and economic elements, this paper studies the relationship between American food aid and agricultural assistance and the evolution of demands made by developing countries for a new international economic order. The ethical viewpoint is based on John Rawls' theory of ‘distributive justice’ and argues that the ‘Right to Food Resolution’ does not meet the developing countries' calls for redistribution. After analysing the political and economic differences in outlook of the developed and developing countries, it is concluded that the conduct of American agricultural assistance policies towards the developing countries has failed to appreciate the needs expressed in their demands for a new order.     

Government revenue, expenditure, and national income: A granger causal analysis of the case of Taiwan

An understanding of the causalities among government receipts, outlays and national income in developing countries may shed some light on the type of government finance favorable to economic prosperity. However, there is no consensus in theories and empirical studies about the causal order among the three variables. This study evaluates their causal relationships in Taiwan within a framework of trivariate autoregression model. We find that there are feedbacks between GNP and government expenditure, on the one hand, and between government revenue and GNP, on the other hand. But there is only a one-way causality running from government revenue to government expenditure. The two bidirectional causalities seem to fit the expectation of fiscal activism. However, the causal flow from government revenue to expenditure indicates the constraint of the former on the latter. Therefore, we call this general causal pattern among the three variables in Taiwan as “constrained fiscal activism.”     

Size really doesn't matter: In search of a national scale effect

I search for a “scale” effect in countries. I use a panel data set that includes 200 countries over forty years and link the population of a country to a host of economic and social phenomena. Using both graphical and statistical techniques, I search for an impact of size on the level of income, inflation, material well-being, health, education, the quality of a country's institutions, heterogeneity, and a number of different international indices and rankings. I have little success; small countries are more open to international trade than large countries, but are not systematically different otherwise. J. Japanese Int. Economies 20 (4) (2006) 482–507.     

Global Retail Chains and Poor Farmers: Evidence from Madagascar

Global retail companies (“supermarkets”) have an increasing influence on developing countries, through foreign investments and/or through the imposition of their private standards. The impact on developing countries and poverty is often assessed as negative. In this paper we show the opposite, based on an analysis of primary data collected to measure the impact of supermarkets on small contract farmers in Madagascar, one of the poorest countries in the world. Almost 10,000 farmers in the Highlands of Madagascar produce vegetables for supermarkets in Europe. In this global supply chain, small farmers’ micro-contracts are combined with intensive farm assistance and supervision programs to fulfill complex quality requirements and phyto-sanitary standards of supermarkets. Small farmers that participate in these contracts have higher welfare, more income stability and shorter lean periods. We also find significant effects on improved technology adoption, better resource management and spillovers on the productivity of the staple crop rice. The small but emerging modern retail sector in Madagascar does not (yet) deliver these benefits as they do not (yet) request the same high standards for their supplies.     

What role for IMF surveillance?

This paper reviews two recent reports on the international monetary system, one by the Group of 10 (industrial countries) and the other by the Group of 24 (developing countries). It contrasts their recommendations for improving policy surveillance by the International Monetary Fund. Its own recommendations include the strengthening of “enhanced surveillance” to make it more formal without making it more onerous, the introduction of “shadow conditionality” to give guidance to governments about their eligibility to draw on the Fund, and the further development of multilateral surveillance along lines proposed at the Tokyo Summit. It would broaden that process, however, by shifting the focus from policy compatibility, defined with reference to exchange-rate behavior, to policy quality, defined with reference to the behavior of global aggregates such as the growth rate of world trade. The paper examines the use of target zones to manage exchange rates and argues that it would not weaken the case for multilateral surveillance, which is needed not only in setting the zones but also to make sure that policies adopted by participating countries do not impart an inflationary or deflationary bias to the international economy.     

Europe and East Asia in the context of regionalization: Theory and economic policy

Much academic interest has recently centered on economic regionalism as a framework of international economic relations. The European Community (EC) has been a focal point. Other regional economic organizations (APEC, NAFTA), have been subjects of debate.This paper discusses three principal arguments: (1) the “natural”/“optimal” regional grouping, (2) transaction cost advantage in a regional model, and (3) the balancing of intraregional and extra-regional economies. Indeed, the argument is most certainly for an international regime of an “open,” not a “fortress” economic regionalism.This paper examines the subject relative to economic theory and policy.     

Foreign exchange regimes and industrial growth in Bangladesh

Foreign exchange regimes have been found to play an important role in implementing trade and industrial development strategies in many developing countries. The economic incentives provided to export-oriented and import-substituting industries can be measured by the real effective exchange rate (REER) for imports and exports. Such measures are developed for Bangladesh. The REER for exports and imports increased by around 72 and 82%, respectively, over the period 1973–1974 to 1976–1977. From 1976–1977 to 1984–1985, the REER for imports fell by nearly 10% while the REER for exports declined by 6%, although the exchange rate for non-traditional exports fared somewhat better. The REER for both imports and exports appears to have recovered somewhat since 1984–1985, but the paper concludes that while trade and industry policies in Bangladesh have become less “inward-looking,” the exchange regime is still biased in favor of import-substituting industrialization. Substantially stronger export incentives than exist at present would be necessary to remove this bias.     

Informal Sector Pollution Control: What Policy Options Do We Have?

In developing countries, urban clusters of informal firms such as brick kilns and leather tanneries can create severe pollution problems. These firms are, however, quite difficult to regulate for a variety of technical and political reasons. Drawing on the literature, this paper first develops a list of feasible environmental management policies. It then examines how these policies have fared in four independent efforts to control emissions from informal brick kilns in northern Mexico. The case studies suggest that: (a) conventional command and control process standards are generally only enforceable when buttressed by peer monitoring, (b) surprisingly, clean technologies can be successfully diffused even when they raise variable costs, in part because early adopters have an economic incentive to promote further adoption, (c) boycotts of “dirty” goods sold in informal markets are unenforceable, (d) well organized informal firms can block implementation of costly abatement strategies such as relocation and (e) private sector-led initiatives may be best suited for informal sector pollution control.     

European Union integration lessons for ASEAN + 3: the importance of contextual specificity

This paper will argue that EU integration appears to offer ASEAN and three Northeast Asian Countries (China, Japan and South Korea) political and security lessons concerning maintenance of regional stability, as well as some economic lessons. There is not, however, any institutional blueprint for integration that these countries could emulate. This is in part because economies are characterized by “contextual specificity” of chosen institutions and their corresponding working rules. These institutions and rules evolve in particular cultural and historical settings and are shaped by the specific country’s philosophical basis, political structure, and attitudes of authorities towards alternative types of economic institutions and the types of corresponding rules they could choose to establish for those institutions.     

Climate change,urban settlements and quality of life: The case of the Southern African Development Community region

Climate change has become a major national, regional and international problem cutting across developed and developing countries alike. Within the developing world, the effects of climate change have been devastating; this has caused enormous human suffering. The Southern African Development Community (SADC), a regional economic block of 15 countries, has been badly ravaged by the vagaries of climate change. The urban areas in particular appear to have been very badly impacted as flooding, drought, pollution and deforestation have become endemic. The impacts of climate change have triggered human suffering of immense magnitude, especially in areas occupied by the marginalised. This article is based on desk research and, using qualitative analysis, examines the impact of climate change on SADC countries, considers initiatives that the regional block has in place in efforts to mitigate the human suffering experienced as a consequence of the negative impact of climate change and, finally, considers a way forward.