WHAT DO WE KNOW ABOUT THE POLITICAL ECONOMY OF ECONOMIC POLICY REFORM?

The recent wave of democratization in developing countries andin formerly communist ones has sparked renewed interest in therelation between politics and economic adjustment. Adjustmentprograms, however well designed in a technical economic sense,are often politically difficult to launch and, once launched,to keep afloat. Success in implementing an adjustment programmay depend on a government's skill in generating political supportand holding off the opposition. This article explores the politicsof economic reform, drawing on country studies by politicalscientists and country specialists, the growing theoreticalliterature by economists, and the findings of a World Bank researchproject on the political economy of adjustment in new democracies.The article examines three broad clusters of variables: institutionalcharacteristics of the political system, aspects of the internaland external economy, and the design of the reform program.It also considers the relevance of political analysis for policymakersand for international financial institutions.