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Policy Reform and Equity: Extending the Benefits of Development : A Sequoia Seminar

Policy Reform and Equity: Extending the Benefits of Development : A Sequoia Seminar

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Policy reform was the central theme in the development economics of the 1980s. Making it so was the patent failure of internationally aided government-driven economies to foster development -- anywhere -- in the Third World. But as the desire to reformgovernment policies for enabling market-driven economic growth was being reborn, so was the fear that many of the poorest of the poor would be even worse off in consequence. Though free markets can guarantee increased opportunities for all, they cannot,inherently, guarantee any particular results for any particular person. The latter requires coercive authority, and impersonal markets are predicated on consent. So, the challenge was/is to design and accomplish policy reforms that would effect the transition from state-driven to market-driven economies while simultaneously improving the living standards of all citizens, including the poorest. The theme resounds in the 1990s even where it may not prevail throughout the former Soviet Union and other locales.

Indeed, the chapters prepared for this book may be even more useful today than they were upon publication in 1988. But today's reader is likely to find the book's 57 pages of give-and-take among seminar participants to be among its most fascinating parts. For example, in these pages of discussion one encounters some astounding memories of a distinguished Harvard professor: "most people today can't even remember what happened in Cuba and in China. But some of us who are as old as myself retain this wistful hope that maybe the judicious exercise of state power can achieve that phenomenon once again." In the professor's defense, he may have been receiving his information from the U.S. Central Intelligence Agency. It was 1987, after all, when the CIA formally estimated that the per capita GDP of East Germany was higher than that of West Germany. In retrospect, the controversy among policymakers and academics that is captured in this book seems symptomatic of the everyday discord without which the Berlin Wall would still be standing and communism would have retained most of its adherents. Today, one may see the discontent with development policies that crescendoed in the early 1980s as a harbinger of the dissolution of the Soviet bloc and its parts. And the substantial merger of political and economic authority that resulted in statist policies throughout the Third World has the same effects wherever mercantilism is sustained, concentrating benefits among government officials and political elites while over-burdening everyone else with their costs. Thus is the same phrase -- "crony capitalism" -- used to describe the non-, even anti-market Russian economy of the 1990s as was commonly used to describe the Philippines of Ferdinand Marcos.

There may be no other book that captures so fully the controversy of the 1980s regarding whether and how to introduce market-oriented reforms in Third World countries while assuring that the poor would not become poorer. It was not imagined at the time that the debate would become equally relevant to an entirely new audience in the 1990s.