Rethinking the Development Agenda
By Jose Antonio Ocampo | June 23, 2000
Liberalization was presented to the developing world as providing a way out of inefficient strategies associated with trade protection and high levels of State intervention, as well as the rent-seeking behaviour that those strategies encouraged. It was also seen as a means of fully exploiting the opportunities generated by globalization. This view represented a significant break with the idea, which underlay development strategies for several decades, that "late industrialization" required a significant degree of State intervention in order to succeed. The Washington Consensus provided one of the best summations of this reform agenda, although it certainly did not reflect the most radical version of this agenda, which called for a minimalist State (Williamson, 1997). It was also, it should be added, a manifestation of the optimism that the reform agenda generated a decade ago.
During the last few years, the wisdom behind this vision has been called into question. The Asian crisis was what probably dealt it the hardest blow. That crisis made it patently clear that, without an adequate institutional setting, financial liberalization could be the source of severe macroeconomic instability. The strong views expressed by the "global civil society" since Seattle indicate that globalization itself is now being questioned and reflect a basic substratum of discontent in the industrialized world. In developing countries, disenchantment with reforms is also growing, but its political manifestations are more disorganized and its agenda unclear.
This paper summarizes some of the basic concepts underlying the call for a new development agenda. Two intersecting themes in the literature on this subject should be emphasized at the outset. The first is the call for a new balance between the market and the public interest. This should not be viewed as running counter to the operation of the market, as actions that ensure an adequate supply of public goods, help to complete markets, assist noncompetitive markets to function properly, exploit positive and avoid negative externalities, or ensure an equitable distribution of the benefits of development can serve as powerful mechanisms for enhancing market development through a variety of economic, social and political channels. An assertive public policy approach of this sort will be, if correctly applied, more market friendly than the alternative approaches that tended to predominate during the first wave of reforms.
The second theme is that, rather than being restricted to State actions, the concept of public policy should be understood as any organized form of action that pursues objectives of collective interest. This definition of public policy is in keeping with an awareness of the need to open up opportunities for participation by civil society and to work to overcome a crisis of the State that affects the developing world and, indeed, the world at large. It thus aims at correcting both "market failures" and "government failures" and, more generally, at building and rebuilding institutions (or, in the terminology of the new institutional literature, institutions and organizations). This is unquestionably one of the most complex tasks awaiting the developing and transition economies. Moreover, it is the most pressing task –yet at the same time one that has so far received insufficient attention– in the process of building a better international order.
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