Paper - Initiative for Policy Dialogue

12
Adding Brazil and Botswana enhances, of course, the importance of the perspective
advanced in this book, the developmentalist state, one which takes an active role in
promoting development. In both of these countries, governments played a central role in
promoting growth. Brazil adds one important wrinkle: it pursued what was essentially
an import substitution policy as opposed to export led growth (though it did not neglect
exports) during the period of rapid growth that the GSC focuses on. (There is one other
way in which Brazil changes the picture presented in the East Asia Miracle. That book
emphasized the importance of education and equality. Brazil through most of this period
performed relatively poorly on both counts; more recently, it has performed better on
both). What is essential is “learning,” and an appropriately designed import substitution
policy can be the basis of technological advances and export diversification, as Brazil has
repeatedly shown. (The Spence Commission seems to implicitly disagree with the
Washington Consensus view of the lost decade—it was the inevitable result of flawed
import substitution policies. As Stiglitz 15 , Rodrik 16 and Ocampo 17 have argued
elsewhere, it was mainly the result of the macro-economic disturbance brought to Latin
America by America’s monetary policies, sometimes referred to as the “Volcker
shock 18 ”.
Botswana brings to the fore another lesson, of especial importance to Africa:
natural resources do not have to be a curse. If appropriately managed, they can be a
blessing. But the fact that there are so few natural resource countries on the list of
success cases is a reminder how difficult that is. 19
What is notable in the list of policies leading to sustained growth are some things
that are not there. The “expanded” Washington Consensus policies (expanded beyond
the list of prescriptions formulated for Latin America, in Williamson’s original paper
defining the Washington consensus 20 ) did not include capital and financial market
liberalization—something that most of the success cases treated with caution; and it did
not include clear systems of property rights—how could it, when among the most
successful cases was China, where they are just now becoming more precisely defined.
Indeed, contrary to the “property rights school,” several of the success cases began with
large land reforms. But while property rights may not play the pivotal role that Hernando
DeSoto has suggested, deficiencies in property rights system can be a hindrance to
growth, and that may be the case in some African countries.
countries in emulating East Asian style interventions (they were deemed to be particularly daunting for
Africa) and to downplay the role of some interventions, e.g. it argues that industrial policy did not make
much of a difference in East Asia.
15 Joseph Stiglitz (2006), Making Gobalization Work, W.W. Norton & Co, p.36.
16 Dani Rodrik (1999), The New Global Economy and Developing Countries: Making Openness Work,
Overseas Development Council, p.75.
17 Ocampo’s many relevant writings include: Enrique Cárdenas, José Antonio Ocampo, and Rosemary
Thorp (editors) (2000), An Economic History of Twentieth-century Latin America: Industrialization and the
State in Latin America: The postwar years, Palgrave.
18 This refers to Paul Volcker’s role as Chairman of the US Federal Reserve Bank, in the sharp rise in
interest rates in the US in the later part of the 1970s to fight inflation.
19 See McCartan, Sachs, and Stiglitz, The Resource Curse, for a more extensive discussion of these issues.
20 Williamson, John (1989) “What Washington Means by Policy Reform”, in: Williamson, John (ed.): Latin
American Readjustment: How Much has Happened, Washington: Institute for International Economics.