Escaping from sterile political straitjackets

World Prices and Development, edited by Stephany Griffith-Jones and Charles Harvey. Gower, Aldershot, 1985, 377 pp.

Though the grand theories of development and underdevelopment are less in evidence today, there is considerable empirical work designed to answer some of the questions raised in the earlier debates. The volume under review is a prime example of this trend, illustrating as it does the approach developed by the Institute of Development Studies at Sussex. Careful empirical investigation is allied to a sound sense of political realities and a refusal to kow-tow to particular interest groups.

The purpose of the collected essays in this volume is to examine the impact of world prices on development through case studies of the recent economic history of Tanzania, Sri Lanka, Malawi, Brazil, Ireland, the Republic of Korea, Argentina, Kuwait, Venezuela, Tunisia, and Jordan. They generally keep to the brief set by the editors and are reliable and informative. In essence the project of this volume is to evaluate various Third World countries' (the case of Ireland seems anomalous) policy responses to changes in the international environment, focusing on long-term implications for development rather than the more customary emphasis on short-term adjustment. There is a clear recognition that political factors may often constrain economic policy decisions, and the approach is decidedly interdisciplinary rather than technical. Though not neglecting macroeconomic change, the essays emphasize the decisive importance of sectoral considerations on adjustment, following the inspiration of the late Dudley Seers.

The present project is set in the context of the generalized deterioration of developing countries' economic performance in the 1980s. With the serious reduction of world trade rates in the 1980s, it seems futile to continue to advocate export-led growth strategies. Whereas the recession of the mid-1970s was relatively short-lived, in 1982 the recorded current balances of industrial countries were still in deficit. As a result, the developing countries were faced with a continued decline in the demand for their exports. The response of the developing countries in the mid-1970s was an increase in borrowing, which, of course, led to the dramatic foreign debt problem. Had interest rates remained very low, and could a rapid export growth have been maintained, the debt issue would still have been serious, but now the margins of adjustment are severely curtailed and the restriction of growth appears the only alternative.

Though the benefits from international finance and trade were distributed unevenly among developing countries, the world recession of the early 1980s has harmed practically all of them. This implies, as the editors note, that "collective self-reliance" may increasingly become a practical necessity and not merely an attractive ideological option. There are common interests in growth and development which cut across the political differences of the Third World, and response.

It is in this context that we should evaluate the policies followed in practice by developing countries in response to variations in world prices.

Balance sheet d experience. On the basis of the various national case studies carried out with a similar methodological brief, the editors attempt to draw general conclusions on the relation between world prices and development. Some of the contributions do not get beyond such trite formulas as: "The inflation rate should be reduced to ensure sound economic development in me long run." The editors go considerably beyond platitudes, although they were unable to generalize on the basis of countries' trade surplus or deficit in energy, food, and capital goods as originally hoped for. Indeed, in somewhat of an understatement they note that "financial and macroeconomic management is not only decided in the Central Bank or the Ministry of Finance, but is heavily influenced by socio-economic and political forces in society." Bearing in mind that such "extraneous" factors may unbalance the best-planned policy decisions, the following are the main features of policy-making successful in generating growth:

- taking account of a country's past history and structural features in designing economic policies;

- the consistent use of targeted state intervention to achieve particular targets;

- market management rather than freeing market forces or simply ignoring them;

- flexibility in responding to large, and often frequent, changes in the international environment;

- a combination of pragmatic use of policy investments with prudence in financial management.

This, of course, is no magic checklist, completion of which guarantees economic development, but it represents a thoughtful balance-sheet of the experience of many Third World countries over the last two decades.

The contribution to our understanding of current development issues made by this volume is considerable. The work is conceptually sophisticated yet quite approachable by the nonspecialist. Its conclusions are suitably prudent but by no means hide behind technical jargon to avoid embarrassing political conclusions. There is much to interest the specialist: for example the country-by-country consideration of food policies or the question of energy. For the general reader, there is an up-to-date consideration of the prospects for development in an intelligent sample of countries. Politically, the conclusions may not please in diverse quarters. The neoliberal enthusiasts of market forces may not like the advocacy of state intervention. Conversely, the proponents of a debt moratorium may reject the call for prudence in financial matters. Nevertheless, the impartial observer will recognize the considerable effort, especially by the editors in their summing up, to break out of sterile political straitjackets. The issues of underdevelopment are too serious to allow for the ritual incantation of pat formulas with little purchase on a rapidly changing reality.

It may soon be possible to move back toward a general theoretical understanding of underdevelopment on the basis of careful empirical studies like the present one. Since the heydays of modernization and dependency theories respectively no general approach has held sway. The effect has been healthy, but at the same time we will have to move back again from the particular to the general if our understanding is to be fully rounded.

Ronaldo Munck