M _ -0~~.,~> -<~~~~~~~~~~x ' ,,"If >fQ71 ,711I,7onn Economy Development FracisFukyam ~~~~~W\ ~ ~ ~ ~ ~ 7i idtta //aie, an lbe,4MiCjI&i&- "I"~ ~ ~ ~ ~ ~ ~~~~~DailKumn ~~~~~I~~~~~~~~~7~~~~~~~~~~~~~~:-0VA it i --tp '1 * ~~~~~~~~~~~~~~~~~~~~loii hsise y '~~~~~~~~~~~'- Amar~~~~~~~~~/1Sl-7C tya Sen,(tl BANK~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~tl )ntre NSTITUTE 011~~~~~~~~Joep FIee Speeclt T ii'ENN' C R 1, B A NK I N T I T L N 0 L l M E,~,-'ON tl A B E 0 N Pa MN Etvpa R li9f9) r. 'a *0 -V A -A A A> i Sqed to befitr eeracy, ratber it hw to 6become fit tiwouXqi demzocracy. Th6 1'd a truly notnentowf c/alzge. S_ ome time ago, in the summer of 1997, a leading Japanese newspaper (Nihotz Keizal S/9itnbuiz) wanted me to identify the most important thing that has happened in the twentieth century. I found this to be a thought-provoking question; so many things of gravity have happened over the last hundred years. The European empires - mostly British and French-that had so dominated the nineteenth century came to an end. We witnessed two world wars. We saw the rise and fall of Fascism and Nazism. The century also witnessed the rise of Communism and a mixture of a fall (as in the former Soviet Union) and a radical transformation (as in China). It also saw a shift from the economic dominance of the West, to a new economic balance which is much more dominated by Japan and East and Southeast Asia. Even D E V E L O P NX E N I O U T R E A C H S UL MX E R 19 9'" 5 though that region is going through some financial and economic problems right now, this is not going to nullifly W h eels of the shift in the balance of the world economv that has occurred through many decades (in the case of Japan, a C art through nearly the entire century). There is no lack of major events to focus on. We have learned that any solutions to But I ended up arguing that the pre-eminent develop- ment of the period is the rise of' democracy. Indeed, in the our problems require much more than distant future when people look back at what happened in piecemeal reform measures attempted in this century, they w7ould find it difficult, I believe, not to accept the pre-eminence of the emergence ot' democracy the past. It demands nothing less than a as the most striking development of this period. fundamental change in our approach to This is not to deny that democracy has evolved gradu- the idao eeometimallv over a very long period, advanced bv manv develop- the idea of development, a paradigm <'< ments: from early Greek theorizing and ephemeral shift toward a parallel pursuit of.... practice (and other early writings on political and civil democracy and a market economy. All governance in different societies), to the Magna Carta in 1215, to the French and the American Revolutions in the but neglected in the process of eighteenth century, to the spread of adult franchise in compressed economic development, Europe and North America in the nineteenth century. But it is in the twentieth centurv that the idea of democracy rintrinsically Important aspects such as got established as the "normal" form of government to economic justice and social security are which anv nation is entitled -whether in Europe, or now gaining widespread support. America, or Asia, or Africa. We do not have to establish afresh, each time, whether such and such a country (South Africa, or Chile, or Congo, or Cambodia) is development of a genuine market "ready" for democracy (the type of question that was prominent in the discourses in the nineteenth century); Be economy under fair and transparent rules now take that for granted. Indeed, it is appropriate to of competition. I have long believed assert, in this meeting in Seoul, that the fuller emergence economic growth achieved under of democracy in the Republic of Korea (including the powerfully pro-democratic commitments affirmed by the conditions of political repression and.. .. visionary leadership of President Kim Dae-jung) is itself market distortion is neither sound nor an excellent example of a step in the direction of consoli- sustainable. I believe democracy and a dating democracy in the contemporary world. In earlier times, there were lengthy discussions on market economy are like two wheels of whether one country or another wvas yet "fit for democ- a cart, and that both must move racy" (for example, the British discussed it regularly in denying India independence). That changed only quite together and depend on each other for recently, with the recognition that the question itself wvas forward motion. wrong-headed: a country does not have to be judged to be fit for democracv, rather it has to become fit through - Korean President Kim Dae-jung, opening dmcav hsi rl oetu hne address, Conference on Democracy, Market democracy. This is a truly momentous chanae. Economy and Development 6 zr, 1; 1N \ I I i t : I eport Democracy ancd evelopmuean Democracy's complex role I want to discuss here the significance of the issue of What exactly is democracy? We must not identify democ- democracy as a constituent of development -indeed as an racy with majority rule alone. Democracy has complex integral part of a good society in the contemporary world. demands, which certainly include voting and respect for I shall argue that democracy has three distinctly positive election results, but it also requires the protection of liber- contributions. First, it enriches individual lives through ties and freedoms, respect for legal entitlements, and the more freedom (involving political and civil rights). See- guaranteeing of free discussions and uncensored distribu- ond, it provides political incentives to the rulers to tion of news and fair comment. Indeed, even elections can respond positively to the needs and demands of the peo- be deeply defective if they occur without giving the differ- ple. Third, the process of open dialogues and debates that ent sides adequate opportunity to present their respective democracy allows and encourages helps in the formation cases, or without giving the electorate the freedom to of values and priorities, and this con- structive function of democracy can be i very important for equity and justice as well as efficiency. Markets too have a major function in the process of development-a role that has heen much discussed and applauded over the last few decades. The world has benefited plentifully from the increase in productivity and prosperity that the market mechanism has made possible. The economic advantages of the use of markets, which Adam Smith discussed with exceptional clarity more than thwo hundred years ago, do not have to be freshly acknowledged in the contempo- rary world. They are part of the stan- dard understanding that economic analysis generates, and this lesson has been widely recognized. obtain news and to consider the views of the competing However, while democracy is important -indeed protaonists. DemocracY is a demanding system, and not crucial -for development and for social j'ustice, the sue- just a mechanical condition (like majority rule), seen in ce of democracy depends not only on the institutional isolation. forms that are adopted (important as they are), but also In evaluating the role of democracy we also have to on the vigor of practice. The opportunities created by examine the claim of some commentators that non-democ- political and civil rights have to be seized and used in line ratic systems are better in bringing about economic devel- with our understanding of fairness and justice. The opment. This belief sometimes goes by the name of "the functioning of democracy depends to a great extent on Lee hypothesis," after the presentation of' this point of its constructive role, since its achievements depend on view by Lee Kuan Yew, the distinguished leader and for- the actions of citizens, influenced by values and norms. mer president of Singapore. He is certainly right that The success of democracy depends ultimately on the some relatively disciplinarian states (such as a pre-democ- emergence, sustaining and strengthening of values that ratic South Korea. his own Singapore, and post-reform make responsible democratic practice effective and China) have had faster rates of economic growth than consequential. D E V E L O P N E N T UT R E A C S U MA F R 1 9 9 9 7 many less authoritarian ones (including Costa Rica, or to draw attention forcefully to general needs, and to Jamaica, or India). demand appropriate public action. The governmental But a general relation of this kind cannot be estab- response to the acute suffering of people often depends on lished on the basis of purposefully selective evidence. For the pressure that is put on it. The exercise of political example, we cannot really take the high economic growth rights (through voting, protesting, criticizing, and so on) of Singapore or China in Asia as a "definitive proof' can make a real difference to the political incentives that that authoritarianism does better in promoting economic operate on a ruling government. growth -any more than we can draw the opposite conclu- I have discussed elsewhere the remarkable fact that in sion on the basis of the fact that the best record of eco- the terrible history of famines in the world, no substantial n.omic growth in Africa (in fact, one of the finest records of famine has ever occurred in any independent and democ- economic growrth in the whole world) can be seen in ratic country with a relatively free press. We cannot find Botswana, which has been an oasis of democracy in that exceptions to this rule, no matter whether we look at the continent over the decades. We need more systematic current starvation in Sudan or North Korea, or the recent empirical studies to sort out the claims and counterclaims. famines in Ethiopia, Somalia or in other dictatorial There is, in fact, no convincingly general evidence that regimes, or earlier famines in the Soviet Union in the authoritarian governance and the suppression of political 1930s, or in China during 1958-61 with the failure of the and civil rights are really Great Leap Forward, or ear- beneficial in encouraging eco- lt° '? 'i /.! ' ler still the famines in Ireland nomic development, even if we or India under alien rule. It is identify development merely e69/Iek r' C f cally than India, still managed not permit any such induction. <> ' -'< X-" cal incentives (which democratic systems could guaran- We must also go beyond the narrow confines of economic tee). But to ignore political incentives by concentrating growth and scrutinize the broader demands of economic only on economic incentives is to opt for a deeply unbal- development, including the need for economic and social anced set of ground rules. Indeed, the security provided security. In that context, we have to look at the connec- by democracy may not be much missed when a country is tion between political and civil rights, on the one hand, lucky enough to be facing no serious calamity, when arid the prevention of major economic disasters, on the everything is running along smoothly. other. Political and civil rights give people the opportunity 8 W a R r. D B A NK I N S T lI U'F E Democracy and the rc,Je of' opposi-t.on democracy lies, I have argued, in three distinct virtues: I turn now to that general issue which 1 had flagged (1) its intrinsic importance, (2) its instrumental contribu- earlier. The achievements of democracy depend not only on tions, and (3) its constructive role in the creation of values the rules and procedures that are adopted and safeguarded, and norms. No evaluation of democratic form of gover- but also on the way the opportunities are used b.y the citi- nance can be complete without considering each. zens. Fidel Valdez Ramos, the former President of the However, while we must acknowledge the importance Philippines, put the point with great clarity in a speech last of democratic institutions, they cannot be viewed as November at the Australian National University: mechanical devices for development. Their use is condi- tioned bv our values and priorities, and ultimately by our "Unotdchooser -ctiru,need not makethptheirminds vetheir sense of justice. Some serious harm has resulted, in the not choose-need not make up their minds or give their ps,fo aigtemre ehns ob tefo consent. All they need to do is to follow. This has been a its oxvn-a solution to many problems. whereas it is an bitter lesson learned from Philippine political experience instrument that can be used in different ways-with or of not so long ago. By contrast, a democracy cannot xvithout vi'sion, with or without social responsibility. survive without civic virtue .. . The political challenge for Indeed, a social commitment to norms and priorities is people around the world todaI is not eust to replace essential not only for equity, but also for the efficiency of authoritarian regimes by democratic ones. Beyond this, the market mechanism itself. it is to make democracv work for ordinary people. " Public debates and discussions can play a major part in Democracy does create this opportunity, wvhich relates the formation of values. In this sense, the openness associ- both to its "instrumental importance" and its "constructive ated with democracy is part of the solution of the problems role," which were discussed earlier. But with what strength of value failures that hinder the effectiveness of markets. these opportunities are seized depends on a variety of fac- The force of public discussion is not only one of the corre- tors, including the vigor of multi-party politics as well as the lates of democracy, with an extensive reach, its cultivation dynamism of value formation. For example, in India the pri- can also make democracy itself function better. Just as it is ority of preventing starvation and famine was fully gripped important to emphasize the need for democracy, it is also already at the time of independence (as it had been in Ire- crucial to safeguard the conditions and circumstances that land as well, with its own experience of famine under British ensure the range and reach of the democratic process. Valu- rule). There was much effectiveness in the activism of politi- able as democracy is as a major source of social opportunit, cal participants in preventing famines and in sharply con- (a recognition that calls for vigorous defense -not least in demning governments for open starvation, and the quick- Asia), there is also the need to examine ways and means of ness and force of this process made the prevention of such making it function well, to realize its potentials. The calamities an inescapable priority of every government. And achievement of social justice depends not only on institu- yet successive opposition parties have been quite docile in tional forms (including democratic rules and regulations), not condemning widespread illiteracy, or the prevalence of but also on effective practice. I have tried to present rea- non-extreme but serious undernourishment (especially sons for taking this issue to be of central importance. This among the children), or the lack of completion of land re- is the major agenda that we face today. E form programs legislated earlier. This docility of opposition has permitted successive governments to get away with un- Thi artit le i excerpted frl7 a pre.entatiwn on Denocracy and conscionable neglect of these vital matters for public policy. Soc/4lu Jastce, ' deli/ered at the Co{n/erence on Denweracy, zlAaket Fcownozy and Deliopinzent uz Seoul, Kurea, Fehru'ay 1999. Democracy with vision I have tried here to briefly discuss the role of democracy A/`bel Laureate Anzartya Sen iv zIetlater l 'Trinity Colleye, zin in the contemporary world, arguing that developing and Canzubridqe, Z7K, end La'niont Uni'Vercoity Pro&tb,uar Emeritas at strengthening a democratic system is an essential compo- Haru'a'd UniU(netvity. nent of the process of development. The significance of [) E V E L O [M L E N T OUT R E A C 11 S L \Y E R I " 9 q 9 IN - a~~~~~~~~~1 I he relationship between democracy successful long-term growth. For instance, water projects and development has long been with participation are not only better designed and con- debated. In the years immediately fol- structed, but participation enhances the likelihood of the lowing World 'War II, there was a sustained support required for long term maintenance. belief in the tradeoff between democ- And consensus-building processes have been key to efforts racy and growth. The Soviet Union, it to bring down inflation in several countries. Broadly Was argued, had grown faster than the countries of the participatory processes (such as "voice," openness, and Wv'est, but to do so, had jettisoned basic democratic rights. transparency) promote truly successful long-term Later, with the enormous success of the East Asian development. An understanding of the centrality of open, economies in the 1960s and 1970s, the lack of full partici- transparent, and participatory processes in sustainable patorv democracy in many of the most successful coun- development helps us to design policies that are more tries was once again seen as reflecting these tradeoffs. likely to lead to long-term economic growth and that rein- The host of factors that interact to impact growth force the strengths of the processes themselves. make it difficult to identify the precise role of any particu- lar factor. Even if we could establish a positive correla- 7he broad range oi partctic!paitgDns tlin, it would be necessary to ascertain a causality: does I will use the term "participation" here in the broadest democracy promote growth or does growth promote sense, to encompass transparency, openness, and voice in democracy? If democracy is a "luxury" good, then those both public and corporate settings. A variety of institutional vith higher incomes, or who see their incomes rising arrangements are consistent with "participation" in this faster, will want more of this "luxury." sense, and the term "participatory processes" refers not just While the data may leave open the question of the to those processes by which decisions are made in national precise relationship between the variables, they have made government, but also to processes used at local and provin- it clear that there is not the strong kind of tradeoff once cial levels, at the workplace and in capital markets. envisioned. Furthermore, research at both the macro-eco- Similarly, participation does not refer simply to voting. nomic and micro-economic levels has provided consider- Participatory processes must entail open dialogue and able insight into some of the ingredients that contribute to broadly active civic engagement, and they require that 1 0 X EJ 1) ll A \ K i \ N E [ I L: I _ X _W>~~~~~~~~~~~~~6T rt| individuals have a voice in the decisions that affect them. Concentrations of economic power and wealth will Processes-not just outcomes-are key to this broader almost inevitably be translated into attempts at political interpretation of participation. The stress on processes is a influence. The question is, what can be done about this? natural outgrowth, not only of the increasing emphasis on Part of any strategy is to limit these concentrations of equity, but also of our greater recognition of agency prob- wealth and economic power. A second prong to the strat- lems. We now recognize the great importance of potential egy is to strengthen the "checks" on abuses of this power discrepancies between the actions taken by the party (the and influence. This prescription encompasses at least government, for example) and the interests that the party three elements. The first is to strengthen civil society, as a is supposed to serve. A government that engages in source of countervailing power-from political parties, to secrecy, making it impossible for citizens to have informed unions, to consumer groups, to think tanks and to a vari- opinions about policies that are critical to their lives and ety of other NGOs. In the parlance of modern economics, the well-being of their country, weakens accountability ensuring participatory processes, and promoting the pub- and the quality of decision-making. lic good more broadly, is itself a public good. As with other public goods, there will be too little provision of Checks on the abuses of power such participatory processes in the absence of public sup- In many countries, an absence of the rule of law and a port. A strong civil society is an important element in a lack of transparency both weaken the economy and strategy of implementing meaningful democratic reforms. undermine participatory processes. In some countries, for Second, governments should not only increase trans- instance, while there are "rules" designed to ensure fair parency, but also recognize that there exists what I have treatment of all, the rich and powerful have special access termed the basic "right to know." Citizens have a right to to the seats of political power and use that influence to know what the government is doing and why. They have a obtain for themselves special favors and exemptions from right to know if "exceptions" are made to certain rules and the rules. They may also "buy" special access to the leg- regulations. Third, societies should extend citizens' rights islative and executive branches of government, thereby to legal recourse. obtaining favorable rules and regulations. D E V E L O F Ai E N T U 'R E A CH S L M E R I q 9 911 Former Heads of State Spieak out Demo f rary and Deeloprrnni lfve des]re a future global economy, Ca1`3tEais-r and the market economy :n --n7-n histo-:-y, our societies have we have to be intent on establishing its are like a tiger-we must utilize its always known poverty and suffering. structure, which is neither achieved nor power, but also secure that it will not But what makes the poverty of today so guaranteed automatically by the famous bite the people. sinister is that this terrible suffering natural law of the 'invisible hand Potul Schiater exists alongside tremendous wealth. The Felipe Gonzzalez Forner Prime Minister of Denmark three richest people in the world now Former Prime Minister of Spainr have assets that exceed the combined 3vr,at is the chae.inege globalization gross domestic product of the poorest fe n.nust no:- forget that overempha- poses for us in East Asia? The challenge forty-eight countries. sis on democracy has the danger of caus- is for us to reconcile market forces with OscarArisw Sanchez ing disorder and, on the other hand, social justice-to ensure that develop- Fortmer President of Codta Rica overemphasis on the market economy ment and democracy always go may destroy a nation's culture while together-to balance the market econ- . .. X , Ii.. -c',/i. ,i.. emphasizing efficiency. omy with social equity, and to give /. jl j .1.' / '.,'c 'ct YasubhiroNakasone development a human face. 2-' 3 Foirmner Prime itniwter of Japan Fide! Va/dez Ramos Fornmer President of the Republic of the Philippines --'iXcz. 3a-wvn- 3X9 3cesse.ld the erec -,ess more effective than decentralized market mechanisms. t .dezis >r- It appears that while markets may work far more effi- I began hy referring to the dehates earlier in this century cientlv in the long run, there may he short-riin circum- concerning the tradeoff between democracy and develop- stances in which market mechanisms are either too low or ment. Underlving that debate was the hypothesis that par- too unreliable. Certainly, the experience of extended pern- ticipatory processes inhibited the kind of quick decision- ods of unemployment and under-utilitzation of capacity- making required for rapid economic growvth. Supporters as illustrated by the Great Depression, and perhaps by the of this view sometimes make an analogy to the military, a frequent financial crises which have plagued the world's highly hierarchical organization in which prices play little economies over the past quarter century-suggest that role. Few have suggested the use of market mechanisms market mechanisms do not always work quickly to allo- for the allocation of scarce military resources in the mid- cate resources efficiently. dle of a war. Presumably, there is a belief that over short Open, participatory processes may result in delay. But periods of time and for well-defined objectives, centralized as maddeningly slow as open political processes some- control may be a more effective organizational form. times seem to be, it is not clear that less participation Earlier in this century, rapid industrialization was yields results - or at least durable results - any more vie wed very much in the same terms: resources had to be quickly on average. Consider how different types of gov- marshalled quickly, which made the military model an ernments might react when faced with an insolvent bank- attractive one to many societies. The Soviet Union, for ing system. An autocratic government may indeed move example, saw time as of the essence. With the state and quickly and effectively to address the problem, if it society threatened by hostile outside forces, its leaders felt chooses to pursue the best interests of society. But if that delay would be costly, and therefore development had instead it is beholden to financial-sector leaders and fears to be imposed from above at rapid speed - and, as it losing their support, the government may well use public turned out, at great cost. funds to keep a sinking system afloat for as long as possi- There has been regrettably little work defining the cir- ble, before finally being forced into real reform. Com- cum-stances under which hierarchical decision making is pared with the latter case, a participatory political 1 2 \\W o ,, 1) B A N 1 N S I I I L : system -one that represents the interests of depositors well spent. Future generations in the borrowing country and taxpayers as well as moneyed interests-might well will be obligated to pay back the loans, and unless the mobilize more quickly to confront the problem. In any returns are sufficient, borrowing today will impoverish event, offsetting any potential costs of openness and par- rather than enrich future generations. If funds end ticipation are, I believe, their overwhelming advantages. up financing capital flight at overvalued exchange rates, for example, it is hard to see hoxv this benefits future Openness and transparency key generations. Open, transparent, and participatory processes are impor- Globalization and economic change provide new chal- tant ingredients in the development transformation. lenges for sustainable comprehensive development. They Nowhere are such processes more important than in eco- also offer new opportunities and have made open, partici- nomic policymaking. While, to be sure, there are certain patory, transparent processes essential for long-run suc- policies that make everybody worse off or everybody bet- cess. This is as true for the private sector as for the public. ter off, in the real world many of the most important pol- As we stand at the threshold of the twenty-first century, icy decisions entail choices among policies that cannot be there is much to be learned from the failures of the cen- so easily rejected or embraced. That is to say, there are tury coming to a close. We cannot shut our eyes to the dis- real tradeoffs among policies: not only do some people asters brought on by totalitarian regimes: similar disasters gain more than others, but some actually lose. should be avoided at all costs. Nor can we ignore the link Many have remarked on the increase in social tensions between these failures and the economic and social disor- that followed upon the Latin American crisis of the 1 980s. der that preceded them. In many cases, education expenditures were cut back, and WVe now know more about how to manage an economy inequality and unemployment increased. What is clear is than we did seventy-five years ago. While we will proba- that all too often, the process by which the decisions were bly never be able to avoid all crises, we can make them made did not comport well xvith open, transparent, and less frequent and their consequences less severe. We have, participatory principles: not only were negotiations that I think, the knowledge to avoid severe recessions and led to adjustment typically conducted in secret, but even depressions. The challenge is to ensure that we use this the outcomes sometimes were not fully disclosed. knowledge and expand it to meet the new situations Whether we like it or not, whether it is justified or not, which continually arise. In pursuing these objectives, there is now in much of the world a legacy of suspicion more open, participatory, and transparent processes xvill and doubt. Opponents see in development conditionality be key ingredients. an echo of the colonial bonds that their countries threw We can hope that in the coming decades, we will make off only one or two generations ago. And while condition- use of this knowledge, of our broad understanding ality is at least widely perceived to have undermined of the development process, and of the new opportunities transparency and participation, there is little evidence that afforded by the changing economy to strengthen and it has achieved much in terms of better policies. The extend development. Through comprehensive strategies results should perhaps not be that surprising, given that that incorporate social and economic development and that policies imposed through conditionality are seldom politi- are forged through transparent and participatory processes, cally sustainable. Indeed, in many cases, the policies are at we can hope to extend the fruits of development in a sus- least perceived to have contributed to the country's prob- tainable way to all citizens of the developing world. E lems, undermined meaningful participation, and led to further breakdown of social cohesion. This article has been excerpted,froln a ,pres,entatian dclie,ered at the CLaqernfee non Deniocracjy, AlarIket eaonanty and De(espitpnent to Obligatio-n to the future Seoul, Korea, FehruarfJ 1999. Those who provide funds -including those of us at the World Bank -must recognize that we have a fiduciary Jas,eph E. Stiqlitz is Sr Kice President and Chief Eaolnanilat, and moral responsibility to make sure that the funds are Th17e aorld Banik D E V' E L O PM 1 E N T C] U T R S R C I 5 U Ml ME I R I 9 9 1 3 F ~~~~~~~~~A A A~~~~~~~~~ A ND T HE CU RR E NT C RI SI S A - ii re cultural values responsible for tolerant in a way that Asia's remarkable postwar eco- monotheistic traditions nomic success? A decade ago many like Judaism, Christian- - observers, including proponents of ity, and Islam are not. "Asian values" like Singapore's former Prime Minister Lee And Confucianism opens Kwan Yew, would have answered affirmatively. Now, in up prospects for social light of the recent crisis that has struck the Asia region, it mobility, being highly merito- ¾ is iseful to revisit the role of cultural values. Many cratic. It is a rational ethical observers today claim that Asian values, far from explain- system ing economic success, are themselves the prime cause of with the cronyism that afflicts the Asian countries. an There is no scholarly disagreement on the proposition empha- that Asian cultural values are more hospitable to paternal- sis on ist-c authoritarianism than to Western-style democracy. educa- Confucianism entails an ethical world in which people tion, and are born not with rights but with duties to hierarchically thus respon- arranged authorities, beginning wlth the family and sive to the extending all the way up to the state and the emperor. needs of a Westerners sometimes forget the key role of Judeo- modern Christian transcendent monotheism in their political and technologi- social lives. The idea that there is an eternal realm of cal econ- divine law superior to positive law gives the individual omv. grounds for revolt against all forms of secular authority. Moreover, In the Asian religions there is no concept of individual the Confu- rights. On the other hand, there are a number of values cian family characteristic of Asian societies, which, while having sepa- system pro- rats roots from their WVestern counterparts, are quite vides a certain supportive both of a modern economy and of democratic protected politics. Asian religions and ethical systems are remarkably sphere of pri- 14 W o R 1. 1) B A N K I N S 'J IT I' E fl:twutrt Olze cultural themze thazt runs throug/h curr-enzt analys_ies of the crXiXs 2t tlhe tendency of miany Wes tern of seer. i ts It lump all coztrlies in Asia togethger- unc)er- the br-oad hteadinig of "crony capaita/lbz, and to /)zlwze the atter feor a serioust mbt a/alocation of resourcesv. vate life that is relatively free of state intrusion. Like all correlation, where wealthier societies tend to expand polit- complex value systems, it is to some extent possible to sepa- ical participation. The first three Asian countries to rate political Confucianism from the Confucianism of every- become industrialized, Japan, South Korea, and Taiwan, day life, rejecting the former while practicing the latter. noxv have functioning democracies. On the other hand, two of the highest per capita income entities, Singapore Weaknesses in the argument and Hong Kong, are not democratic, while the Philippines The first and most important problem with the Asian val- has been a democracy while remaining one of the region's ues argument is that it fails to see Asia as a diverse place, poorer countries. These anomalies can be explained by where values vary considerably from country to country. other factors. Confucianism is interpreted very differently in Japan, As for the economic institutions, some are unique to the Korea, and China, and kinship ties vary in importance region and could not have been created in any other cul- throughout Asia -they play a minimal role in Japan and tural settings. These include the so-called Japanese devel- a very important one in southern China. The second opment model in which a technocratic elite overseas weakness of the Asian values argument is the emphasis it sectoral transitions through control over credit; Japan's places on the direct impact of values on behavior. In fact, system of lifetime employment among large corporations values must be mediated through a variety of institutions and their ke/iretw networks; the chaebol in Korea; and the to make themselves manifest. Asian cultural values family-based networks of overseas Chinese businesses in existed in their present form long before Asian societies southern China and Southeast Asia. While many of these began their periods of explosive economic growth. The institutions are clearly dysfunctional today, it is difficult to causes for that groxvth are much more likely to be found know in retrospect the degree to which they either con- in the institutions that were created in the process, like tributed to or constrained development during Asia's high- stable governments, systems of property rights and com- growth period. The most basic explanation for Asian mercial laxv, as well as in the macro- and somnetimes econoimiic development lies in conventional factors, like microeconomic policies. inputs of capital and labor, combined with political stability With regard to political institutions, it is not at all clear and reasonably good government. The least we can say is that Asian values constitute any kind of insuperable that those institutions were not as harmful to economic obstacle to modern democracy. The empirical record in growth. as many WVestern economists asserted, but have Asia is relatively supportive of the democracy/development clearly become obstacles to growth now. D E V' E [. O P \ F N T TRE C FI S U C l NI ME M IR 9'" 1 5 . 10 L I.e I arfzeOt nied by soaring rates of illegitimacy, from the American Just as explanations for Asian grovvth lie in the realm of rate of 32 percent currently to rates well over 50 percent in conventional economics rather than culture, so too do Scandinavia. While divorce rates have been rising slightly explanations for Asias current crisis. It is impossible for a in Japan, they remain low in other OECD countries, and cultural factor, xvhich changes very the problem of poor, mother- slowly, to account for rapid and headed families, that is so pro- unexpected developments, such as nounced in the United States, is all the loss of foreign currency reserves but unknown in either Korea or or the sudden buildup of short-term Japan. The reason for this differ- credit. There is, however, one cul- ence has a great deal to do with the tural theme that runs through cur- role of women in WVestern as rent analyses of the crisis, the tendency of many Western opposed to Asian societies. Just as in the case of Asia's dis- observers to lump all countries in Asia together under the tinctive economic institutions, it is likely that there will be broad heading of "crony capitalism," and to blame the latter a convergence with Western practices over the next two for a serious misallocation of resources. generations in the social sphere as well. Due to its sharply Throughout East Asia business relations are conducted declining fertility rate, Japan faces a shrinking labor pool. on a more personalistic basis than in North America or This may lead to encouraging women to enter the work- Europe, and there are cultural practices such as reciprocal force, not just prior to marriage but throughout their gift-giving, that often shade over into w hat many Western- working lives. If that happens, many of the social prob- ers would label corruption. But it is impossible to general- lems, like family instability that have plagued Western ize and say that Asian societies are somehow more corrupt countries, may come to affect Japan as well. or more given to cronVism than their \Vestern counter- parts. In fact, cultural factors contributed to a relatively c low rate of corruption in Northeast Asia. One of the inter- In conclusion, Asian values in all their diversity have esting features of industrial policy in Japan, Korea, and played a role in shaping the economic and political institu- Taiwan is precisely the low level of corruption during the tions of East Asia, and in giving Asian societies a social high-growth period in light of the enormous powers given order that is different from that of the West. The impact to planning bureaucrats, and the opportunities for corrupt of these factors can be easily overstated, however, both in or rent-seeking behavior. The problem in these countries terms of the degree to which they facilitated Asia's post- was therefore not a cultural proclivity toxvards personalism war economic growth, and of the extent to which they are and corrupt dealings, rather a lack of institutional checks responsible for the region's current troubles. However, in wlhich over time could serve to control corrupt behavior. all three areas-economic, political, and social-there are While Asian values have produced distinct economic good reasons for thinking that the distinctive institutions and political institutions, their most notable impact is and practices fostered by Asia's cultural systems xvill con- social. Western social patterns have no counterparts any- verge over time with the patterns seen in the WNest. Far where in Asia, including the region's most highly devel- from reinforcing Asian exceptionalism, the current eco- oped societies. Japan and Korea, in particular, look quite nomic crisis will accelerate the homogenization of trends. i distinct from WVestern countries at a similar level of development. Here, crime rates are very low relative to Thid ar1 ix/e 6 excerpted from a preoentation on "A.icn uI aze U2 [l the Europe and particularly the United States, and invalidate WVIake oftheiA.lan Crit6, 'delivered tat the Conference on Democracy, any general theory that urbanization and industrialization Alarket Economy and Deveklpmzent in Seou,4 Korea, Februaly 1999. inevitably encourage higher levels of criminal behavior. Asian exceptionalism is also apparent in data on family Frantci4 Fukuyamia 6 HiJ i.t Pro/'e,oor of Public Policy, In4liltle of structure. Modernization had very different effects on fam- Public Policy) (eolere AIa.on IUniiver.uty, and the author f 'l'he ily structure in Asia than in Europe and North America. In Great Disruption (Free Preco) the WN-,estern countries, family breakdown was accompa- 16 WQ O 1. [) B \ N K I \ KlT I 'I L I L BY DANIEL KAUFMANN Ukraine . 7 ONE OF THE MOST PROMINENT JOUR- NALISTS IN THE COUNTRY CHAL- Ak Ak LENGES THE VICE PREMIER BY POINTING OUT THAT NO M"ATTER WHAT MACRO- ECONOMIC REFORMS THE NEW CABINET ~ M\1ANAGES TO IIMPLE- MENT, PROSPECTS FOR GROWTH REM'vAIN DIM. The journalist eloquently states that growth only evolves from a thriving private sector. Yet such prospects do not exist, he says, because of the private mafia, which extracts a high toll on any private enterprise. The new vice premier calmly concurs with the need to focus on small enterprises in the emerging private sector. Furthermore, he agrees that there is a private mafia that extracts a "tax" from private businesses. He has made "back of the envelope" calculations suggesting that on average such a tax is about 10 percent of a firm's revenues. While this is far from negligible, he conitinues, it pales in comparisoni with the predatory behavior of the "government mafia." His quick calculations indicate that this private sector tax exceeds 50 percent! D) E V E L O P MNI E N T OLUT R E A C H S U Al E R 1 9' 1 7 Figure 1: Bribery and Civil Liberties Progress in High Bribery i the fight against corruption r \ ' 3 4,, t 't 3 requires the protection of civil liber- X _ - > ,3 ''3 $ t3 ' ties and the 53 involvement of civil C ,> '3 S C3 C ; society. r0.67 ' Low Bribery Low civil liberties High civil liberties Four years have since elapsed. Unfortunately, recent cal exhortations. He suggested that we examine taxation, accounts suggest that little has changed-and not only in bribery, dwindling public revenues and absence of rule of' Ukraine. The challenge of addressing government preda- law in an integrated fashion by framing the problem in tion is not universal, but it is ubiquitous. It is worthwhile terms of the "tax burden." He challenged us all to address to consider the subtle wisdom conveyed by the vice pre- corruption on a sounder analytical hasis. mier in that Thursday roundtable and ask whether his aclvice has been heeded or a great challenge still remains. cc-DDb. ci ogres'4 The vice premier showed a basic understanding of the There has been progress in the struggle to combat corrup- power of transparency in a participatory public forum, as tion in many corners of the world. But the lion's share of he admitted to government fallibility so early in the post- the broad challenge posed by the Ukrainian vice premier's Soviet era. He also exhibited unusual foresight in concep- salvo four years ago remains. Participatory approaches tualizing corruption as a public sector developmental still require more rigorous integration with concrete challenge, rather than merely as a private criminal activ- reforms of incentives, systems and institutions. The role of it,,. In addition, he implicitly challenged us to quantify the in-depth and detailed empirical work needs to be problem at hand-generalized pronouncements on the expanded. And bribery and corruption need to be exam- harm inflicted by different factors was not enough. He ined within a broader analytical framework, whether demonstrated that blaming the private mafia instead of through public finance or other established disciplines or predatory politicians and bureaucrats only diverted atten- through an interdisciplinary approach. tion from the true problem. In this paper we discuss four broad challenges emerg- And last but not least, he hinted at the desirability of ing from the lessons of our recent collaborative work, anchoring the understanding of corruption within a seem- which are illustrated in the above anecdote. These chal- ingly unconventional discipline, namely public finance, lenges share in common the " primacy of empiricism." Yet perhaps unwittingly challenging the prevailing views on since the growing field of empirical investigation into institutional and legal "fixes" and the myriad of soft ethi- causes, consequences and "cures" to corruption is still in 1 8 W 0 1 1. 1) R A [ K S I 'I L I' F, 3 eport its infancy, the intention here is not to present definitive answers but to raise questions and issues on upcoming CORRIJ PTIO NT AS A SYSTiEPM challenges in the field. BY ROBERT KLITGAARD The participatiorn of cvil societv Consider two analytical points. First, corruption may The growing involvement of civil society and nongovern- be represented as following a formula: C=M+D-A. mental organizations (NGOs) in the fight against corrup- Corruption equals monopoly plus discretion minus tion is an undisputed fact, as is their role in increasing accountability. Whether the activity is public, private, awareness and mobilizing support. Progress in the fight or nonprofit, and whether it is carried on in Oua- against corruption requires at least two conditions: a mini- gadougou or Washington, one will tend to find corrup- tion when an organization or person has monopoly mum level of organization in civil society, and an environ- power over a good or service, has the discretion to ment in which civil liberties are safeguarded. In many decide who will receive it and how much that person countries neither of these conditions exists. Yet the evi- will get, and Is not accountable. dence is clear about the importance of civil liberties. Cur- Second, corruption is a crime of calculation, not pas- rent empirical research indicates that countries with sion. True, there are both saints who resist all tempta- improved civil liberties are significantly more successful in tions and honest officials who resist most. But when addressing corruption, even after controlling for other bribes are large, the chances of being caught small, determinants. and the penalties if caught meager, many officials will Promoting a more effective civil society succumb. when there is little tradition of so doing is a Combating corruption, therefore, major challenge. WNe must recognize and fully begins with designing better systems. utilize the power of data and technology to Monopolies must be reduced or carefully mobilize civil society and apply pressure on regulated. Official discretion must be political structures. The use of survey data, as clarified. Transparency must be enhanced. The probability of being caught, as well as well as public workshops and in-country th p l f i ilL the penalties for corruption (for both focus groups, combined with the involvement givers and takers), must increase. of the media and other stakeholders, builds E -. . . S ,e ~~~~~Each of these introduces a vast topic. momentum and spearheads new activities by But, notice that none immediately refers civil society and NGOsJ to what most of us think of first when Second, although it may seem paradoxical, corruption is mentioned-that is, new many in the public sector can become signifi- laws, more controls, a change in mental- cant allies -however silently at first- in ity, or an ethical revolution. Laws and con- fighting corruption. Collaboration between trols prove insufficient when systems do reform-minded public officials and NGOs not exist in which to implement them. may be particularly productive when civil Moral awakenings do occur, but seldom societv is not fully developed. Survey results by the design of our public leaders. If we from over 60 countries reveal a remarkable cannot engineer incorruptible officials and , . ., . , ; ,<, . z - ~citizens, we can nonetheless foster com- degree of consensus between civil society and tepbisetrradyf the cpetition, change incentives, and enhance accountabil- thelpublic screaithsei thcupoity-in short, fix the systems that breed corruption. challenge . Third, the empowerment of women to mobilize civil Excerpted from a presentationz on "International Cooperation Againdt society, particularly in the context of anti-corruption, Corruption, delivered at the Conference on Democracy, Mlarket Econ- needs further attention. Data analysis suggests that cor- 0l7y and Deelopmnent i'n Seoul, Korea, Febrnaly 1999. Thio article ruption is more prevalent when women's rights are or'ginally appeared e½ Finance and Development 35 (1), March restricted. 1998. Robert Klitqaard ki Dean and Ford Ditinqa'ibhed Profeor of Inter- national Development and Security at the RAND Graduate School. D E ' E L O P Al ME N T O L T R E \ CH H s u JM 1. 1 ' 19 9 Fourth, new tools and insights are emerging regarding key. As a result, in the context of anti-corruption efforts, participatory approaches to fighting corruption. These major strides are taking place in developing and applying approaches have been explored by others, such as a well-structured technology to grass-roots participation. national chapters of Transparency International and Parallel strides have been made in the understanding of NGOs in India (using the citizens "scorecard" approach). economic and institutional reforms. Further, there is grow- Fifth, the intricate links between politics and civil liber- ing awareness of the relevance of such broad economic and ties need to be better understood in order to deepen our institutional reforms in controlling corruption. These two understanding of the roots of corruption. The degree of approaches are essential complements to each other, not political liberties, i.e., democracy, has a positive substitutes. Any participatory process should lead to con- correlation with improved control of corruption, yet the crete results beyond enhanced participation and height- relationship may be less potent than in the case of ened awareness. Equally important, the implementation of civil liberties. Where executive political will exists, the institutional reforms benefits from the participatory role of NGOs and civil society may be akin to being part- process that has been developed for anti-corruption. ners with government in the implementation of anti-cor- ruption programs. Where such political will is absent, civil 'Towards methodological irigor society's role has a different dimension- it needs to foster Serious anti-corruption action programs are in their the willingness to reform among the political leadership. infancy and are rife with myths regarding strategies and Finally, how relevant is it to consider the political ideol- policy implications. These misconceptions often result ogy of the ruling government in addressing corruption? A from the absence of in-depth analytical and empirical review of the evidence shows that a government's ideology underpinnings for the proposed anti-corruption actions. is not a relevant parameter, and that on average the extent Consequently, research on corruption must probe fur- of corruption is the same whether the government is clas- ther not just into data from an economic standpoint, but sified as left or right wing. The challenges lie elsewhere, as also into its multi-disciplinary facets. A better understand- suggested previously. ing of the causes and costs of corruption will most likely reveal that improved measurement of corruption indica- Integrating participatory process with tors is also necessary. institutional reforms Furthermore, a rather basic challenge-and one notyet For too long we economists underestimated the central addressed-is the best approach to corruption as a field of importance of participation in development. The evidence inquiry. Should it be a freestanding field of investigation is now clear that participation in development projects is and academic training, consistent with its belated yet Figure 2: What do elites view as crucial impediments to development? Public Sector Corruption aeon Ineffective Governmennt ¶ h Institutions t0 Ineffective State o Enterprises Infrastructure _MEN ConstraintstesI Undeveloped Financial _ _ _ _ _ _ _ Institutions Political Instability mann, Private Sector * Civil society respoendenits Corruption * All responderntsts I ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~~~~~~ I - 1 oiy no Moderate impediment Severe impediment Very severe impediment 20 W o R L I) 11 A N K I N S T I T U T E acknowledged importance for development and social accounting for the lion's share of success. Poland might be welfare? Or, since corruption is increasingly recognized as an interesting case study-a country whose governance an important symptom of fundamental institutional veak- and economic performance have been rather remarkable, ness, should it be integrated within existing fields of particularly in contrast to many other countries in the inquiry that heretofore have not paid sufficient attention region. Which specific areas produced the most remark- to corruption? If so, into which able results? Indeed, what actu- fields of inquiry should corrup- C 3CJ k U P lT j N ally accounts for the remarkably tion be mapped? HAS N OW B E E N superior governance perfor- As the Ukrainian vice-pre- CONCEPUALIZED A5 A mance of Poland as compared to mier's remarks suggested, a neighbors to the East, including strong case exists for expanding PUB LI C S E CTO R DEL VE LOP- the former vice-premier's bome, the treatment of corruption MENTAL CHALLANGE, Ukraine? within a public finance frame- R+ZTH ER THAN MERELY AS We have made a case for sig- work. By so doing, it will be A PRIATE CRIMINAL nificantly expanding the overall easier to determine a) the most empirical approach to control- costly types of corruption, b) ACTIVtTY ling corruption and improving the costs and benefits of differ- governance. We need to con- cnt government interventions, c) the losses to public tinue to probc, explorc, and innovatc, recognizing that xve finance resulting from corruption, d) the role and costs of are only in the midst of a fast-pace learning process. What regulatory intervention and e) the correct incentives to we do know is that working in partnership with local discourage bribery by foreign investors. institutions and experts is essential. Citizens of the coun- try-be they in or out of government-know their context The emnpirical challenge~ the empowerment of data better than outsiders. Not long ago the notion that corruption by its "intrinsic At the same time, the data and lessons gathered from nature"' was impossible to measure was accepted as a tru- experience worldwide are beginning to provide some very ism. The advent of a myriad of new surveys and other data clear insights that need to be disseminated confidently and gathering techniques helped dispel this belief. A rich empir- widely. These insights, if effectively adapted to country ical body of data is emerging on governance variables and conditions and complemented by political will, could prove government performance in general, and on corruption in decisive in yielding concrete results. The challenge for the particular. The challenge ahead is to improve the gathering, political leadership, civil society, and the donor community analyzing, and disseminating of this new data. is to capitalize on the insights and momentum generated by Increasingly, the media and opposition politicians are uti- the diagnostics, move from diagnostics to action, and make lizing and interpreting these indices as if they provided an meaningful progress on difficult institutional reforms. E accurate account of a worldwide corruption ranking (even though typically only about 50 countries or so are covered Tis article is excerpted fromn a zpresentatioin on "Challeniqes in the by most indices, and the margin of error in the ranking of a Next Staqe ofAnti-Corraptiotz, "deli/ered at the Conference on particular country can be very large). Thus, sounder survey Democracy, Mifarket Econony and DeielopmZent /I Seoul, Korea, data and methodologies are needed to help make responsible February 1999. choices about programs to control corruption. Daniel Kat7finantz 'I6 Jazanager ,j'the Got'ernance, Regulatio7n and The challeinge of concrete and informed action FinanceDiev ion of tbe WYorld Ban/zk Istztatte. The challenges discussed here are by no means exhaus- tive. WVe still need to understand why there is a paucity of 1'ata is far more than a passive research tool. WVhen well gathered, successful public sector reform in developing countries. In analyzed and presented, survey data complemented by hard finan- those countries where reforms have been successful, we cial information is virtually impossible for authorities to ignore. need to identify the particular measures and institutions D E V F L O P Q E N T O U I R EA C H S U Mi E R I '- 9 9 2 1 T L' Lif Li Nteeded:l A New GrowArth Strategy for the Developing Worl-d BY WALTER RUSSELL MEAD s most but not all of the East Asian economies struggle towards recovery A \ from the devastating financial shocks of the last two years, it is more and more clear that the crises of 1997-98 signaled the end of the Asian miracle. That miracle, a burst of economic growth and rising prosperity unprece- dented since the original industrial revolutions in North America and Europe more than a century ago, transformed the world's political and economic structure. In a generation or less, a significant number of Asian economies moved from poverty to affluence, from technological backwardness to sophisticated users of cutting edge technologies, and from rural societies still tied to age-old agricultural and seasonal rhythms to urban societies fully participating in all the cultural storms and upheavals of the late twentieth century. For twenty years. East Asia's rapid growth transfixed the Philippines. The other Asian economies, it was widely the world. Wealth rose, inequality shrank, and East Asia's believed, would follow the trail blazed by Japan and other share of world trade steadily grew. It seemed that Asia early developers, moving through light consumer assem- had discovered the secrets of King Midas, the ancient bly industries like textiles, toys and cheap electronics, ulti- Near Eastern monarch who turned everything he touched mately to build steel, automobile and finally high tech and to gold. financial service industries. Many observers described the region's economies as a Beyond East Asia, developing country governments, flock of geese sweeping across the sky in a 'V'-formation: international financial and development institutions and Japan in the lead, with Taiwan, South Korea, Hong Kong western governments looked at East Asia's success and and Singapore close behind. Farther back-but flying sought to duplicate it elsewhere. Policy guidance from all very fast -were Malaysia, Indonesia, Thailand, China and these sources counseled developing countries to introduce D E V E LO0 PMAl E N T O U T R E A C H S SU Al Al ER I SAP 9 23 reforms that would put them on the path toward export folio) poured into the creation of a manufacturing sector oriented growth and allow ever greater numbers of geese designed to produce goods for export to developed market to follow Japan. economies-will not work as well in the future as it has in the recent past. Tle c ilap3se af t 3r i ie bc - .o- The villain is no longer western protectionism, though lUnfortunately it now seems clear that export-oriented that continues to be a worry. The new problem is a combi- growth strategies, like the import substitution strategies nation of over capacity in the developing world and struc- popular two and three decades ago, do not work forever. tural change in the developed market economies that The problems of Asia's developing economies have many looks set to reduce growth in demand for traded manufac- structural problems in common with the collapse of tured goods for decades to come. Japan's bubble economy a decade ago, and point to deep Over capacity among producers of manufactured flaws in what only recently looked like an answer to per- goods is a serious problem across a wide range of indus- sistent problems of underdevelopment and poverty. tries. State allocation of credit has greatly exacerbated the Most of the commentary on the economic problems of problem in many export-oriented economies; new, policy the export-oriented economies has centered on financial driven investments continued to be made in industries like system issues: lack of transparency in lending, lack of automobiles and steel long after world wide over capacity effective oversight, government problems had developed. State inLterference in credit allocation, Whl exports will an directed credit allocation suc- failure to hedge properly against ceeded in building industrial bases currency risk, mismatches shuld0 p1la important roles in many countries, but these coun- betveen short-term debts to skit- in dlopment strategies, tries now face difficult and painftil tish foreigners and long-term loans reforms and restructuring given to domestic borrowers, and failure SUcceSsful development will that their financial systems are to properly assess credit risks at a have to rely more on internal now weak, while powerful politi- time of speculation and over- cal interests seek to defend an irLx'estment. marikets and on south-south unsustainable status quo. All of these things are true in The problem with over capacity varying degrees among the trou- is more than a cyclical one. Fun- bled economies, and financial sec- damentally, export-oriented manu- tor overhauls will be necessary before the region's facturing in developing countries cannot expand at rates prospects can decisively improve. Other developing coun- greater than overall growth in demand for such products. tries would be wise to learn from Asia's example and mon- When only a handful of economies, most of them in small itor their financial sectors carefully to prevent the excesses countries, were pursuing export oriented growth strate- and errors that have so greatly exacerbated East Asia's gies, the size of foreign markets was not a constraint. That economic woes. is no longer true. When Taiwan's trade surplus with the United States peaked in 1987, it had reached $800 per h1e e n rnh, C tu hP e uxi.C e. t capita-$800 of trade surplus for every man, woman and These problems are complicated and solving them will be child on the island. For the United States, this trade politically difficult and economically expensive-but with deficit-totaling $16 billion, was manageable. sufficient determination they can and will be solved. It is If mainland China were to achieve an $800 per capita the non-financial obstacles to growth that cause the most trade surplus xvith the United States, however, the US concern to those interested in a return to rapid growth in trade deficit with China wvould reach $988 billion -$3,000 Asia and economic progress in other developing countries. for every person in the United States. If Indonesia, Pak- The chief problem here is that Asia's basic economic pat- istan, India and Bangladesh follow the model, the US tern -high levels of domestic savings and investment trade deficit with these countries would reach $2.1 trillion. combining with foreign investment (both direct and port- 24 WOI1Ifl BANK IS IIU' This, alas, is not possible and the implication is clean. countries whose growth strategies depend heavily on Other countries cannot expect to achieve the same level of rapid increases in manufactured exports to the industrial benefit from exports as the early adopters of export ori- market economies. We are probably at the beginning of a ented growth strategies did. While exports will and should long term deterioration in the terms of trade for produc- play important roles in development strategies in the ers of manufactured goods compara'ble in some ways to future, successful development strategies in years to come the decline in terms of trade for commodity producers will have to rely more on internal markets and on south- over the last ccnturv. South trade. The economic problem of excess capacity and therefore The governance challenge poor profitability for developing producers of manufac- At the same time, East Asian countries and other rapid tured goods is likely to be with us for the long term. It developers face new and difficult governance problems. was once difficult to start up industrial production in Economic development makes societies more complex and developing countries. Now both the hardware and soft- harder to govern well. An urban industrial society is ware aspects of industrial migration are well understood, harder to govern than a rural and agricultural one. Goy- and more and more countries are technically able to build ernments in East Asia and elsewhere today must cope export platforms. with a myriad of difficult problems -land use, urban man- Structural changes in the developed market economies agement, environmental protection, and so forth -which xvi'l further limit the possibilities for exports of manufac- were less urgent and less complex only two decades ago. tured goods. Populations 'In most rich countries are stable Effective regulation of financial markets needs to be or actually declining, reducing the prospects for economic seen as part of this broader governance challenge. Finan- grow.Ath overall and especially for growth in demand for cial markets in rapidly developing economies are more manufactured goods. As these populations age, their con- complicated than they used to be, they do more things, sumption patterns change -away from traded manu fac- and they involve more complex transactions and different tured goods like new cars, and new stereos and computers classes of risk. With respect to financial regulation as well and towards non-traded servi'ces such as medical care, as to other areas of the 'new governance agenda' of rapdly developing countries, the political obstacles for Manufacturing is out, services are in modernizers are deeply rooted and quite difficult to over- Moreover growth in the developed market economies has come. Current institutions and practices are deeply rooted shifted decisively out of manufacturing and into services, in political power structures, and the resistance to change To understand how this works, look at food consumption is determined and resourceful. patterns in rich countries. Past a certain point, consumers All this suggests that the developing exporters of man- don't increase their consumption of food as incomes ufactures face immense challenges. Faced with stiff comn- increase. What happens is that less of the food budget is petition, tight goods markets and complex governance spent On ingredients and more is spent on ser-vice: prepara- issues, these countries need more than superficial reforms tion. People eat out more and eat at fancier restaurants. As to get back on a sustainable growth path. Fortunately, the they choose more expensive foods -meat and fish instead entrepreneurial drive, technical skills and pragmatic of grain, exotic fruits and vegetables rather than staples - approach of East Asia's rapidly developing countries have some additional income is possible for farmers. But most of found creative solutions to equally difficult problems in the increase in spending goes for non-traded ser-vices: chefs, the past and after a somewhat difficult and complex busboys, sommeliers, valet parking attendants and waiters. period of adjustment and reform, East Asia is likely to As incomes continue to rise in advanced countries, emerge once again as one of the most dynamilc regions in consumers are likely to spend a relatively smaller propor- the global economy. U tion of their incomes on manufactured goods and other traded commodities, and more of their income on non- lValter Russet/A/cead &ic Senizor Fe//as', far U.S. Foreigni Po/icy at traded services. That is had news for developing coun- the Caunnel ani Fareiqnz Re/ationa, and directs a Ford Founzdation tries generally, and poses particular problems for proj'ect at the Coansuci/an th2e new 9/loa/meconotnil. nrxF E L oPAI b T ( QT R \AC If 5U AlAl155 1999 25 I ~~ I One of the striking differences between Euro- pean and American approaches to civil society is in their respective attitudes toward speech. Whereas Europeans apparently see speech as one of many rights, subject to limitations in a variety of circum- stances, Americans tend to see speech and its related right, association, as the primary right. The differences between the two cultures may be seen in many contexts. For example, almost all European countries exclude from protection speech that incites hatred of ethnic or other groups. In the United States, although we have struggled w1th what we call "hate speech," such speech is normally more. In our Bill of Rights, it comes first, together with protected unless it is likely to incite or produce "imminent freedom of religion. It involves the freedom to express law,,less action." We, thus, allow American flags to be not just ideas but emotions, and not j'ust for political rea- buirned in protest, Nazis to march in neighborhoods sons but for individual self-realization. In this aspect, the where Holocaust survivors live, and hoodlums to burn differences in treatment of speech may wvell reflect differ- crosses to show their hatred of Black people. Non-Ameni- ences between the highly individualistic society that is cans with whom I have discussed this from all parts of America, and the more communitarian societies of the world find our approach unbelievable. To them, Europe and elsewhere. In almost all European countries, speech is a vital part of the political process, but like positive economic and social rights are enshrined in the other parts of that process, instrumental and subject to Constitution; in the United States, nothing like that can conventional regulation. For Americans, speech is much be found in the federal Constitution. 26IQRRL1 BANK INSTIL I' _ Freedom of the press: Europe vs. USA European practice is vry Fifret eatesaeu ren On such matters, our different histories and situations defamation and insuilt laws to stifle genuiine criticism. Per- may justify different approaches. But in one area, at least, haps because the press in Europe has been more overtly European practice is starkly inconsistent with any notion ideological and party-oriented than in the United States, of freedom of expression, particularly where the press is perhaps because of European traditions of individual concerned. I refer to the many laws against defamation or honor, defamation and insult lawvs have been invoked inisult of the Presideuti, thie Stale, and the Governmnenil. against hostile speech by journalists anid others. Early INo government official likes to be criticized. English law started it, setting the course for much of Indeed, there seems to be a direct correlation Western Europe, and later, the Western Hemisphere. A between the eminence and power of 1606 Star Chamber ruling, de Li/el/b Falizsb', introduced -"- ~~~~officials and the thinness of their skin. In into seditious libel the proposition that defamation of America, however, public officials can great men" was a more serious offense than simple - ~~rarely get any legal remedy for criticism, defamation, in that "it concerns not only the breach of the no matter how vicious and unfair it may be. peace, but also the scandal of Government." -We tried that once, in the last years of the Today in France, all public officials en'joy statutory eihteenth century when we enacted the Alien and protection against insults, abuse, or defamation, and if Sedition Laws. That lasted only a few years and was they bring a ci'vil suit, alleging insult or defamation of higb quickly repudiated. Since then, public debate has been government officials, it carries a higher penalty than that robust to the point of harshness, and that has received against private persons. In Germany, public figures are constitutional sanction. considered "more offendable" by virtue of their prominent In the l960s an effort was made by public officials to positions and can recover greater damages. These laws are use private defamation suits to block criticism; they knew not unusual, and are especially common in East Central official action in the form of criminal proceed'ingS was Europe. Freedom House, an American organization dedi- constitutionally out of the question. In Alabama a suit cated to freedom of speech and market-oriented democ- was brought by a racist potice commissioner against the racy, compiled a survey of civil society, democracy, and A~'e" Yn'k Time,' for an advertisement by civil rights leaders markets in East Central Europe and th~e Newly Indepen- (four clergymen) that contained a few trivial mistakes, dent States. WVith few exceptions, in one country after After the commissioner won his suit before sympathetic another-Albania, Hungary, the Czech Republic, Geor- local courts and 'Juries and obtained a very large sum in gia, Poland, Romania, Serbia-the law condemns libel or damages, the United States Supreme Court stepped in. insult of public officials. The Court ruled that public officials could not maintain a In its Newf York Times opinion, the U.S. Supreme Court defamation action unless the official could prove not only commented that "even a false statement may be deemed to that the allegedly defamatory statement was false, but make a valuable contribution to the public debate, since it that the person uttering the falsehood either knew it was brings about the clear perception and livelier impression false or was recklessly i'ndi'fferent to xvhether it was true of truth, produced by its collision xvith error." One can or false. Mvistakes are inevitable in any heated contro- justify some defamation laws by insisting on basically versy, the Court obser-ved, and the right to make good truthful statements. But there is nothing to be said in faith mistakes must be protected. It is important to stress favor of laws against "Insulting" a president, other public that this applies only to statements about public officials, officials, or the country. Such insults are merely inarticu- or those in the public arena, about matters of public con- late forms of disagreement, what we in America call cern, and not about private people. Regardless of the "blowing off steam." Freedom of expression thus serves as many difficulties xve've had in applying this standard, the a safety valve, reducing the danger of an explosion from basic principle is clear: public officials are not immune to pent-up resentment. criticism, no matter how sharp, unpleasant, and caustic it may be. DE V ELO0PMAlE NT O UT RE A CH ESL IM MER 1999 27 Limits to freedom of speech At odds wit the democracy pri-nciplle Admittedly, some of these statutes are not enforced. But In conclusion, these laws would seem blatantly inconsis- many are. A few of the many examples, not just in East tent with many of the high-sounding protections for Central Europe but elsewhere, will illustrate the point. In speech and the press in the new constitutions. Equally Poland, two students ran afoul of the law when, after a important, many are inconsistent with the European Con- demonstration in 1992, they shouted "down with vention. Even though looser than American doctrine, the NWTalesa- Communist agent. " They were convicted and Convention has been interpreted by the European Court fined. In Indonesia, a legislator was sentenced to 34 of Human Rights to bar the denial of a defense of truth, months in prison for a speech in Germany in which he and as requiring government tolerance of criticism. The called former Indonesian presidents Suharto and requirement that the speaker support his opinion infringes Sukarno "dictators." In Romania, a journalist compared on freedom of opinion itself because a careful distinction President Iliescu to a pig, and was charged with "offend- must be made between facts and value judgments -facts irg State authority." In Russia, a newspaper reporter, can be determined, but value judgments are not suscepti- who called Russian Defense Minis- ble to proof. All of the countries in ter Pavel Grachev "a thief," was D7 E J\{'> it ( East Central Europe are members convicted of "insulting" Grachev, D S UP E pFO S Fi F E - of the Council of Europe and though he was promptly amnestied. N C'E S H >AX- A L X A U S accordingly have adopted the Con- A court in Azerbaijan sentenced six i i 0y jT D IC vention on Human Rights. Use of employees of a satirical newspaper I V [ D '- the defamation and insult laws for prison terms up to five years for MA N F £ f I R E described here thus violates not "insulting the honor and dignity" of F F .1' 0 E S only the constitutions of these President Heydar Aliyev. C. F L r > C \ W A RY countries but also their interna- Elsewhere, journalists in Turkey '. A F > ' J INC tional obligations. have been punished for comparing DFM CK ( sCY. Democracy presupposes differ- parliamentary deputies to "Pavlov's ence, and exists to allow those dif- dogs.". Journalists in Croatia were charged xvith "spread- ferences to determine public policy in a peaceful ing false information" for parodies highlighting President non-violent manner. Freedom of speech to express those Franjo Tudjman's authoritarian tendencies. In Belarus, differences, to persuade, to debate, to criticize, to con- the opposition newspaper Sooboda was charged with libel demn, to let off steam-all these are necessary to a func- for criticizing government officials and fined. In the tioning democracy. Even if one sees speech as purely Czech Republic, there is an odd combination. Articles instrumental, valuable only to promote the 102-03 of the Criminal Code permit prosecutions for democratic process, those in power may not use the defaming the republic, its government, the parliament, euphemism of "respect" to suppress speech by libel and the Constitutional Court, and the President. Even when insult laws, for that usually masks an attempt to keep such lawvs are not enforced, as is often the case in the themselves in power and to frustrate democracy. Czech Republic, they serve to chill and deter criticism. Surely we have had enough of that in this bloodiest of Journalists and others who try to expose corruption are centuries. E especially frequent targets. For example, in Ghana, jour- nalists have been charged or threatened with criminal Thu article appeared tn a longqer vetlvun in The Parker School libel prosecutions for alleging drug peddling by the ruling Journal of East European Law 3, no. 2 (1996):217-26. party. In Slovakia, a journalist was convicted ifor charg- ing that the Labor Minister's brother was involved in dis- Herman Schwartz Is Profesor of Law at The American Lniver- honest business practices. eity. He is a/so a Co-Dilyctor of the Wsahbtnlqton Colleqe of Lawtv Human Rights' Center, and a member o/fthe board>s of the Founda- ton for a Civi Society, the Congresidonal Human Riqhts Founda- tioen and He/sinki Watch. 28 W o R L D IZ A N K I N S I I I L 'I * ~ Global;Ia 1: - to essential resources and services nomic and social environment as they _ _s s ~ u~usG o a sz tu'on means longer hours of work, heavier become economic players in global and thse W ay workloads and a t'all in their nutritilonal markets. In thi's regard, UNIFEM's Forw ard status. Despite the impact of the crisis support for the shea butter nut collec- on women and girls, including the tors in Western Africa and our support BY N O E L E E N H E Y Z E R, trafficking of young women, recovery for the trans-national network of WITH strategies or "rescue packages" have home-based workers are innovative MARTIN K H OR ignored women's livelihoods. Women and transforming. We need to create are therefore doubly victimized; they newv possibilities in the globalization The debate on the Asian crisis contin- are hardest hit in a crisis not of their process, to share effective policies and ues. The list of causes varies in impor- making and are by-passed in any eco- strategies of how to intervene, to advo- tanice and has differetnt impacts among tnOtliuc recovery process. cate and expand spaces for sustaitnable the different countries affected. What- The Chinese character for crisis livelihoods. At the end of the day we ever the causes or combination of consists of two components: an element need leaders of civil society, govern- causes, the Asian crisis has shown us of danger and an element of opportu- ment, international agencies and the the dangers of volatile and large short- nity. 'We have experienced the dangers. private sector itself who understand term capital flows to the economic sta- How do we seize the opportunity of how to shape the globalization process bility of developing countries, with moving forward? At this stage we do in a constructive and effective way to major social consequences and threats not have the option of xvishing away move us forward. There is no luxury of to sustainable human well-being. M/any of the economies affected have descended suddenly into social and political chaos. To make sense of the senseless. the tendency is to search for old eeis The fault lines of ethnicity, class and gender are the first to emerge. The eth- - nic riots in Indonesia, the massive rapes - uf Chinese women, and the burning of small shop-houses selling rice and food- stuff accompanied the turmoil of changing political leadership that could no longer respond to the needs of its -- i - people.I When societies, communities and famihies collapse or are in danger of ml- lapse, women are expected to be the extraordinary heroes of everyday life, devising individual and collective strategies of survival. Yet, they are the first to be hit by an economic crisis. As globalization. The harder challenge choice. Too much damage has already the backbone of the export sector in therefore is to understand the four dif- been done. electronics and textiles, wvorking fre- ferent aspects of globalization - trade, quently as a "flexible" workforce or investment, finance and technology - Thi'. 6 ain exceptfroam a loozger contrib4 - engaged in sub-contract or "casual" and participate in reshaping the global- titn that appeared in Dezelptnsent Foruam, wvork, womcn xvorkcrs are often ization process so that it becomes more "Speaker'f Corner" regarded as "expendable." Women are people-centered and sustainable. The (u's's'v.worldhaazk.orq/defi'ormn) also the ones who feel the immediate current kind of globalization has to be effects of cuts in basic services. transformed into one that has three Noeleetz Heiczr i6 Executive Director of Because of their responsibility in social components: ecological, economic and ULIFEM. AIirtin Khor w Director, Third reproduction, from childeare to care of social sustainability. It has to allow World Nettoork. the sick and elderly. their lack of access small producers control over their eco- D E V E L O P M E N TO R E A C H S U NI M E R 1 99 9 29 The completely inadequate schooling space. Donald E. 170th Com prehensive The idea for the school was originated Professor of Rural SocitOltqy by a group of people from outside the HOEC 118 Developn ent community who chose this site because School of Human Environineutal Science Framework they felt it offered the best chances of Untiversity of Arkansas Sparks Cyber attracting funding for an actual school Dialogue building. However, they simplv cannot get the parents to pay the minimal It is smportant for us to examine four school fees (65 cents US per month). It pillars of modern, primarily Western, The World Bank Groui s sponsoring an is becoming clear that a significant rea- society/ civilization: individualism, sub- electroric discussion on the Comprehen- . ,, , jectivism relativism and instrumental- son is that the parents do not 'own" the s ve Deve opmnent Framework, wvoich \vas school. ism. However, these four concepts f rst unvel ed in October 1998 by World David Pankratz have been taken to their extreme and Bank President James VVo fensohrn The their debased forms have become proposa seeks a more rea is- c and pa'tic - major weaknesses and breakdowns in patory approach to development, w th ooth The image of the countries in the dri- the WATest. \We need to retrieve the social and econom c factors be:rg given ver's seat brings to mind the following essence of these pillars and see how equaN consideration, scenario: they can be adopted, modified, trans- Fo low na is a samp ing of op nions "Here is the driver's seat." lated and integrated with the best val- vo ced during the f rst three wreeks of the "Where is the vehicle?" ues and practices of other on- ine d a ogue. Questions have focised "Times are difficult for donor agen- cultures-and not just force them DEVtI ~ l on the three cies. The steering wheel wvill arrive in down the throats of these cultures. ma n prrc - the second tranche. Meantime, use Rave!Pradhan _ es underly- your initiative." Karuna Alanaqement ng the Yvonne IlcCalla Sobers Katinnandu, Nepal CDF-coun- Practitioner in community development try owner- and participatory refsearcb On Partnership ship, Jamaican basd in .Jama a The CDI calls for a partners hip atnonq the partnershnp, qovernmnent, the internationial developmient and the holas- On the Holistic Approach community. civil societ~y, aind the privtte see- t c approach Tie CDF proposes1 a hals/ti approach to tor to prepare and imnplement the country5 to the structural, soc a and humar; aspects development, [where dtructural, social and oftvn developetineit strategy. of development For a more comprehens ve hubnan as,pects are con,idered together swith v ew, v s t the "Arch ves" of Deve opment the economic and financial, as prerequisites I have been president of a community Forum (www.wor dbank.org/devforum). for staabe, dudtainable and equitable develop- based organization of 10 villages in the inent. Department of Mlbour, Region of Thies On Country Ownership in Senegal. Administered by volunteers The CDF adserts that owvnership by the cottn- The World Bank could take its cue residents, BLOC DES 13 DE try (inot only 6y the government but also civil from the community development pro- MBOULEME. To alleviate poverty, society, the private sector and other develop- grams of the 1960s which, because they partnership is a key word since many tnetnt actors) ic1 evdential and that countries focused upon the local community for stakeholders are involved in the must be in the drivers seat osmninq and direct- the identification of needs, the setting process. My idea is that it is critical to in; the idveloptnent a enda. of priorities, planning, and even imple- focus on "Civil societ' in all its forms," mentation, were necessarily holistic, more specially on community based I am a Canadian, an accountant work- But that did not mean, and does not organization. I strongly believe that ing for three years with a church based need to mean, that a project or program poverty cannot be alleviated without NGO in Zambia. Mv observations have at a particular place and time must take full "ParticipAction" of poor people brought me to the conclusion that most on more than it can manage. It does themselves.... development here does not go deep mean that donors/funders and imple- Bakary Diallo enough into the people to be truly menting organizations must avoid the University of Ottafwa effective... A small group of Zambians ubiquitous practice of promoting their in Lusaka have organized an informal pet solutions and actually alloxv a school in a compound where there is significant degree of local autonomy. 30 w o R L D H A N K I N S T I T U I L Knowiled grul esou rces The Development Forum, the online Other Development Sites: Information Technologies - discussion component of the World Access to Solutions for Sustainable Bank' redesigned webs.te, is the opti- Eldis (Electronic Development and Human Development I Ban redesie west,is the opt- Environment System) is a gateway to i a mal first step on this cybernetic jour- online information on development or r a C Ieee ney. Its focal poiot is an ongoing and m. the environment. It makes a qualitative i cc _ a X expandi'ng series of Development Dia-iO loguexpandng serieseof D f developmn D selection on materials and structures it o logues among members of the develop- fo eayaces ldsi hse b h . r ~~~~~for easy access. Eldis is hosted by the *tl, *X ment COMMUDity on key Issues and Inttt fDveomn SuiesA challenges, with a particular emphasis Susex. of Development Studies, a. ~ ~ ~ ~~ Susx a mentz comnt on> keyP isusn on learning from those who face these Sussex "uvn ids ac.uk/eldis/eld s htmi iSL; 2 co.cAt I challenges in their daily lives. The dia- lti- t l I. logues are complemented by other fea- -' tures, including a Speaker's Corner, 3r>rh Isu nn I whetsnr.? eldis that provokes debate on development Knowledge Broker connects three issues, an index of other online discus- i internet sites which offer one-stop sions, and archives. access to knowledge, practical solu- * a. j | | l ltions and best practices in the field of > *t-- a, -r rN _- 13!i ieducation, health, environmental pro- .UiK ndEntp r.... hrIn bIr F.nnding tection, gender issues, levelihood ation, commerce, human rights, jin the discusien .ly.'i"j t governance and poverty alleviation. - - ** * n~~~~pnnke,' Cornet.. _ FehK oreW8ll8 etbts.6'8su0 . . . . . . . . C IDSM They are: INF021, maintained by .iiSC,_ -th=dcuzktOW 3 . Mli l l UNDP, the Sustainable Networking */wiDRWII mbst l l s- * s sl."'Programme (SDNP), and the Horizon * a '"""''R"l_ Solutions Site that works in collabora- *]tllkas_ -CIDI (Inter-American Council for tion with the UN and others.. - NIli_ vww.worldbanl.orgidevforur Integral Development) operates under wnv.knowvedgabroker.org *.mlUlllw _ athe umbrella of the Organization of a' aVisit one of the following sites and sign American States to promote new forms ID21 (Information for Development -i*iR22illlFi up for the dialogues of choice: of development cooperation. It sup- in the 21st Century) is a fast-track Comprehensive Development Frame- ports activities to strengthen policy research reporting service hacked by work dialogue, broaden the exchange of the UK Department for International _ wnv.vork dbankerg/dsvtorum/cirrnt-cdf knowledge and experience, and facili- Development. It offers hundreds of tate joint action between American summaries of problem-solving work Democracy, Market Economy States countries and their institutions, on critical development dilemmas and Development as well as the international community. around the world. It also lists e-mail nnw.vworldban .org/devforLmi/crrent-dmed nwvv.c d oas.org addresses, other direct contact details, Social and .Environmental Impact hotlinks, and printed sources to ease SocPrivalizan vironmental Impact Senegal Contact is a server hosted by the direct flow of knowledge between of Privatization the Centre SYFED REFER in Dakar, researcher and research user. vvvvwunor dtonk crt/csvfoLru!currGnt-seImpact and includes the Africa Virtual Univer- wwv.id2l org Ending Violence Against Women sity site, among others. Areas of inter- wn vwor dbank.orgqdevforum/current-s imonate est are: education, research, EA economics, culture, media, and civil - msto ,01 Gender and Law (GENDER-LAW) society. *-,, l wwwworidbank.org/devforum/currenr-gender vvv.refersn/accueil Look in the Development Forum lt.'.*,- -- Archives for Dialogues that have , _ ' g - recently ended. D E V E L O P M E N T Q E T R E A C H S U MN E R 1 9 9 9 31 -~~~~~~~~~~~~ B 0arfl Cojitine ft, tAo ite n; PT9 Not surprisingly, the authors criticize Likewise, there wvas insufficient focus on the tin'. onS'ttsalAd/ocan'a bv Thandika adjustment programs, not because they growing role played by non-bank financial Mlkandaxvire and Charles C. Soludo. wvere inherently flawed, but mainly because institutions, both domestic and foreign (i.e., Trenton, N.J., USA, and Asmara, Eritrea: those programs assumed that the African finance companies, securities institutions, Africa \Vorld Press, Inc., 1999. countries were "in the driver's seat". which and institutional investors) and their possi- was not the case. They argue against the ble effects on either past or future crises. This book is a very "cookie cutter approach" and stress the Notwithstanding, this volume, along with * good attempt by two need to be more sensitive to each country's subsequent papers that have and will cer- * i Xl 3'of Africa's best particular history and situation. A very tainlv be written about the East Asian crisis, A known scholars to good book. - Gty Darl/n, Reqiooci Coordn½a- is a "must read" by regulators wvorldwide present the chal- t fird Atfrica, The lMari Bank Jo,stitute and students of financial sector developmernt. ' lenges that Africa - Jooeph E. Pet,', Seni)r Bankisn q Sert' Spe- faces at the turn of Th'es':ils Fsa'alk Crs-A',,e: ReIssl o .oli Recenzt e'/tst, The WA-rld Bank Jostitote i the century, from an Gf b'assk Pa//size,' by Gerard Caprio Jr, African perspective. William C. Hunter, George G. Kaufman, T.7he Nes f.'lobal Econiomiy aid DcAc-l/oping The book is written mainly for development and Danny M. Leipziger. Washington, DC: Cozent1ries: JA1zki/op Gpewae.',i is,'f by Dani professionals, analysts, and researchers. For The World Bank, 1998. Rodrik. Washington, DC: Overseas Devel- those who are not used to the complexity of opment Council, 1999. tlhe development debate, it is not easy read- _ It has been nearly two ir.g. This may limit its circulation and popu- years since the onset A general orientation larity, which is regrettable because the i 4 of the East Asian toward openness in aujthors make a rather passionate plea for all 'c,financial crisis, and trade and capital Africans to realize thIat only they can 4 lessons learned from Rlows has generated develop Africa. the crisis are still new dilemmas for While making it clear that they are emerging. The papers policymakers in writing this book as Africans-re the title, . in this volume were developing countries. 01st Cpntineat, Onr Fl 'ure-the authors man- prepared for a confer- This new globaliza- aged to give a fairly balanced view of the ence that took place only a few months tion model suggests situation, placing the blame right and left, before the crisis erupted. The conference, that policymakers wvill no longer play a pri- wvherever they think it lies. With convincing jointly organized by the Federal Reserve mary role in promoting economic develop- statistical evidence, the authors dispel the Bank of Chicago and the World Bank Insti- ment. In the globalized economy, foreign notion that Africa has been on the decline tute of the World Bank, pulled together investors and a small group of domestic from the start of the post-colonial era-a globally knowvn and highly regarded acade- exporters are those that determine wvhether n)tion that the Berg Report made popular. micians, former and current regulators, and an economy wvill prosper. But can interna- Af-rican economies as a whole actually financial market practitioners to analyze the tional financiers and local entrepreneurs g ewv until the mid-seventies. They do stress causes of past banking system crises and to driven by special interests produce desir- that external shocks and deteriorating suggest measures for preventing or, at the able socioeconomic outcomes, or will their terms of trade contributed to the decline very least, minimizing the impact of future strategies worsen inequality? from the mid-seventies, but they also reveal crises. In this book, Dani Rodrik argues that the dynamic characteristics that made This volume provides a great deal of policymakers will still have an essential post-colonial performance unsustainable. insight into the causes of past banking role, as long as they stop thinking of inter- Features of the pre-crisis performance are crises, highlights the common elements national economic integration as an end in examined xvith care. Africa's potential, found in each, and offers prescriptions for itself. Rather, they must reinforce their as well as the inherent limitations of the preventing the occurrence of future banking external liberalization strategy xvith an policies pursued in the period before the system distress. It is interesting to note, internal set of policies that place substantial structural adjustment programs starting in however, that during the conference there responsibility on the state in building physi- the early eighties, are rigorously scruti- were very few indications or suggestions by cal and human capital and mediating social nized. This should allowv policy makers and either presenters or participants that a conflicts. development agencies to learn from the major crisis was about to unfold in a region -Staff Develop/zent Ot'TRIttAnwc le.,sons. of the world where selected countries wvere being portrayed as models to be emulated. 32 W O IZ L 1) 1 A N IK I N I t I U 1 E 1 st. International Workshop on The World Bank Group "Innovative Marketinq Communications (IMT: Web Site Promoting and Selling Trainin In the New hfGKEROUP .Mil nnium ?.9i.-orld C.urtr,es £tevelopRtew Tnr Cairo, Egypt: February 26 -March 4, 2000 )teopo,eOptot Atpcs vi 3 G-7 to Eo,o Cebt Relief Puloe 'olol,o,ot.otone _p , Ifor Poor Nafion_ $, ~~ FtJtnre. WORLD * lobali2atto, So uld Not1, Loooo 'orO' ' , ' t W the Poor SeotP B AN K looa SpOocr/O ______,l-j- I NSTITUTE )pooatiooosand Poojnts _ Jloropr,hTrsieC eDo .per _ ~~~~~~~~~~~~~~~* t:orldant PonnOloOt. 'dt |sricst ~~~~ ~ IR _|AiJdtdE =i(5 `01t~ 1- z _ vs1 * Integrates a rich set of knowledge M \ I LL IMD/AUC I,1 a Provides easy access to a wealth of information The World Bank Institute (WBI), in collaboration with the Institute of Management Development of the American Uni- * Offers a wvide array of rich and timely versity in Cairo (IMD/AUC) and SPAAC Human Empowerment resources Center, will organize this workshop as a collaborative learning opportunity for training executives, managers and planners to discuss and master innovative strategies, methods and tools for the promotion and selling of training services and prod- ucts, in the context of cost-recovery efforts and ensuring pro- Today gram sustainability and financial viability of training institutions. Partnerships Through Tstate-of-the-artsi presentations, peer-based learning methods, and case-method analysis, participants will Development Forum be expected to improve their conceptual know-how and practi- cal slills in developing creative and cost-effective marketing communication approaches, including publicity and sales pro- Special Interest motional techniques, especially for fee-based training courses and learning materials. Visitor Portals For further information on this Workshop, please contact: Ronny Adhikarya Knowledge Products & Outreach Division (WBIKP) World Bank Institute (WBI) 1 818 H Street, N.W. Washington, DC 20433, USA Fax: (1-202) 473-0305 E-mail: radhikarya@worldbank.org Or please visit the workshop Website at: http://www.worldbank.org/wbi/imc-1 } ggg 2E S|X S ½ g ~~~Development Studies Learning Resources Working Papers Case Studies CD-ROM d- Wg .0bI~he