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Books: The global assembly line; decision making in international organizations; policy making in Mexico; managing and analyzing risk; OPEC investments; performance and prospects in industrial countries; energy policy; basic needs; and housing finance

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1985
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Joseph Grunwald and Kenneth Flamm

Global Factory

Foreign Assembly in International Trade

The Brookings Institution, Washington, DC, 1985, xvi + 259 pp., $29.95 (cloth), $10.95 (paper).

International specialization in processes or components, as distinct from specialization in finished products, is a growing aspect of manufacturing in both developed and developing countries. There is an urgent need for good analytical and empirical studies on this phenomenon, which is known variously as “complementary intra-industry trade” “international production sharing,” “intrafirm trade,” or “international subcontracting.” This book examines one aspect of complementary intra-industry trade, the assembly activities of developing countries. The US semi-conductor industry, which has been relying very extensively on such assembly activities, is examined in detail, while some attention is also paid to the semi-conductor industries in Western Europe and Japan. Case studies of the assembly industries (mainly electronics and apparel) in Mexico, Haiti, and Colombia form the other half of the book.

Grunwald and Flamm conclude that three major factors determine the pattern of foreign assembly activities (besides wage and skill differentials between developed and developing countries): the characteristics of product and production technology; the strategy of multinational enterprise in dealing with uncertainty in foreign operations and with technical change; and the industrial and trade policies of the developed and developing countries.

The study’s excellent review of the impact of policies on the pattern of foreign assembly activities provides the basis on which one can speculate about the policy improvements needed in both developed and developing countries to maximize the overall gains from such international specialization. The key policy factors that have helped foster extensive US reliance on foreign assembly of semi-conductors are tariff rules (known as 806.30 and 807.00) that permit duty-free re-entry of US components sent abroad for processing or assembly and general trade policies that are more open than Europe’s and Japan’s. The tariff provisions, however, are still protectionist in that they discriminate against foreign assembly activities using components manufactured in developing countries (which would have increased backward linkages from assembly activities). On the other hand, certain policies (or lack of rational strategies) in some developing countries appear to be partly responsible for failing to exploit fully the potential for backward linkages and technology transfer.

Although considerable doubts have been raised by some policy makers in developing countries about the net benefits of assembly activities for developing countries, there appear to be significant mutual gains to be expected for selected developing and developed countries through improved policy environments.

What about processing activities (and products) other than assembly (and electronics and apparel)? What are the current status of and future prospects for international specialization with the active participation of developing countries in various stages of industrial maturity? Which technical characteristics and policy environments would significantly increase such specialization? These are some of the key questions that future studies that follow this pioneering work should address. The book is highly recommended to those interested in the trade and industrial policies of both developed and developing countries and in the corporate strategies of multinational enterprises.

Yung Whee Rhee

Frederick K. Lister

Decision-making Strategies for International Organizations

The IMF Model

University of Denver, Denver, ix + 142 pp., $6.95.

In an admirable and provocative monograph, a distinguished former UN official analyzes the decision-making strategies of international organizations. Lister finds the strategy incorporated in the UN model deficient and offers, by way of comparison, the IMF model, which he believes is clearly superior.

The analysis begins with a consideration of whether an optimal international decision-making strategy should be based on the principle of one vote for one country. Lister challenges the efficacy of attempting to “make thousands balance millions in the international scales.” Instead, he counsels a model based on the familiar principle that underlies the corporation: those who have greater responsibility should contribute more resources and should possess a commensurately larger role in the direction of the common enterprise. In the IMF, this model is realized through the device of weighted voting, which in turn derives from a system of quotas and subscriptions applicable to each member.

While the basic structure of the IMF is thus founded on the recognition of the inequality of its members, other principles of organization also contribute to its effectiveness. Lister points out that efficient decision-making can only be assured in a body of limited size. In an international community of some 150 sovereign states, if each member spoke for only two minutes on a single issue, five hours of time would be consumed. The answer, of course, lies in agreeing that representatives of certain members may act on behalf of others organized in constituent groups. Lister is careful to point out, however, that this principle is modified in the IMF, for the IMF’s Articles of Agreement wisely refrain from characterizing the Executive Directors as “representatives” of their governments and the character of the office has thus been allowed to develop on its own.

Another characteristic of decision making in the IMF noted in the study is the general avoidance of formal voting in the Executive Board. Instead, the practice has developed of taking decisions by the sense of the meeting as ascertained by the Chairman who is ex officio the Managing Director. Likewise, Lister counsels that effective decision making must result in legally binding decisions carefully negotiated and clearly subject to implementation. Rhetoric obtains few results. Lister concludes by noting that the IMF model, with suitable adjustments to the particular circumstances, might be considered for wider application in other international organizations.

Robert C. Effros

Robert E. Looney

Economic Policymaking in Mexico

Factors Underlying the 1982 Crisis

Duke University Press, Durham, NC, USA, 1985, xviii + 309 pp., $37.50.

Mr. Looney’s book can be read from two interdependent perspectives—as a thoroughly researched work on a momentous period in Mexico’s modern history, or as a case study of Latin America’s external debt crisis. Under the first perspective, the book covers 1971–83, paying special attention to the rapid-growth policies adopted by the Echeverría and Lopez Portillo administrations. In the author’s view, the main mistake of the Echeverria administration was its attempt “to expand and rely on the public sector as the main vehicle for economic growth, and rectifying social inequalities before developing an adequate tax- and revenue-generating base” (p. 57). López Portillo’s error was to believe that Mexico’s oil revenue and external credit were virtually inexhaustible and that the state could therefore embark “on an investment spree of massive proportions” (p. 109). Mr. Looney believes these ill-fated policies led to the 1982 external crisis.

Although the book makes for interesting reading from the first perspective, it is from the second that it becomes a truly worthwhile undertaking. If many Latin American countries could claim, at least in principle, that their crisis had originated in external factors beyond their control—like the first and second oil shock—Mexico could hardly make the same argument. After all, the higher oil prices dramatically increased Mexico’s foreign exchange earnings and induced massive inflows of commercial financing. Indeed, Mexico’s case tends to support the view that it was internal domestic policies that precipitated the crisis.

Mr. Looney, at least initially, seems to share this judgment, stating that the expansionary policies followed during 1971– 82 were largely responsible for the debt crisis. But this initial conclusion (p. 51) is abandoned at the end of the book when, surprisingly, he declares that “Mexico’s crisis was a cash flow problem more than a fundamental economic problem—a case of illiquidity rather than insolvency” (p. 275). He then goes on to say that, in retrospect, the Mexican crisis of August 1982 was an “old-fashioned financial panic dominated by a sharp shift in expectations” (p. 274).

Could it be that the author is not aware that between 1978 and 1982 Mexico’s public sector deficit rose from 5.6 percent of GDP to over 17 percent of GDP? Does he not accept the link between these growing fiscal deficits and the current account deficits? Does he not appreciate the connection between current account deficits and external debt? The book offers no clear answer. On the one hand, Mr. Looney states that the Government’s inability to reform the tax system resulted in increasing budget deficits reaching 16 percent of GDP in 1982. On the other hand, he argues that the 1982 “economic crisis in Mexico was the result of an unfavorable balance of payments in 1981, accelerated inflation and the high level of external debt” (p. 50). A sharper distinction of causes from effects, or manifestations, would have been desirable.

Some of the book’s most interesting chapters deal with the policy options open to Mexico after 1982. Here Mr. Looney makes precise recommendations in the critical areas of exchange rate and wage policies. “The peso must not be overvalued … and the level of wages and other domestic incomes must not be separated from the conditions that prevail in the markets for labor, capital, and other factors of production” (p. 277). The wisdom of these words cannot be disputed, and the success of the adjustment effort during 1983 and 1984 confirms that Mexico’s policy makers do not disagree with Mr. Looney.

Eduardo Wiesner

Richard J. Herring (editor)

Managing Foreign Exchange Risk

Cambridge University Press, New York, 1983, xi + 235 pp., $29.95.

Richard J. Herring (editor)

Managing International Risk

Cambridge University Press, New York, 1983, xii + 273 pp., $29.95

John Calverley

Country Risk Analysis

Butterworths, London, 1985, ix + 181 pp., $45.

Risk analysis is a risky business, especially in the more open, integrated, electronically linked, and less predictable environment of the present-day international economy. It is an inexact science, but not one that can be ignored; indeed, insufficient attention to risk assessment by commercial banks has been identified as one of the many factors that contributed to the external debt difficulties of the early 1980s.

Risk analysis may involve the fairly narrow, specific foreign exchange risk; the somewhat broader country risk (which applies to international lending and investment); and, broader still, the so-called “systemic” risk, or the possible breakdown of the system of international economic relations. The two volumes edited by Richard Herring, originally published in 1983, cover all these types of risks in a series of essays by eminent academics and, in some cases, senior corporate executives. There is a wealth of material here, and it is impossible to do justice in the space available. Both volumes contain valuable overview chapters by the editor and in his overview to the volume on international risk he concludes; “… it is apparent that there are no definitive answers [to the optimal way to manage international risks]. Nor, in view of the pervasive and irreducible uncertainty that surrounds the future, are there likely to be…. There are few situations of any real importance in which future developments can be fully controlled. Consequently, insurance and diversification strategies are always likely to play a useful role in dealing with international risks. In addition, uncertainty can be reduced to some extent through a better understanding of the forces that give rise to international disturbances and country risks.”

John Calverley’s book, though on the same subject, is an entirely different affair. It is a primer for practitioners and seeks to analyze the basic approaches and specific techniques to country risk analysis, and give guidance as to how they can be incorporated into the decision-making process. As a taxonomy of the subject it will be of interest to many in the field; it is full of lists, menus, rosters, factors, parameters, and so on. This reader missed a more detailed, overall, critical evaluation of the whole subject, although Calverley does state, quite clearly, that risk analysis is important and that there is a need for better analysis.

There has been encouraging progress in addressing the debt problems that surfaced in the early 1980s, although progress has been uneven and the situation remains vulnerable. If normal creditor-debtor relationships are restored, it is to be hoped that memories will be lasting and greater attention will be paid to sound risk analysis. To use Calverley’s terms, the 1970s euphoria, in lending has been replaced by the new caution of the 1980s; the world does not need another euphoria.

Bahram Nowzad

Richard P. Mattione

OPEC’s Investments and the International Financial System

The Brookings Institution, Washington, DC, 1985, xi + 201 pp., $26.95 (cloth) $9.95 (paper).

The large current account surpluses that oil exporting countries accumulated following two major increases in oil prices raised concern that the resulting capital flows would put severe strains on the international financial system. First, it was feared that the system would have difficulty coping with the magnitude of the “recycling” of capital flows from surplus to deficit countries. Later, when the recycling had been accomplished, it was feared that the resulting accumulation of financial assets by OPEC countries would give them the power to disrupt world financial markets, either intentionally or unintentionally, through their investment policies.

Although these concerns have faded along with the OPEC surpluses in recent years, Mattione’s book is still very useful since he clearly demonstrates that such apprehensions were largely misplaced. He begins with a detailed investigation of the size of OPEC members’ asset holdings in various financial markets and concludes that although they were large in absolute size—the total investable cash surplus available to OPEC countries during 1974–82 is estimated at $440 billion—their share of individual financial markets was still small. Consequently, even quite sharp shifts in their assets between markets would have had only relatively minor effects. Moreover, even if any large, sudden sales of assets did tend to depress prices, the OPEC countries themselves would be most affected, since the value of their own holdings would be reduced.

Mattione’s book also contains a comprehensive discussion of the investment strategies followed by individual OPEC members. There are long, extremely detailed discussions of the evolution of investment policy in Saudi Arabia, Kuwait, and the United Arab Emirates—which together account for the bulk of OPEC asset holdings—and shorter treatments of the policies of other member countries. He argues convincingly that the investment strategies have generally been conservative, with an emphasis on safety and diversification, and that any differences in investment orientation between countries were due to differences in the constraints imposed by development strategy and position in the world oil market. Thus, Saudi Arabian investment behavior has demonstrated a preference for relatively short-term, liquid assets, since Saudi efforts to influence oil markets can result in large swings in its current oil revenues, and there is a need for a large cushion of liquid reserves. In contrast, Kuwait does not face the same magnitude of revenue swings from attempts to moderate changes in oil prices by varying production levels, and it consequently has placed greater emphasis on longer-term investments and maximizing rates of return.

The book also contains chapters on OPEC’s foreign aid and on the role of Arab banks in the international financial market. Altogether, this is an interesting contribution with a wealth of useful information.

David Goldsbrough

William J. Baumol and Kenneth McLennan (editors)

Productivity Growth and U.S. Competitiveness

Oxford University Press, New York, 1985, x + 228 pp., $19.95.

Philip Cagan (editor)

Essays in Contemporary Economic Problems

The Economy in Deficit, 1985

American Enterprise Institute, Washington, DC, 1985, 336 pp., $20.95 (cloth), $9.95 (paper).

Paul Cockle (editor)

Public Expenditure Policy, 1984–85

St. Martin’s Press, New York, 1985, 240 pp., $27.50.

George A. Luffman and Richard Reed

The Strategy and Performance of British Industry, 1970–80

St. Martin’s Press, New York, 1985, ix + 271 pp., $32.50.

Jacques Melitz and Charles Wyplosz (editors)

The French Economy Theory and Policy

Westview Press, Boulder, CO, USA, 1985, ix + 386 pp., $30.

These five rather diverse books represent a broad spectrum of views on the problems and prospects facing industrial countries in the latter half of the 1980s, and about the public policies that might improve economic performance. Two of them—Baumol and McLennan, and Cagan—deal primarily with the United States, although each also discusses the relationships between the US experience and that of other countries. Two—Luffman and Read, and Cockle—deal with the United Kingdom, and the fifth—Melitz and Wyplosz—discusses France.

Cagan’s book on US fiscal policy contains much that will be of interest to anyone concerned about the growth of government debt in the United States and the impact of that growth on the world economy. Its 11 papers, prepared for the American Enterprise Institute in late 1984, are up-to-date, forward-looking, and of a uniformly high quality in both technical analysis and readability. The tone of the book may be illustrated by a small sampling of its conclusions: Gottfried Haberler dismisses several arguments purporting to show that a rise in fiscal deficits will not lead to a rise in real interest rates; he favors instead the “common sense view.” Haberler also rejects the view that the European countries would have enjoyed an expansion of output as strong as the United States’ had they followed a similar path of fiscal expansion in the early 1980s. And Alan Walters argues that the fiscal austerity implemented in the United Kingdom since 1979 is a harbinger of what must come eventually in the United States to offset the effects of the current deficits.

Baumol and McLennan’s book examines why productivity growth in the United States has been so slow in relation to that in other large industrial countries. The authors shift the focus of the discussion of US competitiveness from the essentially short-run effects of the strong dollar to the longer-run issue of productivity. This collection of articles, prepared and published under the auspices of the Committee for Economic Development, includes a central chapter by J.R. Norsworthy and David H. Malmquist. They argue that capital investment—rather than “total-factor productivity”—is the most important area in which the United States has been deficient, especially in comparison with Japan, where a high rate of private saving has supported much greater investment. Baumol and McLennan conclude the book with a list of public policies—including the avoidance of large fiscal deficits—that could contribute to better performance in the United States.

Cockle’s book on public expenditure policy in the United Kingdom is intended as the first in a series of annual analyses by economists affiliated with the Independent Treasury Model Club. It examines the official projections contained in the UK budget, in part by performing alternative simulations with the Treasury’s own model. Cockle and his collaborators, several English academic economists, offer a frank and refreshing tone and generally manage to clarify issues by avoiding excessive technical jargon. By explaining the basis for the government’s position and analyzing the areas in which the official projections do not seem likely to hold up, this book and its successors could play a role in the public discussion of British fiscal policy similar to that played in the United States by the annual studies issued by The Brookings Institution.

Luffman and Reed’s study of the performance of British industry during the 1970s is less directly aimed at the discussion of public policy issues than the other volumes under review. It is primarily a detailed statistical comparison of the importance of various characteristics of different firms in determining the quality of their performance. Even here, however, public policy is relevant. The authors examine the importance of changes such as the emergence of double-digit inflation and the increasing involvement of the government as a “stakeholder” in the successful operation of large businesses. Nonetheless, this book will prove more interesting to students of industrial organization than to those of government policy.

Melitz and Wyplosz have produced a conference volume of unusual value, bringing together (in 1982) a distinguished group of economists to discuss reasons and remedies for the weak performance of the French economy. The papers include several models that highlight different aspects of the problem, including exchange rate determination, wage formation, and anticipations of policy shifts. There is far too much of interest in this book to be summarized in this brief review, but one conclusion does stand out: demand management policy is unlikely to be a successful means of solving France’s economic problems, both because of the external constraints that became so clear during the expansionary phase of 1981–82 and because of the structural nature of the difficulties. No overall policy prescriptions emerge from the discussion, although specific suggestions—including the possibility of imposing controls on capital flows—are offered by several authors.

James M. Boughton

Paul Kemezis and Ernest J. Wilson III

The Decade of Energy Policy

Policy Analysis in Oil-Importing Countries

Praeger, New York, 1985, xiii + 271 pp., $27.95.

Whether large or small, rich or poor, socialist or capitalist, oil importing countries in the 1970s had to adapt their domestic policies and institutions to massive international disruptions, especially to the volatile fluctuations of oil prices. This led to new energy regulations and laws and, in some ways, to government involvement in demand management as well as traditional supply-side policies. Oil price increases affected other energy resources and led to new roles for nuclear, coal, and renewables. The principal consequences of these policy changes were an increase during the 1970s in government-to-government oil deals, a greater number of government-sponsored energy companies in importing countries, and expanded energy planning by governments in their efforts to control supplies, prices, and use of fuels.

This book provides a thorough analysis of the energy policies that oil importing countries adopted in order to adjust to the international shocks of the 1970s and the early 1980s. Though the book’s three categories of countries (the US, other industrial country importers, and developing country importers) undertook very different policies, all made intense efforts to improve short- and medium-term energy supply security after exporters assumed control of oil management and ownership. In pursuit of this objective they sought firmer arrangements for oil deliveries and diversified their sources of oil and other imported fuels. In 1973–80 this was achieved mainly through increasing direct bilateral trade with oil producers; in the buyer’s market after 1982, these deals have diminished.

Oil importing countries also tried to increase security of supplies through state-supported exploration for oil in their own national territories. This meant policies to help find new oil, gas, coal, and hydroelectric resources, and research into the development of new energy forms (solar, synthetic fuels, etc.). In this context, the authors acknowledge the role of the World Bank in assisting developing countries to improve the legal and physical infrastructure necessary to attract foreign firms for oil exploration in so-called marginal areas. There has been considerable success in commercial oil finds in several Western African countries.

Looking to the coming ten years, the authors conclude that so long as energy remains a precious commodity in world trade, and while “so much oil comes from the most unstable regions, there is little room for complacency.” Governments are very good at planning today for yesterday’s energy crisis. As oil scarcity grows and demand increases, the authors anticipate “further volatility of markets, confronting energy-importing governments with serious policy challenges in the next decade and beyond.”

This book might be of interest for energy policy makers, energy institutions, and researchers interested in oil politics and future energy strategies.

A. Ferroukhi

Frances Stewart

Basic Needs in Developing Countries

The John Hopkins University Press, Baltimore, 1985, ix + 244 pp., $27.50.

By their very nature new ideas, however relevant, pass into and out of fashion. At the end of the 1970s almost no World Bank country economic report was regarded as complete without a section on meeting basic needs. Indeed whole reports were devoted to this topic. Nowadays references to meeting basic needs would be the exception rather than the rule. Frances Stewart’s excellent new book is a timely reminder that if improvement of the general welfare is a primary concern of development economists, their analysis must go beyond the current understandable preoccupation with growth and macroeconomic balances.

This book offers policy makers a comprehensive overview of the basic needs approach to welfare economics. It starts with a good discussion of the difficulties in defining precisely the concept of basic needs. Since much loose thinking on this subject has tended to discredit the basic needs approach in the eyes of many “hard headed” quantitative economists, such a framework is useful in making the analysis of basic needs more rigorous. It is designed to assist planners in incorporating basic needs objectives more effectively into the planning process. The book then draws extensively on country experience to evaluate the correlation between the provision of various basic services or goods and the improvement of selected welfare indicators. While none of this is particularly new, it usefully draws together, in a systematic way, the principal themes of the basic needs approach.

Because of the enormous variety of country situations and the complexity of the interactions between the different factors determining welfare, the book makes clear that there is no simple, optimal, universal strategy for meeting basic needs. But what stands out clearly from the accumulated mass of country experience is that improving basic education is as much a prerequisite for a successful basic needs strategy as it is for achieving more rapid growth. And this provides a link with a current preoccupation of development theorists: the need to pay greater attention to strengthening institutions and development administration. As the book’s case study of Nigeria illustrates so well, a country may be richly endowed with resources but lack the capacity to deliver services or to market its production. To achieve greater organizational efficiency for whatever purpose, poor countries need a better educated workforce.

Pierre Landell-Mills

Mark Boleat

National Housing Finance Systems

A Comparative Study

Croom Helm (in association with the International Union of Building Societies and Savings Associations), Dover, NH, USA, 1984, 489 pp., $50.

This very timely book fills a conspicuous gap in the literature on housing finance. With the rapid integration of world financial markets and the dramatic impact of high and fluctuating interest rates, as well as deflation, on traditional housing finance systems, conventional approaches are being tested everywhere and international comparisons of experience are badly needed.

Mark Boleat’s objective is to “describe the process by which personal savings are transformed into loans for house purchase, and the institutions which intermediate between investor and borrower.” Drawing on his long experience with the British Building Societies Association, on his rare international experience, and on a worldwide network of contacts, the author successfully presents a very large amount of information on more than 50 countries. The major attraction of the book is that, for a change, housing finance mechanisms are described in the context of their national financial markets and we are not offered the kind of truncated information prevalent in this field.

Boleat begins with a simple but useful discussion of the four ways in which funds are channeled to finance housing: the direct route, the contractual system, the deposit-taking system, and the mortgage bank system. He identifies five major factors that strongly influence the size of housing finance systems: the level of owner-occupancy; the rate of inflation; the turnover in the housing market (because new loans reflect current prices); the degree of institutional responsiveness, which is affected by regulations; and the tax advantages.

This survey shows clearly that in an environment of high and fluctuating interest rates it is not possible to have viable housing finance institutions without adjustable mortgage instruments. Competition between specialist and general financial institutions is increasing markedly. Progressive deregulation has been the order of the day in many national policy reviews and it is creating a new environment for formerly rigidly regulated specialist institutions which have difficulty adjusting. Rapid technological change in this service-intensive industry is also opening new possibilities.

This review is less rich for developing countries but it stresses the shortcomings of interest rate controls in attempting to direct credit to preferred activities; it also suggests that the correct way to develop a system may be to start with a mortgage bank to which deposit-taking functions might be added later. With this book, Boleat has performed an important service by providing well-presented information on a very wide variety of national systems in a convenient, sound, and easily accessible format. The challenge now is to find ways to update this information periodically and to give more momentum to the international flow of usable information in this field. It is a task in which international organizations have not yet played an adequate role.

Bertrand Renaud

Albert Ando, Hidekazu Eguchi, Roger Farmer, and Yoshio Suzuki (editors)

Monetary Policy in Our Times

MIT Press, Cambridge, MA, USA, 1985, xi + 329 pp., $25.

This collection of eight papers commemorating the establishment of the Institute for Monetary and Economic Studies of the Bank of Japan explores the role of monetary policy in an uncertain world, domestic and international aspects of monetary policy, and implications for exchange rate determination. Academic and central bank economists from both industrial and developing countries comment on each paper and the resultant discussion offers three general conclusions. First, little progress has been made in closing the gap between Keynesian and monetarist views on the role of monetary policy in influencing economic activity. Second, while academicians proposed a monetary policy guided by a nominal-GNP target, central bank economists voiced opposition for practical and political reasons; they favored targeting monetary aggregates. Third, there seems to be general, though not unanimous, agreement that, even under the generalized floating exchange rate system, international coordination of policies is desirable to bring about stability in the world economy. All in all, a good summary of the state of the art in monetary economic management.

George Rosen

Western Economists and Eastern Societies

Agents of Change in South Asia, 1950–70

The John Hopkins University Press, Baltimore, 1985, 270 pp., $30.

This historical examination of the role of economic advisors from the Ford Foundation, Harvard University, and the Massachusetts Institute of Technology in development research and planning in India and Pakistan provides valuable lessons for economists and policy makers alike. In tracing the development process in South Asia and the interaction of foreign experts with local economists and politicians, Rosen highlights the importance of developing indigenous expertise and knowledge of local political and socioeconomic conditions. He favors institution-building and training over pure advice from foreign experts, and underlines the often ignored fact that development policy deals with major political issues. Economic advice and policies cannot, therefore, be framed with scientific detachment, nor can the Western development experience be replicated in societies that are quite different. In studying South Asian development, Rosen also offers useful commentary on the maturing of development economics and economists.

Paolo Savona and George Sutija (editors)

Eurodollars and International Banking

St Martin’s Press, New York, 1985, xiii + 226 pp., $29.95.

This is a collection of papers given at a 1983 conference by a mix of academics and practitioners. For a long time the Eurodollar market was a hotly debated topic: How large is it? What are its implications for monetary policy? Should it be regulated, and if so, how and by whom? These issues were never entirely resolved and the present volume does not leave us much wiser. This collection does provide an interesting discussion of some aspects of the remarkable Eurodollar phenomenon, which was the nucleus of what has become one giant, electronically linked, international financial market.

A. Tarr and Morris E. Moeke

Aggregate Costs to the United States of Tariffs and Quotas on Imports

General Tariff Cuts and Removal of Quotas on Automobiles, Steel, Sugar, and Textiles

US Federal Trade Commission, Washington DC, 1984, xi + 148 pp., free.

Concern about rising protectionism in international trade has increased interest in quantifying the economic benefits and adjustment costs associated with trade liberalization. This study adapts and updates the results of general equilibrium models developed in earlier studies to arrive at current estimates of the employment and welfare effects for the United States of a multilateral elimination of all tariff barriers. These are supplemented by estimates, based on partial equilibrium analysis, of the effects on consumers, producers, and the economy as a whole, of a unilateral removal by the United States of nontariff trade barriers in selected sectors (automobiles, steel, sugar, and textiles). The present value of future benefits and costs is also estimated. The estimates of the aggregate costs to the economy of maintaining import restrictions are conservative, as the authors acknowledge. They indicate, nevertheless, that trade liberalization could generate significant benefits over the medium term.

Dennis A. Rondinelli

Applied Methods of Regional Analysis

The Spatial Dimensions of Development Policy

Westview Press, Boulder, CO, USA, 1985, xviii + 264 pp., $25.

A welcome addition to the literature on regional development. While the field offers numerous competing theories and approaches, few have been applied in LDC contexts and their empirical validity remains largely unknown. This book introduces a conceptual framework used for a USAID-supported project to develop “lagging regions in LDCs” and presents project experiences in the Philippines and Bolivia. The project approach, based mainly on the “central place theory,” is modest and sensible, and provides a useful descriptive framework for understanding the constraints that inhibit development in lagging regions. This “primarily descriptive” approach “can only provide a point of departure for analysis rather than a comprehensive model,” so that its potential contribution to actual planning and decision making is limited. The author indicates that the development potential of a “settlement system” is influenced by “the interaction of people, the performance of activities, and the flow of resources in geographic space.” Much more, then, needs to be learned about how individual households and businesses respond to markets and public sector interventions.

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