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International Monetary Fund. External Relations Dept.
Published Date:
January 1997
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The state and development

Although the issues raised in Wendy Ayres and Alex McCalla’s response to Lena Hasle’s letter (June 1997) in connection with “Rural Development, Agriculture and Security” (December 1996) were pertinent to the development debate, two areas concern me.

First, Ayres and McCalla state that “in Uganda and Kenya the [World] Bank is supporting the development of improved techniques for growing vegetables near houses; simple, lightweight tools for weeding and harvesting; and improved village-level food processing techniques.” Is this support free? If it is, then the World Bank’s gesture is phenomenal. It can be regarded as a Marshall Plan for the recipient countries. However, this plan would fall far below that which the United States extended to Europe for reconstruction purposes after the devastation of the world wars. Why is it that the developed world and the World Bank are so reluctant to devise a similar plan for the third world instead of committing funds whose impact remains negligible?

Second, if this support is not free, how does the World Bank expect to be repaid? The type of activities the women engage in cannot enable them to repay the loans. And, if the women cannot repay, will the onus not fall on their governments? Obviously, all governments that have borrowed from the World Bank are permanently in debt. Why is this the case? Is this lending merely a finance issue? This latter question is the most crucial to the development debate.

Both parties fail to tackle the central role of the state in development. As long as international organizations deny the centrality of the state—which they do on the grounds that the states are the very cause of third world problems—their efforts will continue to be dismal. Indeed, activities such as agriculture and food security, rural electrification, land redistribution, and economic growth, are state led. Private sector initiative and NGOs merely supplement the efforts of the state.

The character and centrality of the state, especially the state’s responsiveness to the needs of society, are crucial in the development process. Developed countries were able to develop only because their states had the capacity to marshall sufficient resources to inject into their economies. The focus should be on making third world states “strong.” To think that supporting women will automatically deliver development is not only wishful thinking but dishonest.

Yasin A.A. Olum

University of Newcastle upon Tyne United Kingdom

India’s saving performance

With respect to Martin Mühleisen’s thought-provoking article, “Improving India’s Saving Performance” (June 1997), it might be argued that the trade-off between physical and financial saving depends on the financial deepening of the economy and that financial reforms accelerate financial deepening. The changing structure of the financial sector should therefore be factored into attempts to estimate physical saving and establish time trends for domestic saving.

Although household saving responds to a host of factors—including growth, distribution of income, and demography—maintaining interest rates at an appropriate level is critical. Recent evidence on real interest rates and inflationary expectations suggests that policymakers should monitor the former, which can play a role in stimulating growth. It is encouraging that India is proactive in this area, using moral suasion for downward adjustment of nominal interest rates so that the cost-push effect of real interest rates is moderated while savings are indexed. The realization of higher growth and stability is subject to India’s resource and physical structural constraints, but, as competition increases, productivity is gradually growing, as reflected in the recent decline in the capital-to-output ratio. Let the real dynamics be deep-rooted.

Dr. Tapas Kumar Chakrabarty Bank of Mauritius

Culture and development

In his review of my book, The Pan-American Dream (September 1997), William Easterly says that I have “done the world a service by promoting culture and economics as a field for inquiry.” The Pan-American Dream also stresses the links between culture and political and social development, but Mr. Easterly ignores these and the other main themes of the book (such as the prospects for a genuine Western Hemisphere community). He even ignores a section on the implications of the book’s arguments for the World Bank and other donors.

Mr. Easterly exaggerates in his statement that, “In [Harrison’s] view, culture is to blame for just about everything except El Niño.… when Harrison briefly considers policies and institutions as determinants of growth, he dismisses them as consequences of culture.” In fact, the book repeatedly returns to the complex cause-and-effect relationships between culture, policies, institutions, and natural resources, and stresses that good economic policies promote progressive cultural change.

In commenting on the role of the Basques in Chile’s progress, Mr. Easterly asserts that my earlier book, Who Prospers? [reviewed by William Easterly in the March 1994 issue] stated that “the Basques were the secret behind Costa Rica’s stability.” In fact, Who Prospers? observes that the oft-heard explanation that a large Basque population accounts for Costa Rica’s atypical development is “unsubstantiated by data.”

For the benefit of Mr. Easterly and others who may think the Chilean miracle is the consequence only of recent good economic policies, I quote Friedrich Hassaurek, an American diplomat, who wrote in 1892: “Chile is the most prosperous and respectable of the South American republics.… She has had less revolutionary problems than her neighbors.… The Chileans are more enterprising than their neighbors. Chilean commerce is flourishing.”

Whatever Mr. Easterly may think about the role of culture in Latin America’s development—he describes himself as no convencido—a growing number of prominent Latin Americans are convinced that culture does matter and that modernizing traditional values is indispensable to Latin America’s progress. Ellos sí son convencidos.

Lawrence E. Harrison Vineyard Haven, Massachusetts

CHINA 2020

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Clear Water, Blue Skies: China’s Environment in the New Century explores the relationship between economic growth and the environment. Particular attention is given to urban areas and the impact of pollution on health conditions.

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At China’s Table: Food Security Options focuses on how China will avoid national chronic food insecurity. The report evaluates solutions such as food storage and models and projects food supply and demand for 2020.

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Financing Health Care: Issues and Options for China assesses the state of health care in China and addresses the problems facing the sector in terms of financial access to health care, efficiency, and total cost.

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Sharing Rising Incomes: Disparities in China analyzes the growing gap between the haves and the have-nots. Topics include disparities in pay across educational, occupational, and gender groupings, and the impact of land distribution on incomes and welfare.

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INDEX 1997–VOLUME 34

Articles

Paul A. Armknecht and Paula R. De Masi, Bias in the US Consumer Price Index: Why It Could Be Important, June

Douglas F. Barnes, Robert van der Plas, and Willem Floor, Tackling the Rural Energy Problem in Developing Countries, June

Tamim Bayoumi and Gabrielle Lipworth, Japanese Foreign Direct Investment and Regional Trade, September

Amar Bhattacharya, Peter J. Montiel, and Sunil Sharma, How Can Sub-Saharan Africa Attract More Private Capital Inflows? June

Craig Burnside and David Dollar, Aid Spurs Growth—in a Sound Policy Environment, December

Marcel Cassard and David Folkerts-Landau, Sovereign Debt: Managing the Risks, December

Ajay Chhibber, The State in a Changing World, September

Benedict Clements, The Real Plan, Poverty, and Income Distribution in Brazil, September

Benedict Clements, Sanjeev Gupta, and Jerald Schiff, What Happened to the Peace Dividend? March

Klaus Deininger and Lyn Squire, Economic Growth and Income Inequality: Reexamining the Links, March

John Dodsworth, How Indochina’s Economies Took Off, March

Stanley Fischer, Financial System Soundness, March

Alex Fleming, Lily Chu, and Marie-Renée Bakker, Banking Crises in the Baltics, March

David Folkerts-Landau, Peter Garber, and Dirk Schoenmaker, The Reform of Wholesale Payment Systems, June

Stephen S. Golub, Are International Labor Standards Needed to Prevent Social Dumping? December

Cheryl W. Gray, Creditors’ Crucial Role in Corporate Governance, June

Cheryl W. Gray, Reforming Legal Systems in Developing and Transition Countries, September

David Haarmeyer and Ashoka Mody, Private Capital in Water and Sanitation, March

Aasim M. Husain, Hong Kong, China in Transition, September

IMF Policy Development and Review Department, Experience Under the IMF’s Enhanced Structural Adjustment Facility, September

IMF Research Department Staff, Capital Flow Sustainability and Speculative Currency Attacks, December

Zamir Iqbal, Islamic Financial Systems, June

Takatoshi Ito, Japan’s Economy Needs Structural Change, June

Abdelali Jbili, Klaus Enders, and Volker Treichel, Financial Sector Reforms in Morocco and Tunisia, September

Charles F. Kramer, Explaining the Dividend Yield in the United States, December

Charles F. Kramer and Yutong Li, Job Uncertainty, Unemployment, and Inflation in the United States, December

Brian Levy, How Can States Foster Markets? September

G.A. Mackenzie, Philip Gerson, and Alfredo Cuevas, Can Public Pension Reform Increase Saving? December

Anil K. Malhotra, Private Participation in Infrastructure: Lessons from Asia’s Power Sector, December

Hassanali Mehran and Bernard Laurens, Interest Rates: An Approach to Liberalization, June

Robert Miller, Jack Glen, Fred Jaspersen, and Yannis Karmokolias, International Joint Ventures in Developing Countries, March

John Motala, Statistical Discrepancies in the World Current Account, March

Martin Mühleisen, Improving India’s Saving Performance, June

Huw Pill and Mahmood Pradhan, Financial Liberalization in Africa and Asia, June

Jacques J. Polak, The IMF Monetary Model: A Hardy Perennial, December

Sanjay Pradhan, Improving the State’s Institutional Capability, September

Alessandro Prati and Garry J. Schinasi, What Impact Will EMU Have on European Securities Markets? September

Peter J. Quirk, Money Laundering: Muddying the Macroeconomy, March

Martín Rama, Efficient Public Sector Downsizing, September

Ranil Salgado, Productivity Growth in Canada and the United States, December

Janet G. Stotsky, How Tax Systems Treat Men and Women Differently, March

Arvind Subramanian, Egypt: Poised for Sustained Growth? December

Vinaya Swaroop, Education and Health Care in the Caribbean, June

Teresa Ter-Minassian, Decentralizing Government, September

Vinod Thomas and Tamara Belt, Growth and the Environment: Allies or Foes? June

Nadeem Ul Haque, Donald Mathieson, and Nelson Mark, Rating the Raters of Country Creditworthiness, March

Nadeem Ul Haque, Donald Mathieson, and Sunil Sharma, Causes of Capital Inflows and Policy Responses to Them, March

Peter Van Der Veen and Cynthia Wilson, A New Initiative to Promote Clean Coal, December

Michael Walton, The Maturation of the East Asian Miracle, September

Jacob Yaron and McDonald Benjamin, Developing Rural Financial Markets, December

Developing Countries Get More Private Investment, Less Aid, June

Economic Trends in the Developing World, March

Book Reviews

Age F. P. Bakker, The Liberalization of Capital Movements in Europe: The Monetary Committee and Financial Integration 1958–1994, reviewed by S. Kal Wajid, March

Leszek Balcerowicz, Socialism, Capitalism, Transformation, reviewed by Gerd Schwartz, March

Zvi Bodie, Olivia S. Mitchell, and John A. Turner, editors, Securing Employer-Based Pensions: An International Perspective, reviewed by Albert Jaeger, September

Anand Chandavarkar, Central Banking in Developing Countries, reviewed by Manuel Guitián, June

Alex Counts, Give Us Credit: How Mohammad Yunus’s Micro-Lending Revolution Is Empowering Women from Bangladesh to Chicago, reviewed by Thomas Dichter, September

Richard Disney, Can We Afford to Grow Older? reviewed by Olivia S. Mitchell, September

Lawrence E. Harrison, The Pan-Amercian Dream: Do Latin America’s Cultural Values Discourage True Partnership with the United States and Canada? reviewed by William Easterly, September

Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order, reviewed by Ke-young Chu, June

Douglas A. Irwin, Against the Tide: An Intellectual History of Free Trade, reviewed by J. M. Finger, June

Vijay Joshi and I.M.D. Little, India’s Economic Reforms, 1991–2001, reviewed by Deena Khatkhate, December

Robert D. Kaplan, The Ends of the Earth: From Togo to Turkmenistan, From Iran to Cambodia—A Journey to the Frontiers of Anarchy, reviewed by Lant Pritchett, March

Leon T. Kendall and Michael J. Fishman, editors, A Primer on Securitization, reviewed by Harald Hirschhofer, September

Robert O. Keohane and Marc A. Levy, editors, Institutions for Environmental Aid: Pitfalls and Promise, reviewed by David Freestone, June

Ans Kolk, Forests in International Politics: International Organisations, NGOs and the Brazilian Amazon, reviewed by David Cassells, December

Rosa María Lastra, Central Banking and Banking Regulation, reviewed by Manuel Guitián, March

Richard Layard and John Parker, The Coming Russian Boom: A Guide to New Markets and Politics, reviewed by Thomas A. Wolf, December

Gavin Maasdorp, editor, Can South and Southern Africa Becóme Globally Competitive Economies? reviewed by Ataman Aksoy, December

Benno Ndulu, Nicolas van de Walle, and others, Agenda for Africa’s Economic Renewal, reviewed by Hiroyuki Hino, March

OECD, Future Global Capital Shortages: Real Threat or Pure Fiction? reviewed by Robert F. Wescott, March

Kunibert Raffer and H.W. Singer, The Foreign Aid Business: Economic Assistance and Development Co-operation, reviewed by David Dollar, June

S.L.N. Simha, Fifty Years of Bretton Woods Twins (IMF and World Bank), reviewed by Margaret Garritsen de Vries, June

Helen Todd, Women at the Center: Grameen Bank Borrowers After One Decade, reviewed by Thomas Dichter, September

John A. Turner and Noriyasu Watanabe, Private Pension Policies in Industrialized Countries: A Comparative Analysis, reviewed by Louise Fox, March

Dirk Vandewalle, editor, North Africa: Development and Reform in a Changing Global Economy, reviewed by Klaus Enders, March

Elmus Wicker, The Banking Panics of the Great Depression, reviewed by James M. Boughton, June

Three new books from the IMF

Fiscal Federalism in Theory and Practice

Edited by Teresa Ter-Minassian

Over the past few decades, countries around the world have given state and local governments a greater role in deciding how public funds are spent and more responsibility for collecting revenues. Will fiscal decentralization lead to a more equitable distribution of public funds and better macroeconomic management? This collection of papers by IMF staff provides both a theoretical overview of fiscal federalism and an examination of fiscal federalism as it is practiced today in a number of industrial, developing, and transition countries.

US$35.00. Available in English, (paper) ISBN 1-55775-663-5. 700 pp. 1997

Stock #FFTPEA

Trade Policy Issues

Edited by Chorng-Huey Wong and Naheed Kirmani

This book examines a wide range of current trade policy issues that were the subject of a seminar organized by the IMF. Topics include the design and implementation of trade reform, trade liberalization in industrial and transition economies, regional trading arrangements, the impact of the Uruguay Round, the role of the World Trade Organization, and post-Uruguay Round issues.

US$22.00. Available in English, (paper) ISBN 1-55775-621-X. x + 197 pp. 1997

Stock #TPI-EA

Systemic Bank Restructuring and Macroeconomic Policy

Edited by William E. Alexander, Jeffrey M. Davis, Liam P. Ebrill, and Carl-Johan Lindgren

A follow-up to Bank Soundness and Macroeconomic Policy, this volume discusses the experiences of a number of countries with bank restructuring and establishes broad principles and guidelines for policymakers in the restructuring of banking systems.

US$23.50. Available in English, (paper) ISBN 1-55775-665-1. x + 181 pp. 1997

Stock #SBRMEA

Also available, Bank Soundness and Macroeconomic Policy, US$23.50

ISBN 1-55775-599-X. xi + 215 pp., 1996

Stock #BSMPEA

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