Mohsin Khan, Morris Goldstein, and Vittorio Corbo
Published Date:
September 1987
  • ShareShare
Show Summary Details
Marcel Massé

I do not disagree basically with the papers as written, since they appeal to economic logic and so make sense although they may be a bit repetitive. Their main problem is one I encountered many times when I was with the Canadian International Development Association: that is, I feel that the presentation represents a disembodied model. In reality, in order to judge policies we must have in mind a much more integrated decisionmaking model. The model seems disembodied because in order to judge, for instance, whether the public sector should be smaller or larger in any country (as we all know instinctively, and those who have worked in developing countries know by experience) one has to look at what the precise situation is in that country, what its culture is, what the relationships are between the various ethnic groups, what the level of education is, and so on.

In that sense, any prescription from a theoretical model must become “embodied” to make sense. For instance, I once asked an expert who had worked for years on Jamaica, with both the Fund and the Bank, why that country had so much difficulty to start back on a growth path, notwithstanding the help of Fund program after Fund program. His reply was that everything flowed from the fact that the price of bauxite had gone down, seemingly for good. As a result, he said, Jamaica had gone from wealth to poverty, and the population had to accept that they were now not a middle-income country but a lower-income country. This reality had to be reflected in their economic behavior. Well, this may well be true, but it is not what the Jamaicans themselves think; and as long as they continue to think that way, they will not adopt the policies recommended by the theoretical model.

In fact I think that the first question to be asked should concern the political and social constraints in that country and the measures that it is possible to implement given the cultural environment. By culture I mean all the elements that affect the behavior of the various decisionmakers. So, Mr. Chairman, I would conclude that the models are important but they should not be the ultimate guide in forming our views of what policies should be taken.

To take the analogy of a father, I would say that the papers show that growth is the reward of discipline and abstinence and that there is no “alternative path to development.” You have to reduce consumption in order to increase investment and growth. Here Benjamin Spock is wrong, and the authoritarian father is right!

As they follow that pattern, of course, the Fund and very soon the Bank become the hated enforcers they are in a number of countries. But they believe that they are right, and that, if they have enough leverage, the countries will ultimately develop satisfactorily.

I think that the role of the Fund and the Bank as enforcers has to be modified. It has to be modified by people who would have a much better understanding of why the decisionmakers in the developing countries want to adopt decisions that from the point of view of the Fund or the Bank do not seem rational.

For instance, in terms of the adjustment period, Mr. Guitién is, I think, right when he says that the choice between adjustment and growth is really an intertemporal choice. My experience tends to confirm that this choice is better left to those who know what tradeoff is acceptable locally.

Given the political constraints in most countries, however, the next most important determinant of the success of an adjustment period is probably the amount of foreign financing available to make the transition smoother and easier. Here I can only make a plea that the industrial countries examine carefully the consequences, on themselves as well as on the developing countries, of continuing the present trend towards decreasing the net financing available.

As a last point, too much attention to the doctrine of sovereignty has, I think, prevented us from agreeing that many difficulties experienced by developing countries originate in the policies of the industrial countries: at some point compensation will have to be paid, either through the nonpayment of some part of the international debt, or through an increase in bilateral and multilateral transfers from the industrial countries.

    Other Resources Citing This Publication