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Thursday, 4 June 2009

Mini Book Reviews

Last month I read two small books that are important in different ways. I have not written formal reviews for different reasons. Those following us on our twitter page would have seen various snippets from them during May.

The first item is Reclaiming Development by Ha-Joon Chang. Following our review of Bad Samaritans, Ha-Joon got in touch and was excited at the review and happy that we were discussing and taking ownership of these great questions. A point raised in that review was the difficult in operationalising some of the ideas. As a response, Ha-Joon was kind enough to send us a copy of Reclaiming Development, which was written before Bad Samaritans. It is a great complement to Bad Samaritans and would urge all contributors to pick up their copy. My thanks to Ha-Joon for being kind enough to draw the book to our attention.

The second item is the Boston Review Book Africa's Turn by Edward Miguel Actually. Calling it a book is probably too much. Its more of small compilation, a bit like a blog turned into a book. It begins with an opening statement/post by Miguel, followed by various responses from "experts" on Africa. Miguel then concludes on the way forward. What makes it worth reading is the diversity of views on where Africa stands now and where it is going (includes responses by historians, health policy experts, economists and political scientists). The whole mini book can be read in less than 2 hours. Its also accompanied by a website/blog. Again its strongly recommended, if only because one day I am sure we'll compile a similar book on Zambia drawing from the many contributors and diversity in expertise we have on this website.

2 comments:

  1. Here is a review from Amazon:

    Brilliant survey of development economics, March 2, 2009
    By William Podmore (London United Kingdom) -

    Ha-Joon Chang, now Reader in the Political Economy of Development at Cambridge University, and Ilene Grabel, of the University of Denver, have produced a brilliant, superbly-organised book. They aim to reclaim development from the neoliberal orthodoxy that has failed developing countries and yet has dominated policy and debate for the last 25 years.

    Part 1 considers and rejects six key myths about development. Part 2 provides development policy options that are better than their neoliberal counterparts.

    Chapter 1 refutes the myth that developed countries succeeded because they embraced the free market. Post-1945 Japan and France, for example, subordinated their financial sectors to industry's needs and grew far more rapidly than Britain and the USA, which let finance dominate industry.

    Chapter 2 refutes the myth that neoliberalism works. In 1960-80, with active, interventionist policies, GDP per head grew by 75% in Latin America and the Caribbean, and by 34% in sub-Saharan Africa. In 1980-2000, under neoliberal policies, it grew by just 7% in the former and fell by 15% in the latter. 1980-2000's best-performing countries were India and China - hardly neoliberal models!

    Chapter 3 refutes the myth that neoliberal globalisation is unstoppable. China, India, Sweden, Austria, Netherlands, France and Germany all have very different policies and institutions from Britain and the USA.

    Chapter 4 refutes the myth that the USA is the model for all. Despite its 1990s `boom', 10% of US families were poor in 2000, as in 1989. It grew no faster between 1980 and 2000 than between 1960 and 1979.

    Chapter 5 refutes the myth that Anglo-American history is the norm. The British and US experiences were abnormal - slavery and empire, for instance. During their own development, both used East Asian-style trade and industry policies.

    Chapter 6 refutes the myth that developing countries need the international financial institutions and independent central banks. Neoliberals denigrate the public sector as self-interested, but it seems this doesn't apply to the staff of the World Bank, the IMF, the WTO and the central banks. They all represent global finance, not national democracy.

    In Part 2, each chapter presents the neoliberal case, counter-arguments, and a range of alternative policies.

    Chapter 7 examines trade and industry policies. The neoliberals promote free trade as the supreme good. But countries like India and China have grown using infant industry protection and interventionist trading policies. Industry gains with subsidies, licences, managed credit and investment, R&D and training, all tied to meeting performance guidelines. Firm capital controls and financial regulation promote long-term, stable investment.

    Chapter 8 looks at privatisation and intellectual property rights (IPRs). Austria, France, Finland, Norway and Singapore all have dynamic state sectors. IPRs are neither necessary nor sufficient to create new knowledge. They reduce technology transfer and innovation, and increase companies' powers at the public's expense. Education and government support for R&D are more important to innovation than protection of IPRs.

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  2. Chapter 9 studies international capital flows. Since 1980, the liberalised financial environment has encouraged portfolio investment in developing countries (buying stocks, bonds, derivatives, etc.) - zero in 1980, $9.4 billion in 2002, and foreign direct investment (buying controlling interests in foreign firms) - $4.4 billion in 1980, $143 billion in 2002. This financial liberalisation increased the opportunities and incentives to speculate. Bank loans financed speculative real estate development and stock trading, and mergers and privatisations that did not make economic sense.

    Policy can discourage, not ban, the use of foreign loans as a source of finance and ensure their use for productive developments. Restrictions on capital flight, on currency speculation and on access to foreign currency and loans protected India and China during the Asian financial crisis.

    Chapter 10 examines domestic financial regulation. Financial liberalisation does not bring investment for development, but speculation, currency and banking crises, and recessions. Financial systems should provide long-term finance for investment in infrastructure and infant industries. But large banks are less willing than small banks to lend to small businesses.

    Chapter 11 looks at macroeconomic policy. Restricting currency convertibility reduces the risks of currency depreciation and collapse, of capital flight and financial instability. Post-1945, European countries' managed exchange rates and capital controls supported growth and kept currencies stable.

    In the neoliberal view, inflation is the only danger, and government spending (especially when deficit-financed) is always inflationary. Yet a World Bank study of 127 countries from 1960 to 1992 found that inflation rates of up to 20% did no harm to economic growth. Public spending on transport, education and health care reduces poverty and promotes economic growth.

    The evidence is that independent central banks like the European Central Bank and the Bank of England bring not economic growth or more jobs or financial stability. Instead, they bring excess credit growth and inflated stock and real estate prices.

    These kinds of policies for equitable and stable development, growth and jobs, are good not just for developing countries but also for any country that wants to survive the present crisis.

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