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Development Policy and the role of trade Craig Belden & Heidi Correa
The Washington Consensus: A post-mortem Robert K. McCleery and Fernando De Paolis
Washington Consensus (WC) Overview Consists of ten factors Maintenance of public exchange rate Privatization Macroeconomic stability Reforming tax systems Trade liberalization Liberalization of interest rates Deregulation Property rights Reordering public expenditures Liberalization of FDI
Three Groups Group One Things that everyone agrees with Group Two Factors that are correct if done right Group Three A more contentious group
Current Proponents of the WC What would be their reasons for the WC not working like it was designed to? Not the fault of the policies Problems of timing Lack of coordination Poor implementation
The WC View of Growth, Poverty, and Distribution “Trickle-down” Effect Current studies support this finding Do you think that distribution is an important factor in poverty reduction?
Authors View of Growth, Poverty, and Distribution Distribution Matters! In egalitarian societies Higher incentive to save and invest Land reform promote efficiency Universal education gives everyone a head start
Inequality and Growth Inverse relationship Inequality serves as an excuse for corruption which can lead to Capital flight Rent seeking Tax evasion
Trade Theory Does increased trade reduce inequality? NO! What is important is factor endowments of developing countries relative to other developing countries, NOT developed China and India example
Can the argument for trade liberalization be saved? It needs a link to the development of institutions
WC View on Institutional Involvement The government should lay the foundation of economic growth in a country and leave everything else to the free market. What does this mean? Give examples of actions a government should take and actions they shouldn’t
Should Provide legal system to protect property rights to encourage investment Provide security Provide macroeconomic stability Provide basic social services Provide infrastructure
Shouldn’t Directing credit Controlling prices of goods and services Intervening in labor markets Borrowing heavily Excessive taxing Blocking foreign investment Producing or distributing goods and services
Interventionist They look at the East Asian model and see them doing both Arguing that it leads to short cuts Opponents could only say that it was not transferable They “concluded that social institutions play a vital complementary role to public policies”
Six Lessons from East Asia Lesson one Failures Lesson two Don’t kick them out, improve their capacity! Lesson three Context matters
Lessons Continued… Lesson four Incentives Lesson five Governance Lesson six Accountability
Financial Liberalization According to Prasad, Rogoff, Wei, and Kose Financial integration is not a necessary condition for achieving a high growth rate Example - China and India Financial integration is not a sufficient condition for a fast economic growth rate
Final Thoughts on the WC Williams Views - Success     Vs.  The Authors (amongst many others) views - South Korea, Indonesia, Thailand
How to Help Poor Countries Nancy Birdsall, Dani Rodrik,  & Arvind Subramanian
From the Inside Out
Market Access Agriculture
Market Access Increased reductions of trade barriers will mean taking away access to markets by doing away with preferential trade agreements and leaving developing countries to compete with other developing countries.
Show me the money What are the central recommendation in regards to aid made by developing countries?
Show me the money What are the central recommendation in regards to aid made by developing countries?
Show me the money Can it create key institutions and long-term economic health?
Burdens -TRIPS -Not enough space to craft their own economic policies -Meeting demands before accession into the WTO
Positive Steps -Taking action against corrupt leaders -Assisting with R&D -Enhancing global labor majority -Prevention and resolution of conflicts and humanitarian crises -Stopping arms sales -Stopping illegal trade (diamonds, drugs, humans) -Reforming international economic institutions
Positive Steps -Taking action against corrupt leaders -Assisting R&D -Enhancing global labor majority -Prevention and resolution of conflicts and humanitarian crises -Stopping arms sales -Stopping illegal trade (diamonds, drugs, human) -Reforming international economic institutions Can you think of other creative steps?
Activity time!!!!!!!!!! Haiti Brazil Sudan Kazakhstan Definitely Mmm, Sometimes Not in your life Countries Categories
Washington Consensus Maintenance of public exchange rate Privatization Macroeconomic stability Reforming tax systems Trade liberalization Liberalization of interest rates Deregulation Property rights Reordering public expenditures Liberalization of FDI

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chapter 10 - excise tax of transfer and business taxation
chapter 10 - excise tax of transfer and business taxationchapter 10 - excise tax of transfer and business taxation
chapter 10 - excise tax of transfer and business taxation
 

Development Policy

  • 1. Development Policy and the role of trade Craig Belden & Heidi Correa
  • 2. The Washington Consensus: A post-mortem Robert K. McCleery and Fernando De Paolis
  • 3. Washington Consensus (WC) Overview Consists of ten factors Maintenance of public exchange rate Privatization Macroeconomic stability Reforming tax systems Trade liberalization Liberalization of interest rates Deregulation Property rights Reordering public expenditures Liberalization of FDI
  • 4. Three Groups Group One Things that everyone agrees with Group Two Factors that are correct if done right Group Three A more contentious group
  • 5. Current Proponents of the WC What would be their reasons for the WC not working like it was designed to? Not the fault of the policies Problems of timing Lack of coordination Poor implementation
  • 6. The WC View of Growth, Poverty, and Distribution “Trickle-down” Effect Current studies support this finding Do you think that distribution is an important factor in poverty reduction?
  • 7. Authors View of Growth, Poverty, and Distribution Distribution Matters! In egalitarian societies Higher incentive to save and invest Land reform promote efficiency Universal education gives everyone a head start
  • 8. Inequality and Growth Inverse relationship Inequality serves as an excuse for corruption which can lead to Capital flight Rent seeking Tax evasion
  • 9. Trade Theory Does increased trade reduce inequality? NO! What is important is factor endowments of developing countries relative to other developing countries, NOT developed China and India example
  • 10. Can the argument for trade liberalization be saved? It needs a link to the development of institutions
  • 11. WC View on Institutional Involvement The government should lay the foundation of economic growth in a country and leave everything else to the free market. What does this mean? Give examples of actions a government should take and actions they shouldn’t
  • 12. Should Provide legal system to protect property rights to encourage investment Provide security Provide macroeconomic stability Provide basic social services Provide infrastructure
  • 13. Shouldn’t Directing credit Controlling prices of goods and services Intervening in labor markets Borrowing heavily Excessive taxing Blocking foreign investment Producing or distributing goods and services
  • 14. Interventionist They look at the East Asian model and see them doing both Arguing that it leads to short cuts Opponents could only say that it was not transferable They “concluded that social institutions play a vital complementary role to public policies”
  • 15. Six Lessons from East Asia Lesson one Failures Lesson two Don’t kick them out, improve their capacity! Lesson three Context matters
  • 16. Lessons Continued… Lesson four Incentives Lesson five Governance Lesson six Accountability
  • 17. Financial Liberalization According to Prasad, Rogoff, Wei, and Kose Financial integration is not a necessary condition for achieving a high growth rate Example - China and India Financial integration is not a sufficient condition for a fast economic growth rate
  • 18. Final Thoughts on the WC Williams Views - Success Vs. The Authors (amongst many others) views - South Korea, Indonesia, Thailand
  • 19. How to Help Poor Countries Nancy Birdsall, Dani Rodrik, & Arvind Subramanian
  • 22. Market Access Increased reductions of trade barriers will mean taking away access to markets by doing away with preferential trade agreements and leaving developing countries to compete with other developing countries.
  • 23. Show me the money What are the central recommendation in regards to aid made by developing countries?
  • 24. Show me the money What are the central recommendation in regards to aid made by developing countries?
  • 25. Show me the money Can it create key institutions and long-term economic health?
  • 26. Burdens -TRIPS -Not enough space to craft their own economic policies -Meeting demands before accession into the WTO
  • 27. Positive Steps -Taking action against corrupt leaders -Assisting with R&D -Enhancing global labor majority -Prevention and resolution of conflicts and humanitarian crises -Stopping arms sales -Stopping illegal trade (diamonds, drugs, humans) -Reforming international economic institutions
  • 28. Positive Steps -Taking action against corrupt leaders -Assisting R&D -Enhancing global labor majority -Prevention and resolution of conflicts and humanitarian crises -Stopping arms sales -Stopping illegal trade (diamonds, drugs, human) -Reforming international economic institutions Can you think of other creative steps?
  • 29. Activity time!!!!!!!!!! Haiti Brazil Sudan Kazakhstan Definitely Mmm, Sometimes Not in your life Countries Categories
  • 30. Washington Consensus Maintenance of public exchange rate Privatization Macroeconomic stability Reforming tax systems Trade liberalization Liberalization of interest rates Deregulation Property rights Reordering public expenditures Liberalization of FDI