Market Politics and Foreign Assistance

TL;DR: A broad consensus emerged in the 1980s on the economic policies needed for stable growth and development, to the effect that there really is no alternative to a market economy, supported by conservative fiscal and monetary policies and open trading policies as mentioned in this paper.

Abstract: A broad consensus emerged in the 1980s on the economic policies needed for stable growth and development, to the effect that there really is no alternative to a market economy, supported by conservative fiscal and monetary policies and open trading policies. Yet there were disappointingly few examples in which developing countries were able to implement comprehensive reforms over sustained periods. To be sure, there were cases where ambitious reform programmes were initiated, and even a few where those programmes withstood the test of time. But the economic changes implemented were often quite modest and piecemeal: rollback and recalcitrant implementation of reforms was common. Certainly by the acid test of success - sustained, non-inflationary growth, and the ability to begin re-attracting voluntary foreign investment and flight capital - the 1980s were the lost decade for vast regions of the Third World. In fact, despite periodic announcements of reform, growthstunting economic policies have persisted in some countries for decades, well beyond what any reasonable observer might attribute to periods necessary to learn and correct for their ill effects. Increasingly economists blame politics for the tenaciousness of bad economic policies over such long periods, but where their prescriptions are most deficient is in taking into account the role that civil, legal and political institutions play in determining economic success or failure.