What I am worried about, however, is the view that institutions are simply matters of choice and therefore all countries should try to reach the (quite highly-set) ‘minimum global standard’ right away or after a minimal transition period. While accepting that latecomer countries do not have to spend as much time as the pioneer countries had done in developing new institutions, we should not forget that it took the NDCs typically decades, and sometimes even generations, to establish certain institutions whose need had already been perceived. It usually took them another few decades to make them work properly by improving administration, closing various loopholes and strengthening enforcement. In addition, we should not forget that, when compared to the NDCs in earlier times, today’s developing countries already have high standards of institutional development, which in the 1960s and 1970s proved quite capable of supporting high rates of economic growth. Given this, it may be unreasonable to ask them to raise the quality of their institutions dramatically in a short time span.
4.5 Concluding Remarks
Why do the international development policy establishment, and the NDCs that control it, not recommend the policies that were used over the last several centuries by most of the successful developers? Why do they try to impose on today’s developing countries certain ‘best practice’ institutions, which had not been used by the NDCs at comparable stages of development?
Why then are the advanced countries so ignorant of their own historical development? Is it because of the natural tendency for people to interpret history from the viewpoint of their current intellectual and political agenda, which can often obscure the historical perspective? Or is it because, as it has happened repeatedly, countries have vested interests in imposing policies and institutions which they themselves had not used during their own development, but which are beneficial for them once they have reached the technological frontier? In short, are the developed countries trying to ‘kick away the ladder’ by insisting that developing countries adopt policies and institutions that were not the ones that they had used in order to develop?
The discussion in this book proposes that this is indeed what they are doing. I do accept that this ‘ladder-kicking’ may be done out of genuine (if misinformed) goodwill. Some of those NDC policy makers and scholars who make the recommendations may be genuinely misinformed: thinking that their own countries developed through free trade and other laissez-faire policies, they want developing countries to benefit from these same policies. However, this makes it no less harmful for developing countries. Indeed, it may be even more dangerous than ‘ladder-kicking’ based on naked national interests, as self-righteousness can be a lot more stubborn than self-interest.
Whatever the intention behind the ‘ladder-kicking’ may be, the fact remains that these allegedly ‘good’ policies and institutions have not been able to generate the promised growth dynamism in the developing countries during the last two decades or so when they have been strongly promoted by the IDPE. Indeed, in many developing countries growth has simply collapsed.
So what is to be done? While spelling out a detailed agenda for action is beyond the scope of this book, the following points may be made.
To begin with, the historical facts about the developmental experiences of the developed countries should be more widely publicized. This is not only a matter of ‘getting history right’, but also of allowing the developing countries to make informed choices about the policies and institutions that may be appropriate for them. There should be greater intellectual effort towards a better understanding of the role of policies and institutions – especially the latter – in economic development, by throwing out historical myths and overly abstract theories that are blinding many theoreticians and policymakers.
More specifically, in terms of policies, the ‘bad policies’ that most NDCs used so effectively when they themselves were developing should at least be allowed, if not actively encouraged, by the developed countries and the IDPE that they control. While it is true that the activist ITT policies can sometimes degenerate into a web of red tape and corruption, this should not mean that therefore such policies should never be used. After all, we do not stop flying aeroplanes because there is a chance that they might crash, or abandon all vaccination programmes because some children may die from allergic reactions.
The upshot of all this is that we need an approach to international development policy making that is very different from that which is being pursued by the developed countries and the international development policy establishment.
In terms of policies, I would first of all argue for a radical change to the policy-related conditionalities attached to financial assistance from the IMF and the World Bank or from the developed country governments. These conditionalities should be based on the recognition that Lessons for the Present many of the policies that are considered ‘bad’ are in fact not so, and that there can be no ‘best practice’ policy to which everyone should adhere. Second, the WTO rules and other multilateral trade agreements should be rewritten in such a way that a more active use of infant industry promotion tools (e.g., tariffs and subsidies) is allowed.
Institutional improvement should be encouraged, especially given the enormous growth potential that a combination of (truly) good policies and good institutions can bring about. However, this should not be equated with imposing a fixed set of contemporary Anglo-American institutions on all countries. There also need to be more serious attempts, both at the academic and the practical levels, to explore exactly which institutions are necessary or beneficial for what types of countries, given their stages of development and specific economic, political, social and even cultural conditions. Particular care has to be taken not to demand an excessively rapid upgrading of institutions by developing countries, especially given that they already have quite developed institutions when compared to the NDCs at comparable stages of development, and given that establishing and running new institutions is very costly.
Allowing developing countries to adopt policies and institutions that are more suitable to their stages of development and to other conditions they experience will enable them to grow faster, as indeed was the case during the 1960s and 1970s. This will benefit not only the developing countries, but also the developed nations in the long term, as it will increase the trade and investment opportunities available.[17] That the developed countries are not able to see this is the tragedy of our time. To use a classic Chinese adage, they may be ‘missing larger, longer-term gains by too eagerly seeking smaller, short-term ones’. It is time to think again about which policies and institutions will help today’s developing countries to develop faster; this will in turn bring greater benefits to the developed countries as well.
References
Abramovitz, M, 1986, ‘Catching Up, Forging Ahead, and Falling Behind’, Journal of Economic History, vol. 46, no. 2.
---1989, ‘Thinking about Growth’, in Thinking About Growth, Cambridge, Cambridge University Press.
17
Of course, this does not necessarily imply that everyone will benefit from this. For example, some workers in developed countries may suffer as a result of an increase in investment opportunities in developing countries, which, unless there is an appropriate internal income transfer mechanism, results in the transfer of certain production activities to these developing nations.