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The political economy of development, 1945 to date
Hardy, Chandra
Hardy, Chandra
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"This paper examines the two pre-dominant economic policy frameworks that have guided development policy since the end of World War II and assesses their success in promoting growth and poverty reduction in the developing countries. The Keynesian, mixed economy, interventionist approach was the guiding principle from 1945 to 1980 and the neo-liberal framework advocating greater reliance on the private sector and unfettered markets has been the dominant theme since 1980. The paper traces the political economy of development in the evolution of the lending policies of the World Bank and the IMF. In addition to their own lending, these two institutions have played a leadership role in determining the policies of all the other providers of capital to the developing countries including UN agencies, the regional development banks, bilateral donors and private creditors and investors. There was widespread agreement during the earlier period of managed trade, capital controls, and fixed exchange rates (until 1971) that governments had an important role to play in the economy. Governments could undertake investments that the private sector was unwilling or unable to make, provide the infrastructure needed to support private sector development and implement policies to promote social welfare, increase employment and reduce income disparities. Between 1950 and 1975, world GDP growth rates averaged 5% per annum and significant progress was made in the developing countries in improving living standards. However, there was growing recognition in the 1960s and 1970s that the task of bringing about economic development was a lot more complex and costly than the reconstruction of the postwar industrial countries; that the benefits of growth were by-passing the poor; and that weak export prospects, a heavy debt burden and the limited availability of low cost loans were major obstacles to growth in the developing countries. The paper examines the factors leading up to the oil price increases in the 1970s; the policy responses in the advanced countries that brought the postwar economic boom to an end, and the recycling of the oil surplus through the commercial banks. The recession and inflation in the industrial countries that followed the increase in oil prices led to the successful political and economic shift from Keynesian policies to the neo-liberal policies of Mrs. Thatcher in the UK and President Reagan in the US."(pg 3)
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2004-04
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With permission of the license/copyright holder