Last updated 22 August, 1999

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Jorge Braga de Macedo  © 7 August, 1996  Return to my homepage

Concept and approach

The first general lesson I draw from economic history and from comparative studies is that the specifics of each development experience cannot be forgotten. . That being said, the protection of property rights and open markets for the international trade of goods, services and assets are often seen as requirements for a sustained development. Moreover, the sequencing of domestic liberalization policies must depend on the regulatory abilities of the state, which may be threatened by liberalization itself, especially with respect to financial markets. This is why changing and creating new institutions, capable of delivering the desired role of the state in economic life, remains very much a matter for national choice, albeit constrained by the initial conditions, both economic, social and political.

As development refers to the enhancement of the standards of living of individuals, the process encompasses the reduction in poverty, improvements in health and education of the population, and an increase in productive capacity as well as rising per capita income. Although the core concerns are clear enough, the boundaries of development studies, and development economics in particular, are essentially arbitrary. This is why competing paradigms, rather than a dominant orthodoxy, characterized the study of the structure and behavior of poor countries.

Then the collapse of the paradigm of development based on import-substituting-industrialization in most developing countries; the demise of centrally planned economies of Eastern Europe and the Soviet Union; and the emergence of a global economy impacted strongly on the theory and practice of development. Each one of these three outcomes contributed to bring about some convergence in paradigms, which is reflected in the growing awareness of the crucial role of the protection of property rights and of open markets for the international trade of goods, services and assets.

Put in another way, there is increasing recognition of the importance of micro behavioral responses to a range of incentives and unobserved factors both for analysis and for policy formulation. A process of economic reforms in developing countries by reducing state involvement in the economy through privatization, opening up the economy much more to foreign trade and investment and allowing market forces and the private sector to guide resource allocation to a much greater extent has been going on for over a decade.

These reforms have deepened and broadened the scope of development studies, to the point that they are now close to what was once thought of as comparative economics. The comparison of market economies with centrally planned ones (seen as developed in terms of their command over resources, education and health) was conceptually very different from development. Yet, countries in Eastern Europe, the Baltics and the Commonwealth of Independent States have embarked on market –oriented transition in large part because they believe it will advance economic, social and political development.

Several reforms carried out in China over the last decade have also involved some market-oriented development policies, but they were not supported by multiparty democracy and pluralism. The absence of political, as opposed to economic, transition can of course be found in developing countries other than China but, given its population, this is the most important exception to the prevailing requirements for development.

The path followed by China may contain positive lessons for other countries in development, even when it departs from the values of market economy, pluralistic democracy and respect for human rights. But even a country as large as China may not be immune to the pressures of globalisation. In other words, globalisation has blurred distinction between North and South or rich and poor countries. The problems of income distribution and skills are now global.