Development Day 2012
Variation within regions greater than variation in the mean across regions, still some fundamental differences
◦ Level of economic development (income per capita, human capital, industrial base, inequality).
◦ Geographic location (CEEC part of Europe, CA other extreme).
◦ Historical/cultural traits: Role of religion, gender roles, colonial experience.
◦ Economic system: creating a market economy from scratch versus patching.
Still, they have the main challenge in common:
How to concurrently create and consolidate
democratic institutions, parties and media,
and undertake economic reforms to improve
international competitiveness, create jobs,
stabilize internal and external balances, and
increase enterprise productivity.
New literature emerged based on CEEC and CIS experience. Emphasized importance of market supporting institutions and influence of politics.
Some key lessons.
1. Institutional reform: Economic reforms only
generate hoped for benefits if supported by legal institutions that guarantee market access to all (protection of property rights, contract
enforcement, incentives for competition, innovation, and learning).
2. Economic reform: Sequencing and speed of reforms can be crucial both for economic
effectiveness and political feasibility (devil in the detail).
◦ Concurrent economic and political reforms create additional challenges. Meaningless to focus just on what is economically optimal without
considering political constraints.
Political resistance just as likely to come from
“winners of partial reform” as from losers of reform.
Distrust of politicians necessitates checks an balances to generate trust between citizens and their political leaders. Particularly important to generate support for an agenda of change.
◦ A potential for good, but often slows the
momentum for political and institutional change and encourage corruption and state capture.
Political constraints (building trust): Make a clean cut with the past. Old power structures often
remain in politics, armed forces, public
administration and business elites (CIS v. CEEC).
Progress and credibility requires revamping, or political containment, of these institutions.
Use the early “window of opportunity” to
implement politically challenging reforms. Design reforms to empower stakeholders in support of further change, and weaken defenders of the
status quo (voucher privatization in Czech Rep.).
Institutional Reform: Economic reforms need to be accompanied by political and institutional reforms that reduce the risk of state capture to the benefit of a narrow elite. If reforms are
perceived as window dressing with little real difference for implementation, no supply
response (World Bank).
A new social contract must include all, be they
women, minorities, young. Inclusion often breeds moderation, whereas exclusion often fosters
radicalization.
The importance of a possible EU membership for CEEC cannot be underestimated. What
institutional arrangement (and with whom) can be offered to MENA that offers similar incentives, the same focal point in terms of the countries
future (and thereby political stability) and peace of mind for foreign investors?
Southern partnership, “more for more”, will make no difference if conditionality is not credible.
Respect ownership. Given past history and current narrative, outside actors don’t want to be perceived as “meddling”. Can
undermine credibility of governments we
want to support in eyes of citizens skeptical of the West.
