Trade, Trade Policy and Economic Development in very Low-Income Countries

This paper is a critique of recent mainstream ideas about appropriate policies for economic development, e.g. the “Washington consensus”. It begins with a review of the of the macroeconomic, fiscal, and foreign balances of typical developing economies, and then reviews the major proposals of the World Bank’s 1991 World Development Report. An important distinction between allocative and productive efficiency is drawn, and used to analyze issues of industrial and trade strategy, privatization, market deregulation, and financial reform. After a discussion of macroeconomic stabilization, the paper closes with a “non-Washington synthesis” of alternative policy views.