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June 24, 2005

Matthew Lockwood.

Matthew Lockwood writes in the Guardian about what should really be done about African poverty. There’s a lot of support for, say, Jim’s, view, that the Asian tigers were thoroughly interventionist and that thus it appears that market liberalisation is not the policy to push.

Lockwood also rather debunks this argument by pointing out that such a path depends upon decent government, something that Africa is notably short of. Which rather leaves the door open to the liberalisers like myself, that in the abscence of such decent governance it is better for the government not to interfere in the economy at all than it is for it to cock it up by interfering badly.

Hhmm. Back to Bayesian priors I think.

June 24, 2005 in Make Poverty History | Permalink

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Comments

Well some African goverments are more decent than others, no? So aid policy can be suited to type surely.

What do you make of the idea that a nation's economy might need to reach a certain stage of development before it would realise a clear net gain from trade liberalisation, and below that point elements of protectionism may work better?

I'm thinking of things like the IMF snippet posted by Jim that talks about changes in tax revenues of undeveloped economies after removing tarifs from instance.

Also I have half an idea that the mechanisms for channeling the net gain in wealth (from lower import prices for instance) back into the economy might not operate so well in undeveloped economies. Perhaps because it's too hard to create new businesses in such countries (i.e. poor access to capital/credit, too much bureaucracy etc.)

I am generally a little confused by the off cited fact (well, it is presented as a fact and I presume it is) that the Asian tigers got started under protectionist/interventionist regimes. Are there different types of intervention, such that one type encourages the growth of competitive industries, and another type that just shelters uncompetitive industries and inhibits the development of productive, self-sustaining economies?

Is it possible to coherently argue that intervention like the Asian Tigers did it can be good, but intervention like certain African states (for instance) are doing it is bad?

I don't know enough about the details of what the Asian Tigers did, and what the African countries are doing / various people are suggesting the African countries ought to do, to answer that question myself.

I know you & Jim have had spats along these lines before.

Posted by: Paddy Carter | Jun 24, 2005 10:27:19 AM

Some countries would do dirigisme so badly that there's no point in considering it as a contender in the "how to run the country stakes". e.g. U.K.

Posted by: dearieme | Jun 24, 2005 10:45:28 AM

Having re-read Lockwood's article he does not appear to be arguing for interventionist economic policies in the absence of good governance at all. He seem to be arguing much along the lines that I imagine you would, that the priority is improving governance first, then (and here's where he differs from you) some interventionist economic policies.

Posted by: Paddy Carter | Jun 24, 2005 11:47:13 AM

Getting rid of the dictators and despots would help. Is no one looking to the experience in Latin America?

Posted by: Andrew Ian Dodge | Jun 25, 2005 12:33:42 AM

I don't think Lockwood is arguing for an interventionist state, nor is he exactly arguing for market liberalisation.

His argument is that the quality of leadership in Africa is, basically, bad. For historical and contemporary reasons, Africa is not in a good place to be able to make smart decisions to promote development. While not denying the importance of achieving trade justice, fighting chronic disease, and so on, Africa needs to be able to establish their own version of the developmental state, which requires the freedom to make good decisions. Those factors are internal and external.

One solution, which he outlines in the article, is to increase African governments' policy space. One of Africa's problems is that the way aid is currently given out interrupts the learning processes which other states like the Asian Tigers had the freedom to go through. It's too much been the case that Africans have had things done to them, and so they've been mongofied by aid conditions and accountability and reporting procedures. Good policy should be rewarded instead - what that is shouldn't be prescribed, but the objectives are common enough for donors and governments to accept.

Whether African governments decide to go interventionist or free market should be up to them.

Posted by: Thomas Geoghegan | Nov 27, 2006 12:21:10 PM

Paddy - Interesting question (on types of intervention). The answer is that it's not the intervention itself that is different (export subsidies, import tariffs as protection for example) but the enforcement with which those protectionist items are enforced. If a country can credibly threaten to remove protection if a firm doesn't get upto international competitiveness in a set timeframe then it can help a firm / country jump the technology gap just as China is doing (Rodrik has written about this a lot at Harvard).

If not, i.e. if the rulers are dependent on those getting the subsidies for support to stay in power, then you get the African story. But just liberalising, as Mushtaq Khan has pointed out, doesn't work. It's been tried before, in colonial times, didn't work.

Posted by: Adam Jackson | Jan 5, 2007 9:21:57 AM