On (2), I’m curious what you make of the argument from Bill Easterly that we should be re-re-evaluating structural adjustment-type policies in light of strong growth in LMICs since roughly the turn of the century?
First, for a long time (like from Nic VDWs politics of permanent crisis if not earlier) a mainstream argument has been that SAPs were bad not because the policies were bad—many were straightforwardly, obviously good—but because they were nearly impossible to implement given the politics of the countries undergoing crisis. In response, many countries just didn’t implement the policies, or they kind of half implemented them and foot dragged and did all kinds of stuff to avoid implementing politically destabilizing policies. So then if we look back like the Griers did in their paper or Easterly did and say “countries that reformed did well” this doesn’t actually address the initial issue with SAPs, which is that lots of countries didn’t reform despite the IMF wanting them to, often for actually decent reasons. And of course for anyone acting today the question isn’t “did countries that selected into reform do well?” it is “did the countries that the IMF tried to get to reform do well?”. Turns out those are different questions, and we don’t have an answer to the second.
Second, and this is more anecdotal, but even if we grant that SAPs worked one effect of them was to radically delegitimize all sorts of good economic policies (like removing gasoline subsidies). That’s tragic, and I think it’s plausible that this effect echos out to this day in some LICs. Any full accounting of SAPs would ideally take this into account.
In response to all this, we got small bore randomista development. I’m not saying it should be the only game in town, but if the question is what can outsiders do to help people in LICs? then I think the randomista approach has a lot going for it. For reasons of power and skin in the game and information, I don’t think outsiders are usually well-positioned to do institutional reform stuff within LICs. I do not feel the same way about water chlorination or bed nets or cash transfers, etc.
Super interesting! I hadn’t come across that permanent crisis book.
All this does give some evidence against the critique that “we don’t know how to increase growth.” That’s not something you’ve said, but was a common reaction to the randomista development post. It also implies that there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.
I’m not sure I quite understand the sentence about how SAPs “radically delegitimize all sorts of good economic policies”—do you mean that while the SAP reforms as a whole might look good on recent analyses, they included some harmful recommendations, such as removing gasoline subsidies?
Agree that outsiders working on institutional reform is much more fraught and difficult. If I was going to work on this, the first interventions I’d be interested in evaluating are technical assistance programs like the ODI Fellows, and home-grown policy advice orgs like the Africa Center for Economics Transformation. I’m very unsure about the impact of those orgs at the moment, but I’m so curious to know what a rigorous evaluation would find.
There are two meanings of “we don’t know how to increase growth.” One is that literally no one knows what Malawi could do to increase growth. That’s very likely wrong. The second is “given all of the social and (especially) political constraints in existence right now, no one knows what marginal thing they could actually do that would increase growth in Malawi.” I think that’s basically right. Leaders in LICs themselves generally know, or have advisors that know, which policies could increase growth. If a LIC isn’t growing it very likely isn’t because leaders lack knowledge of what they should do. They lack incentives, and those incentives should be taken seriously. It’s kind of like pointing out that US sugar subsidies are a bad economic policy, which they totally are. Everyone knows this. They don’t persist because US politicians or anyone else lacks that knowledge. They persist because of bad incentives, and changing those is very hard.
In sum on this point, I agree that “there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.” My claim is that neither you nor I nor basically any outsider has any lever to pull on that, and that thinking really hard about it will not solve this. Growth is pretty attractive to people in LICs, so almost by definition if it’s blocked then something real and hard to move is blocking it. As I said above “The reason people gravitate towards things like bed nets is purely on tractability.”
Lastly, on the confusion re: delegitimizing policies. Sorry if I phrased that badly. To be clear, gasoline subsidies are horrible! We should be taxing gasoline, not subsidizing it. I picked that as an example of a good policy that is plausibly viewed more skeptically because the IMF pushed it. I think it is plausible that there are a lot of good policies that are now viewed more negatively they were part of SAPs. I hold this view weakly as it’s hard to test, but I think it’s a real thing. If all of a sudden China started telling the US to get rid of its sugar subsidies I actually think that would make them harder not easier to remove. This is the same dynamic.
All that said, I think I’d probably also favour people chipping in towards an endowment for a liberal, free market think tank in Nigeria (though I haven’t give this much thought and for all I know 5 might already exist).
On (2), I’m curious what you make of the argument from Bill Easterly that we should be re-re-evaluating structural adjustment-type policies in light of strong growth in LMICs since roughly the turn of the century?
Good question. Kevin and Robin Grier make a similar argument. I mostly buy it, but I think there are two very important caveats.
First, for a long time (like from Nic VDWs politics of permanent crisis if not earlier) a mainstream argument has been that SAPs were bad not because the policies were bad—many were straightforwardly, obviously good—but because they were nearly impossible to implement given the politics of the countries undergoing crisis. In response, many countries just didn’t implement the policies, or they kind of half implemented them and foot dragged and did all kinds of stuff to avoid implementing politically destabilizing policies. So then if we look back like the Griers did in their paper or Easterly did and say “countries that reformed did well” this doesn’t actually address the initial issue with SAPs, which is that lots of countries didn’t reform despite the IMF wanting them to, often for actually decent reasons. And of course for anyone acting today the question isn’t “did countries that selected into reform do well?” it is “did the countries that the IMF tried to get to reform do well?”. Turns out those are different questions, and we don’t have an answer to the second.
Second, and this is more anecdotal, but even if we grant that SAPs worked one effect of them was to radically delegitimize all sorts of good economic policies (like removing gasoline subsidies). That’s tragic, and I think it’s plausible that this effect echos out to this day in some LICs. Any full accounting of SAPs would ideally take this into account.
In response to all this, we got small bore randomista development. I’m not saying it should be the only game in town, but if the question is what can outsiders do to help people in LICs? then I think the randomista approach has a lot going for it. For reasons of power and skin in the game and information, I don’t think outsiders are usually well-positioned to do institutional reform stuff within LICs. I do not feel the same way about water chlorination or bed nets or cash transfers, etc.
Super interesting! I hadn’t come across that permanent crisis book.
All this does give some evidence against the critique that “we don’t know how to increase growth.” That’s not something you’ve said, but was a common reaction to the randomista development post. It also implies that there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.
I’m not sure I quite understand the sentence about how SAPs “radically delegitimize all sorts of good economic policies”—do you mean that while the SAP reforms as a whole might look good on recent analyses, they included some harmful recommendations, such as removing gasoline subsidies?
Agree that outsiders working on institutional reform is much more fraught and difficult. If I was going to work on this, the first interventions I’d be interested in evaluating are technical assistance programs like the ODI Fellows, and home-grown policy advice orgs like the Africa Center for Economics Transformation. I’m very unsure about the impact of those orgs at the moment, but I’m so curious to know what a rigorous evaluation would find.
There are two meanings of “we don’t know how to increase growth.” One is that literally no one knows what Malawi could do to increase growth. That’s very likely wrong. The second is “given all of the social and (especially) political constraints in existence right now, no one knows what marginal thing they could actually do that would increase growth in Malawi.” I think that’s basically right. Leaders in LICs themselves generally know, or have advisors that know, which policies could increase growth. If a LIC isn’t growing it very likely isn’t because leaders lack knowledge of what they should do. They lack incentives, and those incentives should be taken seriously. It’s kind of like pointing out that US sugar subsidies are a bad economic policy, which they totally are. Everyone knows this. They don’t persist because US politicians or anyone else lacks that knowledge. They persist because of bad incentives, and changing those is very hard.
In sum on this point, I agree that “there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.” My claim is that neither you nor I nor basically any outsider has any lever to pull on that, and that thinking really hard about it will not solve this. Growth is pretty attractive to people in LICs, so almost by definition if it’s blocked then something real and hard to move is blocking it. As I said above “The reason people gravitate towards things like bed nets is purely on tractability.”
Lastly, on the confusion re: delegitimizing policies. Sorry if I phrased that badly. To be clear, gasoline subsidies are horrible! We should be taxing gasoline, not subsidizing it. I picked that as an example of a good policy that is plausibly viewed more skeptically because the IMF pushed it. I think it is plausible that there are a lot of good policies that are now viewed more negatively they were part of SAPs. I hold this view weakly as it’s hard to test, but I think it’s a real thing. If all of a sudden China started telling the US to get rid of its sugar subsidies I actually think that would make them harder not easier to remove. This is the same dynamic.
All that said, I think I’d probably also favour people chipping in towards an endowment for a liberal, free market think tank in Nigeria (though I haven’t give this much thought and for all I know 5 might already exist).