rodrik goodbye wc

8/6/2019 Rodrik Goodbye WC

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/"Iou'nal o.f Ecottotn.ic LiterltLu e\tol. XLIY (Decentbcr 2006), pp. 973-987

Goodbve \l'ash ngton Con sen sus,Hel t' Wash ngtn Confusjon PA Rev ew of te World Bank'sEconomic Grotuth in the 1990s;Learning from a Decade o ReformDrNr Rorrux.

Proponents al'l(] (-:1^itic)s alike agree that the 1xiic es spa'uned by tlte WasllingtoltCtr:se,tstts l'rcxe not pntduced the d.esited. resuhs. Tlrc debate noto is not ouertchetlwr th.e \Ya'shingtn Consensus ' s dead ctr alioe' but ooer ahat wtll replace it' At't'iinPoltotlt 1na1-ket'ii this intellectual terraitl is tlte Worlcl Bank's Fconomic Glou'thirr ihe l990s, Learning frorrr a l)ecade o1']le brrn (2005)' w th tts entph'as s on.huntility, policy dixers ty ''selectipe and nLldest re ontw, and experi1ne1.'Ltation, this is,a,itlrn, ,.r rnurl i,',r;J (ll)ln,nt den'Lonstrotingthe e:\te\'Lt to uL ch the thinking of tlvd.euelopnrcnt 7:toltcy -t,c tntt,,pcte ,] , lsrttlt, t p itt w,;l-, ngn T7l''nfr,, ,t,,r! ttr tlt, r ',.to,q,litie,l l,1,t,hL ffi4|ircEn tr T' i i,t3t,ttll;gcnt[y al1Ntlg Illps?diD ]'sc |('1spe(tiu requir a]I apiproacl t tlut recogn :es that

L. lntrocluctictttT jle rr.ed to he t"lrrirclv sirnple lol tl'eI rpe,ldl, r. ol polj,; ad\"( p jrr llrP trnli, :.Obseruilg tLe eudless list ofpollcy {bllies to

' Hltn'.ljd Unn'ersiql I am gr.rtelirlto Boger Cordon br-,i\,n ..,i.('"'. ' 'a,l," r'.'rr' rnHic,rr'lcH rr r nrrI "' l rr. !, n -nd iul'n \\ rlli rrr,- n i' tl j' ' ' r ^ns'o ' B''n' 'Z'1li '^r'l'' r'''nvil'..glr 'e lr+ l'"e'ld'e Ltt le ' y"-r' I 'l n \iilJrnrrr nn rc r ded nre that rny t.rtle is {ar fi.on origh , having been usedin .Lllnost identic.J lornl l]y N'ojses N.drn (1999). I]l iis. 'o rrl .l.n r .:.1's a l'.sinn t' rr' "1r" '1'.'pel ]1 carl A D]i}^|Jandrn Ll9c5)'

.fa.ith

rv}rich poor natious hacl succumbed, anyu'cll-tlained and rvell-irttentiolcd econorilistcould feel justif ed in uttering the obvioustruths of the profession: get your nacro balances in older, take the state out ofbusiless,gire r,,rrkel: fiec rej" Slabili,'e. lri\rtiTe lincl lrheraliz.'hpcarrre lhe rnanlra ofa eetr Ielrtjor, oI ler']r"or t Lls rr'\u, ul 'l'.11 le' t]r it' 'the developing u'orld ancl of the politicalleaders thel' cour.rseled.Cndil.r'J ir.lolrrr \Villiarn;nn' I lgvur (cll- Ikrrowrl \\'lshingron Conset.sus. llris atlvice \in.pired ; rv.tr'e nf tefnr'tns in Lrtin r'eli'r \973

tlv biltd ng a)l7stro nts on groutll rl flar fron settingto settirlg.


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9;1

'lJre ore tJrJrrg that is gcnerally agreecl onabout the cousequences o{ thcse relor rls ist)ral thiuqs liave lot quite u'orked out theu,av thel. ri,r:r-c intended. Eveu thcir mostiucJent supporters norv corcede that gro\ltlrhas bc'en bclov' expectrrtions ir T-atillArlcl-ica (arrd tl]c "tlaI]sjtio]l cl'is s" deepcrilnd r'l-ror-c sustailed than elpectcd in forrnersocialist econorlies). Not otr]) were successstorjcs jr] Sull Salrar'al Alrica 'eu'alld lar irr.'-_----=..-r To citc just onc er.r,nlle, lifw pcrccnt or u,orc ol thcstrlc ownr'1:l cntcryrises \\rre dn csted drring thc 1990s lnlhc CcntrJ i;jc! I1eP!l]]n.' cotc d'hon'c' C]alnbia,cLalla, c]rrjD r Bisslu' Krrlr,a' N l1r' TanZxn'l1' T()go,Ugnnltt' rlnd Zlilll)ia (John N;]]is '0i]3). on i]le xk ]aoftlxllc lel'o|ll 1ll n iic ' s{{, \jin).c l) nc]]nral (2003)'

.lotrnt al oJ Econoltlic Literatllre, \tol. XLIY (Dccet)Lber 20t)6))"" ' .,'1, t.J'-rar \ll-r: lJ'r" {rrr,,lar,.err'rlJ;| "rrr.t"r'. .l rl.. lrelirr lrr'rrls, r,pc .rr ,lrc.'| ,Jcr. lnl irrg ,r'prs. \\ iJr. th" lrll ni the BL rlrr r\Vall and the collapse oi the Soviet Union, bllllc'l_socia]ist cou trjeS sirll jlar]r, lllac]e al,old l, u;' lo\irJ tnJrkpls -llrc '. la. nrorplrri\ ar:/arla. deleguJe'in ' x,. J-E6Ilffi-i zaliou irll,atil -Arueliqa-ald-Easter-rl Eul:el:r3r ,'r, pioLabJl frL)1\ lle]e_L'e Jl l'']) roi]lt jll/ cr-orro rrrin Li..lorr. lr, Srrh-:.Llrlr,rr .\lri,j]l.ot, r',rr.' t. rr'.,i,''lsifl, le*.rortri' riun r ',l1,1'."d. l,u' rlrere'oo,t suh.l'rrr'iul I'orliorr or-'l e rrnr.r 1'nJ c1 is,.rd:r ,\a\ ,do1't.d .1o'plllarketilg boarcls rvcle c'lis:narrtled, in lationr du, "d. 'r'.r'lc "1'er'ed up .rrrJ . grrificarrr\ ,,t''.''L'. llli\'ItllJtio]| ]lnJel- lkP]l I, Such rr,as tlre elttlrusiasll lor re bllrr jnl,lli.r''i), of t]rese coutrtries thai WilliamsonorigiDal l st o 'do'.s ar'rcl dotl'ts cane to iookr-enralkabll, tarre ancl innocrious by' colrpar-.n r lrr n rrli(u rr fi,'arrr.iul lil'errJiz;.tin r,llJ ,'1'e irr- ull lo ir,r-n'rtinrral 'apirr,,l llorr.\'\'l llI ll]''l ]l llrrlht'r t]rlrn iv]l. \\jllilI,'s,,r'\hacl anticipatecl (or thought pr-ucient) fi-om)the varta{e point ol the late 1960s.wj]ljarllson (2000) pIotcstations no \litlr-sl,rrrdir,:. llre rclor'rr ngprrdr erctrlrr.,ll; carle;ln he I'e cei1pfl ;t la;1ri I'y il:. nril ,. us arr I' ri r'ly .t1, ologic,l , llr,rr ro ,rnpn., r' e \libe ralisil":Lld "lrnr-ket fuudarrentalism" on ]developing latiols.

behl'eetr. ltrrt tlre rlalket o e1rted Iebrnls othe 1990s plovecl ill suited to dea] .'ith tlregrou'ing public health energelicy in rvhichthe contir.ielit becane embroiled. The critics.mcarru'hile, feel tliat the disappoi ting out-con]cs have r..irdicated their concems abouttlie irappropriate[ess of tire standard reformagelda. Whlle tlrr: lessons clrav.n by plopoltcnts aud skeptics cliffer. it is lair to sav thatnohodl r'erll; heljpves irr rhe WLslrjrrqrnrr{'o]l5 'llsUs Jn\ lllol''.Z Tll, llU('s io]l llo\\ i"r'ol ,rltnrl.eI tlre \\ashitrgrorr U,,lrsntr.u, isdeacl or alive; it is rvhat u.ill replace it.The \Vorld Bankt Econornic Ctttu;th irttlLe 1990s: Lea'rning front a Decarle ofJi',t ttlgfont) is one of a spate of recent atterp-at nakirg sense ofthe facts ofthe last clecadeand a liali, and plobabll'the nost iltelligeni.In ict, it is a l ather extlaoldinat1' docutleltinsofirr as it shows hou' r. ]@-eoug'inrntlrp"r.igirrtrta'Ir11g-'on-L^rls ''sIl''Tlrr rc ale lo , otri:dLlrr irs5ertion\ helc ol,,,.l'rl lroils ru,] " lr"t a".'''L-.''a t,]i p---prin r. _ ]or polic1'Ier.i - -aclP he' 'r r 1ll'lrii is ' 'ri I lre tr, ,'L.] t'o" l'u r' ih. to r lolicy divelsity, for selective and rrodestitelbrrls, arld brexpet iIrrentatiolr. "The celr-tlal rnessage o ' this r'olrrlle.'' GobirrdNankani, the \\rorld Barrl< vice-presideltrvho oversau, the eflbrt, rvrites in the prei.\ceo tl', Lt,ok' i" l]rrl llrcre i1 1U r111q11'' ur i_r'ersal set o| ruies ' iwl to i rr'lw iii, fornlu]ae ;lid tIe _rc-mtli -oi'a]l _''l,'e'bes| pirrcticc]_s_ -o' x'il] oca ;onl ;':the rc.iLder' has to rern nd hirirsc]l that thebook he is hokling ir his hancls is not sorne

2 In x book edjtc.ti\\rth PcdIo_P. l(, KLtcz\,nski in 2003.l'.1.n \trllrrrr. n l;l .r'.'r ''f "J. I ,.,.rr' ";,r1,cnl|hasizing c'isisProo ing o cconcrrtlies,''scconc]_gcDe rrtion" cf(Jl n)s' anri po1lcies adrJrcssirrg incquaLitvJ^, ' Jl ,*,i, . hu ,'\a,.li. nJ \\:ll,.,'1 , ,, '00I llobcrto Z.rgha Ied tLe term th{t prcpirrcd thcrcport l1cnrbcr"- o1 the le.tln ,ere J. Edgtrr1o Carrrpos'Jlms ]Ians('l, Ann Illrlison. Philip KecIcl, Ionn \Kcss'dcs' SaIrvar L.ltccr' Pctc Monli.,], Litnt Pliichcit.S. lt:rn,achrLndlan. Luis Scn,cn, Olcksly Shvcts, andllLtora T.ng.


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Rorlrilt: Coodbtle \\Iashingt:ott Conse rtsus, Ilello \'Yashingt:ott CottJitsioni' 975r'irt_] ciil rtlanj{isto, llut a repot't plepared b1'thc seat ol ortborlory in thc uujver-se ofdevelopnTeut Polici'.

cni''il'olrrl'reiits',r'lc] c tjn.,cd foreign aid''1'he succqsses ri'erc ferv .u'ith Ugalila,T:t1zania, aniJ pzarnllique tlle tlost cott-l-''''''lt.. '''r'''l i'''t.'r,'' s -"r'd n r l'ir" tl irgil,. rnore ir.u r .L ,le.rdc lLr' . 'fl{;\d. tL-r.ervelo lr' ,lrtnt,l ,r'J 1',Lrr'lul [irrrr''i]l ' r'e5 inr,aiiiinlciica;'_ ast:sraa-Ri-rssia,T d'l-urkcr,: lr4ost itacl renlained ur.rpredicted byfirancial nar*cts al.icl ecotloliiists until capi-tal {lou,s startccl to revcrse verl suddeuly'Qo.,rC? tl'" l.:rii \rr er'ir:411ov1q lrrJlrelj'V.ll ;Il l''l c; Ilr,,l'cd s]rot t-l'', d'Tlj;-199ij;; a whole sarv Jess glowth inL.' irr \r.r'ti' r in lrer crl'il. GDI' llru r irrlgin -\ll 'l'


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976 Jotuna.l of Econonic Literudlu-c, \bl. XL -\l (Decetnher 2006)

olrp o |lrp i''sic]'rr n' L,o,,,i'l; Jr,,1,lB l.trt,, t' rl..rr "11, r e1'1,.'1,,,r1,1 1,.,1 L1;,. o1,'.'|o''''.''o'loo"]ia*d-a:n i'.-'"il\\;:tr||;].c\-tlianales rlr'J re'rr'nq ll,e eIii('i, y;rirrs 'r.rn ''Iirr ilr.rlilrg lIrc n lllJ Jid l'or p.ije-llough )tte1ltioii_ta stiiraul ns tlie \ijn;l j;|lor,.. tlrrr l:p l,"l,ilIl 'h. qr",rud; li.--""s.\, kitrx ''llir r..r; g.tirr' do, s nr utnorlni Jnrl..ro ' {h,:lLtllg. Alrl,orrsl, l. r"porr J,,.slr"t ,llrl, I,lr il i. tlri, \\'t\.ul.i.t lil.irrli tl,c'1,1'1ln1r 11.11, ,rr rr ir,d i" i\rrl .rr.rrkni or gor-r-t'l t'l'ct' l la' Iu t er J l ra j ul l , i,r"cu-u liL-nr|)lnoll"l\]l) 'l|: ||(e jIl'c .nrti J, ' otp cnsil)r'J lr'-r'''r or,'dc.''nir'g ''[ 1'g];c' "',.'|_ti.ti l]'.rt' di.rnrlio',s IllJl .j' I.]J l[r "cl .i_ai.

3. Tlte Intetyreta.tictn

resol'I e ajlocati;;' TJr ];'iia1i a sdbg5.d..to icbrrtill-hur)ns on-i] ; ,ltt stei $]ng ot'l thc l2rttcl instead (]1resu]ts_ irt sna]] br:ri -it -arflcorrld even tun out to lte corrlt--r1tr.oc}rctive'rr" r. 1',ii' \ )i,rkcrq- 1.r,, I I'nliri,.,,l L,u,l",.t..lr\l'.rrtrl Inlc ti lol..t in une.rrp.r rrrelrr.,lcss lelbln in rrnotlier).or icntatioli-do not

'rhe questjon is }row to l-rte1.plet this Iecellte-rpcrlerrcc arid Jtq-rv to tur-r'r dre illlc1p-eta-rorr illn cor, rcLe poliL) Jrr, e HernLe arl t.i ll g.f o t n llefil-rli rilakes'inre r'a]rrab]el,rlr:ti \r. I rrt t. Jti,p ,', . ul llr. . .a.n ,.o -clusiols beJov,, enphasizinq those that departnrost stroltgly fi-olt tlie earlier approach.

irn1.1"1ng ,1".1 1,. r I e:n1,r,.r.i. ir rl,e n-lo_1rul . fl ' irrillrLlr. gn on ,u ;,uir I out tlrJl 1erLl. r.'f rhc." en.ls LJr I,e i,.l,ie,.eJ in r ]111.1. I'e1 n1 11;;. Foi -..rrrr1.le lrnde ,r1,e, - I11p.5 ,11' [e :r, lrinv,.d tlrrou.'lr io\\, r j.r I,url /rrri ''Lu, .l].n lhro.rPlr d'rn Jra'.,. L.r, k.e\|nl l (||h iL] P( .pecii.| ar orrn1ni' 2' '1,-qP\PL,r1 procc.sj g zor,, 5. JrrJ so orr. Thisrcrj,r'r, ialinr, of sta.de|d I,est prr iicc ,rr\\orld Bar.( 1,olir; .rdrite is q,rire re-rn -rLrLlo ,,r'J inur, l,o, I,ar, ,.1,r, , uiiL,rrrt ,,significar-rt jnteInal ight.T.[qrd; .1 i r 'e r'" n I corrlcit, rp{lrir'. dillire,,.c,luri. lo .uivil'g '.L,rr rnurr proL'lnr'.Elihanciug private investlne[t inceltivesna1' require irnproving the seci.uity oi ptop_er-ty iglits iu one country brrt enharcirqg tliefinalciil sector. in anoiher. l'echnoloiicaicatch_up lrlay call br bettei-oI worse patelrtprotectjol, depcnding ou the level of devcloplnent. 'fhjs explains rvhy countries that ar.egror.viliq-the repor t cites Bangladesh,Bolsu.r. r. Clril" Chir'r Eqy,t. Ir,,1,,,. L,,l'DB. V.r'r"iliu,' (r'i Lrrrka, -l unisi.r, ,rr,Jvictr, rrr - lr,\r sr,.l.divcrse Pnlily r.nnllcu_lul.io .. r'rrJ rrlrl rrt. rrrl,l< to c,,p; ,u,.,.c..'rrl]r',li(v rplnrl,s :.r Jl,otlrer n,,l ,lry oflen , rrJup ir failure.' { ,1r"i) /'"r, '' i,'4 {ra,,t R' J,rl,, i]l..ltc. |]JL'l'r'c-ffil,nerr r lenJen.y {,,.ruog, r.ate rhe

' rd l rrlrllics o '.r l-' or e t. .ct.oliorr irr g, rl er lr-rncnt bchavior.. Rules rverc ureant t; disci-pline the ualfeasance of gover..ltr]tents. But iti r rr\ n i llrll- (ovr'.tr||rc l r{i.L rpt in.t,.a,.. orL'' 1.r1,r.i, l /1, l1 . Cr[, .rir,u. , u,rc..t.!l'^lrd' lrl't,.'l f ll o\ d lr.o;cljlll n,'lici 1io'j' (tire lrrr rls ,'l 'he go.." ' " , .'r"",l-',f .',.ff Irr'ltcn lIrc Lirrrrg ' onslr'rlrrl.r.r. ] ,ck ol Lr,,l- iil'iiit): h rt Ind ro di.r,.trorrs nuic,,,ncs \vlr, ,. ,rlre hir'dinC, nr.u :Lin' l,-,.i,rn.,Ln r1 e1 1 21.1-!. lrrcr\\'. fl1, 1n ir 116 llle'r..rrit, lu itnpruv Iing the processes of clccisionmaking (better,1re, J,,.,'r'rl hri:rr,es hetler guidir,g 1,rir,.iI'lp' beItcr i.nplnrrrerrlitiL,rr "rr, h (l .iiJiscrcriorr lerd. t" l,ett"r nlt.nr, cs, (irn]ryY ielor- ,.llor't. rrnpcl rnLc ,oler rir,./ 'r',lbr oll 1|r |';p,|1,,2.',/i!/,',-l;/'/\ oIl H''o/ r.n rr., -"or^t1r r'.Lrr cr rlr lJ r.,Lc a lrunJrr-l;sr

o1'' ' ' ']]l ilclocco]l olni c stabj]it},' .lo'nti"lih-r;r'i. rtio.r. x11r.l n1re1111e5. Lrr" h"e,.ir.letg'ed nl rnull to .rrei.rl lnjnjlni2g f1.-,'I d"l"',l''rr'";;in'll,'i.rr'. rr irrirnizcI, rTf,. rn.rtirrrjze l\ ri\',r I i / a I in r , . rn,rrrr..ize liLrelll z,rrion ol lin.,'r' e sillr rl,, r,s .r,plion'llrt rl,, rrnr,-.,f rlro., s1,.11 gr.. rh(.b, ltc, rr:rll '; n' rrrJ .rr ,ill 1"r.e., o'olnol i, o t\"ll. I lrrl ilr-,- F\l.dicr,s rr, jrr,r .nr,,, ,.J'rr. ',.r\.. ir. r'J', L rlr, .p l.-i, .iTrl,.. , r r 1,,.


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977:!|jl'l''lC]l ]'l \\a.lIi].ol^.l ( 'orr'.e rsu ' \\|r'|crl ' .o is rrn tuo'l-r*o,,1 r .ptl uJ ul iJ, r,rihirrp.'lre,'. ,.. r.l"rirr's. co t.tn|| \n||se lt,Ll "."-lrro ..i' r. rJr.r. r."rr lrell' ,... l,eln,r \\ tterLitr i'stttr, lr{ < l on' tLjtr'd h' l'.,rr. l,.,P.rhrights, irll1lrovitlg firrarlcia] i"t".ndi"tini'r.iJl lot help._Whel it is coustr.ainecl by ltighcost o ' capital. j nlpr-or,in g nstJtritJorlal qu j-tr irill lr:.nlly rrorL. [,11p111,p1,1;riior. trrdle:,rrrj r: rh,,rrr ')r- n 11111p nl tlre I,irrdi||d' Lr .lt-rllrl\ "r',-J 'h, clr:,rr;, i {lrcti.il. .1r.'r'' r'olnr. rr, i..i|qr.al lrrrt ol r],6, 1pf61,,,

process. Even thc.rugh countt.ies rlay face sitt:rti tr. ir' \\'liir'Il lJ''|.|)' 'U.l: J.rirrt..i , ,lt'' ll.'addr-essed sirnultaneously, tlie report jud-qes these situations to be r.are, 'I utostr

put orit a clocurnent that focused on ntuchtlre sal'i'lc issues i t]]e coltext o[ LirtiDnlerica (noop Sirrglr et' al' 2005)' This isan equally reurar.kable dociinent rvhich.lru,.r' ll' rr ill \\_J}1|i.rnlI r]l''r,'i. rlrltirilr.rI'Lt cnnlpr,:us tl,, se-Jry\ TF" IITF ,, t,"ri.'arts lnrn Ilrr...1.r e l,.1.it pl.erni.e orn11iIl'1r lc. rllrirppointirrq- Lirr ij( L. sic.n.Sln]ent o ld i]ot 'lle more-_l]if{l'eit, r{{, n-Jinq ro i's ouilrors 'lr. I,rohl, rn \\.{5rr"l rrirlr tlr, rrppr-or, lr t,,k, rr ,,_, relorn, L,rrr rllrrt il dirl Lo'goJ"ep'rnd[,,re,,.,ugh t .;1,g Illre '.lo s orrn rrnrJ., r-li,rrn. rvcr.urJ .\clr ttrLl r, , rltirr,.,l irr|orr plnr- ,p. rir r"Mote progress \\7as ]ade,'' tlre IN4!- rcpoi'tc]airtls' "t'it]r rneasures that lrad lorv up iontr u5'r cuq ll 15 l,ri\iri/"iiurr rn]rtir,, tUr.ror n. 'hri llorrri\pd grp.Ltnr. In.rg lplrlsenel'r,i. .r tcl, i.c ilnl )t nvi I rg I I ritCroe,.or o riC'r'J i,,L',r 'rrirL, tir.ritutror,. rr,J qircrorl,-e ,ir.gl. g.rlnnd.1rdiLirl s;rferrr< ,1, 1ji , :[]1e.,r're dtro ,olis i" "^Tr"ss"rl slLcil(.ll\ ir itrcr,ll' ,rl L,;r. ,,l Ar'r',1 Kr u,.gor, ,1,.,-J'..,. u ,I'oli.\ r'l.lL,r',,: \lrarrl \Vell fr,cd Li'tleF:riIe,| \4'r''l' , K ru"2i oq ' Fi'n rhi.Perspecti\/e, the 'ajlureshave to be clra]]


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9;8 Jotunal. rlf EcottonLic L terllllre, \bl XL^r (Dece]nber 2006)TAI]LE 1'f HF Lj(; E\TEl) \.vAsHINc'lo\ (b\sliNsl]s

O(i]l.rl \\'ashingto Conselrsus "Augrrented \\raslingt()]r Corlsensustlre pre\ious J0 ite rs, plusr

5 U]lified |1nd colllPetitjve exchaD.(c rates 15' Fi il ci codes and stand.rrds

L Fjscal cliscipline2. Reorie trltioll of public expenditures3. Tru lelbrrn.1' FjnlIncia] ljberill zetiol1

6. Trrdr: libclaliz.rtiorr7. Opcnness to Il l'I'!. P \'ntiz:ltionI Deregulatior]0' secllle ProPe ]' Bights

11' colPol ate gove nance1t. Anti corruptiont3. Ir1c llle Lr1lol lrrlrrkets1-1. \\rfo agrce]nents16.'Pludent capltal-rrccount oPcning17' Non intellnediate exchange te egjlnes]8' IndePenC]e'tt centrl1] b:rn](s/in ]ation t.lr'qetjngi9. Social sifeq' ncts20. Targeted poverly rcduction

rnrrLel5 I'ro\pd ton rveak. Ioor govet:ralrcollrd, uttrtl'riotl lrrrl:L Jed-t' P+,6l;ii' co'Tl snd the jird ciar'v rvere it]e 'fective. ld labornalket i stitutions wele not suf ic ently" lr:xible'''Of course tltis secouti point, about thela.Lerr41!4lri !!-r4!u!!!!q!al reforttl' isitscif ar irrplicit rePrdiatiol of tlre origiua]rersio_19 . LIE\LJ irg11] r ( oF\P.rsus. irr'nf''r ''' ll,e l,tter r]id Lot l otiiirnrit rrl.orrllrelbllll o ' the type thai Krueger and tlreIMF have in nriud il theil inter pr etatior.i oftlie 1990s. Most of the iterus irr Williar4;p1-r'sol]girla|Lstr., T_il-ati-rt]'vsilllE-policycfi al i ge s ( l ib e r alize trade, e_li4luter-lr+ercyovelI }ti.]] aT dlie-T1j-sca]deficits, ar-id soon) tlit djd rrot requirc deeP-seated irstitu-tior.ral changes. Williansor did include tlrrope h riglrl.' irr I'is li\l LIrl tlral ua'rlrP 1I,rrl il, rrr ,rrr rh, list r"rl ciLnc rltrro.l os r'raftertliought.Wl]at has beeo.ulg glear-e. to practitionersof the \\lashingtorr Consensus ovel tirne istlrl ll.e slu rJald I'olrcy ret"r'rnr di,l norl'ro-,ll|,'" ld'', i-IB151-!! llat \groun'l inl_

l ij i i;lTT -.'-.'--''U'' J i tio] s \.f c poo]''' \(,I l n Jr,"@i'..lml-r-' f,..aa''- reIe siqt,'ti-illr iot.lt-llr-tnctrll'rili s : r-tos' JlIf.lettt. l e._'',l ;elr]rla adc I i l'er' tliz.'''nn r'r ou ld==-'-

r-rot rvork if liscal institutiosi_-rer:E la|rrr1' l;_-to+'a}'" oRft'r-o.t m d. r'.. .''''.,' u 1' -it.J trtrrke_ls- did .. -'--llilIloc.L'e linancr- 1oexpalding sectors, custons oflicials were llotcompetent aud horcst enough, labor-rtrar'lietinstitutions did rot rvork properly to reducetrarsitional unenployt'uent, ald so on. Theupshot is that the origirral \VashirrgtonConselsus has beel augrnented by a iorglist o 'so-called "second genelatiorr'' relb41rs'.,'",. ',,'".,ily i ' 'rinm"'rr "ri'n ",l\l Pl l5n''l lU'llerJl ion ol I l re.e ;lU-l.ilP ir l'l iiutional reibrms depends on rvho is tall


7/15

Rorlrik Cood.bLle \\iashington Conse)n.stts, IieILo Wasitington Cctt-fir:;ionp g7gploper t1' rights has been historical\, perhapsthe single lliost irllportarrt cleternllnlri ofvy,.nlll, .nU]|tI; .s ",r'.'t t.ir-lr .r':J ot]rerjs' 'c r,a",'pd pnor. Cninq ^r e .lep rrrrtlrer.E ,'r, r'; :rrrJ llu"s I -riri, lu03 slrorv"rl Lhr-il)o]iLr.. I c trlJ. ,r|to,,t,",., jr,jlatrnr,. rrrdF}l'l|'Il| . t'.''o.'rei.a|'il,t.'n rlo l nr ' 1g11 111;irrdepcllclcr'rt el 'ecton lollg-tct'tlt eco]Iotl'rjcperlorl.iauce once the cluirlity of dollestjcinstitutiolts is incluc.led iu the regr.essior.i.o ierI. t]'rjs ri ork ]ras takerr a foltl tha lnav becailed "institutions furclanertalisn',l_to-p|:'Ie tr r,' '' d.]j.liiEUl.I'l| |,'l {|l. no;licr ri'arre of "rrralket firndarnentalislt.,,t ier'jrrg llrl i',:litrrtinn. ':lgl,' i. tl,. ,nanrr.n r]r' 'l',rrr ' l' ilJ't as geilil13 Pri'-. llgl i\\'r. lJr. trJtrlrr ut ll,c l.rller. Tlr_,\u 'ne rc' l \\ usJ lt.g1n11 fn.1.pr. r..I.r'iesJ.rs ",i,fer,,i. 1,1-ii-1;6a; rrlnm rt i, "n*,r, ll,( I,r i' ,r(J ot irj.iir.rli,;rrs J l J'lirkeli to its logical couclusion, the focus ouil-"lil llinr., l, rr polerrhrill) rlrhilrr,irjr,.- s.rJc',11," t. to' U,1',.r.,,.1o1rn,.r.. I r rst iir rr r.,r,.-.rr, b\rjr',rvpt.. rr.liurn dennl) prr l.ndJ"c1 i,solefi

| xr'olr t t t,''d."J r"' luir". r r rltiol.', sl'r rrl jnn.l]t]- ills]o]-l nation-jll the alcas o ru)c o iarv,I'rnl''rr) i ielrl: I,tolc|Lntr. glr\prr,, r.c, r||rl.,,nlr _j ''v ' 'ln \\r l'nl hl ll .ci'ni''j.' lhnlrl theIloll 1 |s .lr qr'lrr|1r irr |,ool.'_urrr'rrins! \J]' irll,r^h r,r


8/15

I

\

9S0 ],,tt n tol o Ecrnt,,1,L Lic.llllll',''ir-itroclucecl irr giotu r-egressiolis' the r'esrt]tsarc rnrch rvc.rlic,r'and lcss robust. Ernpiticalu'ork focrrsing o1l trilrtsitiorts iuto and out ol'qr'orl'th has brrnc] ]ittle evidet-rce that lalge-sctrlc il'tstitutjotla] trarrs bt rnatiols play a roIe(Hausmarrr, Pritchett, and Rodr-iJt 2005;Beljarrl lt F' Jotres irrrd Ber'ija;lin A' olkeri9005). To talre tv'o iJnpoltant cxiunples,Chir-ra enbarked orr rap d gr olr'th ill the late197G i\'ith1_-11aiqe] __lls ' .tc- rll of iricen-tjvi:s that \'crc lllal'glr'a]]i'-'-ratur e (and-cr'-rtainly rvit1'r no _ iv'er }ii]l'--Ic bl']li orsigni icant change jn its trade r'egirne ear-li'on), aucl Indjai tralsition io high gro$th in{lrp o'rr ) ,9q0. '',., pr.,.,|nd .iTa,]nTnllied) bv rr identi iable -_ iDstitutio-lal,l'.r"j*q. Tl' .' rrrd ollr, r o\l).11' lr" \ \.lq1gest that i.r policy rl,rker ntercsted iD ignit-ii.rg econornic gloutli na1'be better sen'ec1

I b1; talgetilig tJrc most blncJing corstrairts occonomic grou'th-rvhere the bang lor therefor-nr buck is greatest-than by ir.rvestirrgscalcc poJitlcal ald acLniuistt ative capital onalrbitions iDstitutional refonrs. Of coursc,irrstitutional rebt ll lr.ill be needed eventrra]'1 11'to sustain ccor.lornic growth. But Jt lrlay be' easiel alii] rnore effective to do that tenthe econom-v is aJr-eady growing irnd its costs, car-r be sprcad ovr:r'tine.In the limit, the obsession \\'ith corrpre-ilrn'.ire in:rilrrl 'rt,rl el^t tr' l"rl. tn r 1'nJin;\.., r',1:r rl'.ri is ho1'cl,."l; .rt' l,'ilic'rr'.rr',1 ri''liLiallv inpossible to lulfill. Telling poor coun-t es )lA l_ica or L,atilr Arlrerica that theyh.rr'c io sct tlreJl siglits on the bcst-Practiceilrstilutions c-'f the United States or Srvedenjs like tellirg then tliat tlre orly rva,r' todevelop is to becotnc develctped haldL,vusehrl po)icy ailvicel Fut.thermot'e, there issollletlring irlhelently urr :alsifiable about tliisadlice. So-9p1p,,enileLi,rJ.p-3gpryla thater'err the I-llost atlbitious irrstitutiotra] re orrlef brts can lle fuultcd ex post for'har'ing leftsorrethir.rg out. So you re{bnrecl institutions

\toL. XL t (Decetnber 2006)probleur urust be u'ith lack of salety'nets andirrader1uate social jnsrttarrce. Yorr r'e bnlledthose u'ith little effect? Obviously the plob-lem was that your political slsterl rvirsulable to gelerate sulficicut credJbiiity:locl


9/15

Ror1.riL Good'bye \4ra,sl'Littgt:ott Consenstrs, HelLo Wrl.shingtotl Colllsion? 981irrrl'.,lir..rr.e r,il]r llro,r" \\lr^ itrgre tl ar Ihero.tl ru'.,1r..i .t is pno' 1,r,;1,,';ui'., ,,rrd u, rkgo\:elriltrce. ancl that large :rid florvs arerllore likelr' io disap1rear iu tlre pockets o 'col'r-upt of Jciirldolrl than to bster developnlellt. Ther' al'que tlrat tlarr1' o 'the poolestcoultries ol Lhe rvorld (e.g., Beniu, \'Iaii,SenegllJ) lrar'e ill lact niade siglri icarrt str.idesin lmproving theil econou'iic and politicalinstitutiors, and tl.iai in ar.ry case the iuvest-nerts in hulnal capltal tlint tlrcl'advocatervoulC likelv foster better ilistitutiols as rvell.itr llreir ri'rv tlrr. r'hsessi',truill, gor' 1113 1oi' n l'''r jusl lll l \l'Use |'ot l-ir h r utIl'lt'ics .r.,tdo tlg rnore to lrelp poot natiotrs'

countries have enibarked on high srou'th intlris big prrsh laslrion or tl'llough t}ie irr usiclrrof large anlourrts of for.eigrr aid? s_ sachsicrjtjcs ]oi,e to Poilrt oirt' there has not_6ei-n-slrol'tage o {prcigrr: .s]il 4triqL qlld !or'o1the mos_t l alrdly glorving cglltt1res oflhepast lrave done so rvi out reb,itig u-ruclr -or+\\. .tcrrr ,rid. S.,"lr, .r',d hii ( ollaLuri,lurs'' ourrlet lhl ^[li,'l ;5 '|e j.l] he''ause jt .t-t'll ls lrorrr lriqlr tr..,:,1,nrl tosl. lorr-producti\iiiy agriculture, a vcr] Leary diseasebur'den. adr'else geopolitics. aud s]*' diffu-lsion o 'technology rourabroad (Saclrs et al'i2004' pp' 130_31), alJ o 'rvhich nra]


10/15

9SlgIo\\', br]t t1rat the r'gr'orvth splrr_ts er'erttrrallyljzzlc out. This suggests a ratlrer dillcrcntr-erlec]y,, one that focuses iu the short rul otrselcctively, rerroving binclilrg constraints orrgl'orr'th (u'hicJl rrla1' rveJl dl Icl_ ltollr courrtl]'to countrl'), and in the medium to longer-lIull o]l ellranc lg resilience to exterrraI\ s]'ocl.s.11 1 u ]l ciaborate otl t}r s r'ellleclvbr:lou'.Ultinatelr', u'her-e the U.N. N{illenniurr\ l*'j , i Jjrli yrru.l lrurr, I-rot,t,t, ' Jt ttrI R / '.,,/ i. irr lre crretrt oI l.r n\, IPJqP t]r ,r 'r

\ ir\\'rr P\ ..t" l'.rte .rt,d , nllsoqrlonrh ilr rheld.d11'' 1l .' | , "l'fi'l' r'.- ' '.lril'rrnd h) it"\1r1'11n1. l-lr" U.\. V I'orrr,irrr,' lrnjeqt ;.ibased ou lhe vieu. that u'e basically klov'or,,u.rlr ru rr,,'.nJ J L,,'ld. rr'.Lirious rrr'd',r'rry clfoll ln ' r:rdi, a'e rrorld porerll: \\''have srrccessfully jdentified all ihe miu qir.istLiit rnatter. and rve better rroi'e on all oftlretl sitrLultatreou sly' I'aan ngfrotn Reforn,Ll1' contrrrst' is arl ocle to lrrrrnilit'rr \lrlra u'el.:rr' l, ,l'r'' ,l' ii .:,'s irr'l']r,'ir'r i. |]l. i'1])' ''l 'r..urr.irrj ll .'L rr, It'oti tnn nrr, I \\7 tr" dr" ,l 'u rtl'lr) fr. rd'o( , llirn.. tr'.'c cau- \lor,ill lltr'I '',ll.'']ll'i''' ''ur ,' 'or's''l','r" Ithc pa1'offs seerll the gr'eltest.6' A Prnctical Agcnrla for Fornu[at ngCroutlt Stttttt,giesBut u4rirt is the operatioral contcnt ofsr.icL ii cautiolrs, cxpelirnentalist approach?Il t'c adopt the path rccoli.rleldcd byLtttrning frant Reforlt., cal' rve sa1' anything1lloIc l]liu-l "di ' ?rerrtst:-okcs brdi ferent[o]ks" or- avoid a rilrilistic attitudc r.r'ber-c"event]rirr" goes"? Lean ltg fronL Refctnllsays little tliat is useful o1r this, brrt I thiDktlre ars\\,er is ")'cs" to both questions. Lct rrebriefl1' orrtJine her e a rvay o thinkir-rg aboutgr'ou.t)i strateg es tlrat airlicls sorne c-'f thcobvious pit lls.rr FolLn ,:mpiical rnalysis ivLiclr cnrphasizcs tbc roleo r:rtcrn.r] s]rlrks (nl intcra(tjol \r'itlr 1vc'lk hstjtL)liolrs) {5tlrc c,Llprit Ior s,r)wth collapses. v'c Rod, ik (1999)

.|tltLnla.l of Ec:cntt:l1tl C I'itera'l]u'e, Yll' XLl\/ (Dece]nber 2a()6)Tl.is r11'r,'*.' , or.sisr' nl llrrP, s-'1rterrr..rJ"ln'''' 'r.' r ir'. .r.c r'' '''l l" ulrdcr't''l, ,ha3o'tlt '7.* roiigu-" ort_*I " th.

to tr'get tlrc iclenti led cotlstlai}rts 4PPIopd-atelv''Tlill d, rve rreed to inst t:rtiorlaliie tIjprocess of diagDosis aud policy Iesponse toensule that tJie econolty rernirirs dytalticancl grorvth cloes lot lizzle out.6'\ Str'1l 1: Crotutll D agrLo.sticsPolicy le br'rlls o ' tbe (ugllcntcd)\\iashi gton Consensus t;.pe are ineffectivebecause tl.rere is irothiDg tllat etsurcs thatthcv are closely tar-gcted or rvhat nray be thclrost impor-tant co[strajrts biockitlg eco-romic grorvth. The trick is to liud thoseirreas rr'hcl'c rc br'rri t'ill yield the greatcstretun. Othem'ise, policynrakers are cor.r-clemned to a spra)'-gur'r approach, thev shoottheir refom gul) o]r as rnany potclltial targets as possible, lioping that sone v'ili turrout to be ibe or:res they are reiLlll, after. A sr.rccessful grou'th straiegl', by contrast, bcgiusby jclertiflne the most biDdiDg constraints.Ilui car this be douc? I Ilirusrnarrn.Roclik, ancl \rclasco (2005), rve devo]op ahamervorl< that rve believe suggests a positiveansrver' \\le begin witlr a basic but porver ui

high or the privirte return [o :ill\'estr.ielrt rnr]stbe lou'. If the pro|lcr1 1, ,ti1[ ]ey' prli'irteIetur'ns, that u tu ] l]-]ust be dtle r:itlLer tcllorv economic (social) retunrs or to a laigegap behveen social and private returns (Jou'p \'ate aPploPability)' TJre first step irlthe diagDostic analysis Js to figure outt'hich of these conditions more accuratelyclratactcljzes the ecoDomy j]r questio .!-ortunateiy, it is possible to nake progressbecause each ol these slndrolnes throu's outdi 'erer'itscts o[ diagnostic sigllals or getlcl--atc dilferent patten.ts of coltloverrents jrr

(

cconolry, ecororrjc acti\.itv lnust bc con-'|r,]jl''l li) J|le|tn n l'' oJIre lro\i]E _!\n 'Lr''nr. illrliTr,-,,Tof i'r.,r,. rnus'Le 1,"' .


11/15

L.w Cturn tl) cconorllic rctilh ? Hish cost ol inarlce," \ ,,'-=\ /'- /'/ \,/*i),',.'u,,,", '*, o.uLo" :o'r J r,' '|r. Lns l|)l,,,Ir i:ll'lr9l ' ' ' , ;. -/t\ f\ Itt \ I \ II I \ q"\"n''r.'r '.rr.r II I \ t,"1''"' r:ril rrcr II I \ t\ /\ I' J ,/ \ " i-",,*'o', ,.urdir.t,orr I",|i:],,,,. .n,li-il. * / \ ,rr,,lr",', '\n,nirj,/ Ir' \ \' ||_J|\Lo\.j)' ' nli,'ro IsIr nllcrc ]isks: ]ov'u,i,lll" p,opsrb nshis. llnanciJ, cio'estic;iiJ co.rupti.n't.res *",ill?1,f.)"t savrns

Rodl"ik: cood.by e Washin gton Consenzu.s, H elLo Wasl ngtotl C onfusionP 983ProLlernl Lon, levels o Priva e i vestnleDt and err|reprerreurship

Figl/'? 1' Growth Digllostics

poointer-mediation

e onorllic r'ariables. For elarlrple, iu anecouol'ny that is cor.istraired by cost oflinance *'e rvouJd expect real illterest ratesto be h;gh, borrowers to be chas ng lenders,tl]e Current irccorrnt defic t to be as large asthe br'eigr borrorvirrg constlai]1t will a]lorv,and entrepreneurs to be full of investntent

pret close to caPtu nq the situation ofcouDtr-ies such as Brazil or Tulkey, for exam-nle. Bv cotrtr:rst, in trr e(olJom\ r.rlrete eco-Iror r. ic rct ivity is conslrained hy-lou+rjvJterctu1nT-rrTciT r ate rr l_be ]oru. blnkl rT]he fl rril_ in_Tq'ildl g Jer ers *ill be chasing' lffi tre't-urren| ucou r' r wj]l he'u."i_ b]I,c" or irt surpIus. ltrd en1rcpreneuls rvjll L. 'nore iljerestecl ifiturtm-


12/15

984 Jottntal of Ecc.,netntic L tera!.lu tt. \/ol. XLI\I (Decetiber 2006)l''''i' V ;Il.|) llt oll'tl Pjl\']fo]lll f.l||: | ui-. ll''l)'r,'r'a6;hi!l-r.1rrol''.rtaliqr'i" rn:L) b, plut, (i-cd poot\'. l,igh iliflatiou rrray geleratetlirct_o r-isk, labor-capital colr 1icts rla;ldcpr-ess production incertives, and so otl.lterl atively! t}re fault-uay-lie.uthrrrarkelQil,''"s such as techlological spillovers.cootdirration 'aj]ures' alrd ptc'blelrrs of eco-uouic 'self-discover-y" (i.e., ur'r ce rt ai 11t-\'about the underlving cost sttuctule of theL.cororry; see Hausrlarur and Rodrjk 2003).s usrra], u'e ]ook for'tlre tell-tale sigrrs ofeacb o tlrese. Soriletines, tlle diagnosticaralysis proceeds dorvn a pat ticular path notlleczruse o 'rlirect el,ideuce brrt because tlteother paths have been luled out.l2Tt is possible to carry out this kild ofirr.Lh. . r'ri l r'rclr {rrer lev"l ol Ji rrlcreg,rtion, ald indeed any real rvor lcl applicationhas to be corisir'ler-ably rlore dctniled thattthe one I have sketched Lere. But I liope thissunrrrary conveys the value of an cxplicitlydiagr-rostic l_an'rervork. Even a nrdiri'ientar1applicatior.r of these p'-ilrc\rles can somc-ti es r evcal ilnportirnt gaps or shortcotttingsi1l tr-aditiorral rcfbnn packaees. For exauiple,'rvhetl the cost o[ finarrce is an rnpofiantbinclilg constraint (as seens likeJy in Brazil),institutiorral irnilroverreDts airrcd at irnprovirrg tlre "brrsirress cl Ilate" (i'e., r'edircirrg redtape, lou'er'ing tilres' atld so on) rv ll be uotolJ1'ine Ieciir'e (slnce tlre problerll docs notlie $'itb investnent derrarid), but it can alsobacklire (silce an inclease itr investrnentrlellarrd vil] prrt ul'tlicr uprvards plcssuteor'r interest Iatcs ).6.2 SteT: 2: Policq Da.sign

previoris step. 'fhe principJe of policy target-i l' Jl ii-a r l' plr-' tcss.rqe, i:rg'-t l I r, |'oJ ic) re(forr\e e. clo.rl) ,rs g"sih]p on iT"',or r rce of i I'e, I isl or.Loq-+lence il cled il corr-strainti aie ie ll4I!co}}s ajnt' br exalnplc,1ord tl'" llol,lc'r' i' lhe tesull nl lack ofco -,pplitinn Jrrd l:rrge hat k spread.. the.rp1''opfiate Iespo Se is to t'edrrce inPedjrr']ents to i'corapetitiln in the balltiug secior. ]S:illlple as it rnay be, tli s fir'st-best logico ten does lot rvork, and indeed carr beeven connterplocluctive. 'fhe reasol is thatlve are uecessarily operating in a secottd-br:st r:rvirolnrent. due io othel distoltionsor adn.iinistr ative alrd nolitical constlaints.lrr rie.ignir'c 1'oli.y. rre h,r\e ln l,P orl lrc Iloulout lnl rrnlblos, en cornlli' Jtiorrs rnd \urrcxlrecicd L, trcr''jucr.r.s. Lel rnP teluttr loan exaliple liom Chilra. FormaLorvtrel1lTr ghts 1rr Chirra'.s torvrrslrip anc1 r.illage etlter-1r-i:'\s ltE.t upt' re.'le.l rrot i r f ri\l,lPran,l, o1 in rhn cerrtrrl qn\plr'ner,l. hui irr I .g,/lo,:,1] gcrrr,t rt.r;trts ' rorvt,:lrips ur villlgns\ \ ,l-'rorn llre lens of lir.l-hp,r refnrr ll'ese ." \ - llIPllli.Ps ;' |lohIcllal;l' sll].'e. i|^ nl'l' ( (u , *ts"l'i., iit- ;. u '1;11 Pri\JrP ir,v.'lrrr, rt ',l'd )' Yentlcprenerir-ship, it rvould have beer far'pr-e r'ableto jnstit]tte pIaie pIoPeltyrights (as Russja artcl other' EasTEITI En r'T iTiorreco]]o]llies dicl)' But the first bestlogic is rlot lrelpful here because a PIatepr]perty s1'sterlilcJics oll arr ef 'ectivi: j di-cia!-To r-hE-jrfo r'c e ll el t of PIoPeft}' Iightsand contracts. In the absence of such a legalsystcnr, bnnal propclty ghiS ale tlot \\'o]'thtiluch, as tlinor'ity sl'iarelro]dels nRussiasoon discovered to their chagrilr. Until ane Tective judiciary is cr'eated, ii nray rlakclnore sensc to lnake virtue out of necessityand bl'Ce eltlepleneurs into PaltnershiPu'ith their- rrost likely expropriatols, t]iclocai state authorities. That is exactly rvlrattlie TVEs djd. Local governrnents werekecn to ensure thc prosperity of these Ienteryrises as theil equiy stake generated,rever.-es direr Il; lnr lliP'n. I r rlrP 'n\ irormerrt chalacteristic o Chjrla' p-LgBgJJy \rights were effectively more secute under]

once tlre key problem(s) ale identif ed,rr'e r-ieed to think bout the appropriate poLi-c): respoDses. The key in ihis step is io focus"r' 'l'" r " L'lcer larlrrr"ti'I'!l]] 4'" pslitaariljderrii ied ! the

l: So irr th c, e of El Sa\,aL]or rr'e concludcd that lackol sel 'discor'crl rvr* !n illlPo ani nnd bjlldjng constrnnrth P.irt l)cc.ltlsc tber'e ivas llttle c\idcn h lavrlr of theoilx]l t .lditi lJ elPlin iiolls (llnusrn nn and Roddk2005)


13/15

Roclril;: Coodbye Wa.shin'gtoll Corrscllstls, Hello \\lasl' 'rtgtotl Cortfu'sion? 985

)

'clilect iocal governn'le t orvnglship 1!al'lr'.'.-r*ori,l l'k. lr l "t L*n ' ut clet I prir ale,',,r'''''isl'ts le:.LI teqjrlre'' Si'.l,'-i,inpl''s'.'n,, |'" asily rrulh1llierlh,,drrk l{r{r); . A-; ar''tddiliurral illus{ritiotr'consider the case of achieviug integratiouvith the ro,otld econouy. Policvrnakers iucou tries such as Soutlt Korea aitcl Tair'van inthe earl-v 1960s and China in the late 1970shacl decic]ed ilrat en]rancinq tlieir count es'pariiciptitiotr il t'orld uraikets ro'as a key.objcclire I or a \\'P\lPrll rcoltorrri't Ihe tno''clir'ecl r.',rr. 'uo'rl,l ltav" l'ertt fr' redtrce orc]irlr l)ate barljcls to irlports arrd 'or eigr'rillvestLnert. Instead, these countfiesechievec.l the sarue ends (i.e, reduce theiurtitraclc bjas o[ their ecortorl.ric poLicies)ILroug]r url olr\ elriiollcl lrrPJlrs Soutlr Kore'r"r'J Tlri'rr'' ernirl.';eJ c\l'orl ldrqrls arld, ,o,,rl .rrl'srJi, s lol ll,' il lit trrs Cl itr'r. "i..J ^ut .l'c,.ial ecol otrric zottcs uhprelnr'' itrr irrrc."'ls lrad fl, r e:c in L lree rtaderc'ri , . t','' ,1rr 'l'er-r c)r'r'r llr' r' Lrnr urr'. rrlio ral t' 1'111,'11. ple'urr'ilhlv I'P' r1l\P lll'\cr-eirtecl lrvcr ar1jr-ritrr,ellt costs arrd ptrt less.lr' . ur. r'..1.'l li'l', J so'i,'l h.rrgrtinr'6'3 Step 3: Instittlt ol a l.i:ing 'eJonlt

'f}.ie ratute o{ the bindnig cor'lstraint \1i11uecessarilv chauge over tirlle. Fol exarr ple,schoolilg rntry not bc a bilrding constr&ilrtir-iitjalli', but as ilvestlT]errt and entlep e-r.iculsJiip pick up, it u'ill likely becorue oneu lcss ilre qr'ality al-rd quautiq' o ] schoo]s'increase nt,"i tit,i". In Hausn,aun, Rodrik,and Veltrsco (2005), u'e illustlate thjs issrteusirg the ex,rrrpie of tlrc . Dorninilan il{--D;b1i,. Tlri" corrnlo .vr ahle lo sPurororrr]r .'.t illt J ]l'llol,cr nl seclnI-q rec]I]('i tortrrs tl'.'t siirrrulrl' d ;"u' 'ilnlrrl it 1Inrrli.rn r"d n'a.lrrilas Bul il regleclpd rn-'L-irrg tlre itrsttrrtliotrll inr"sl rrerrls letuiled ro\l, irrl -esili.r'.e lIrd rohrt'lrrrss lo '( olrorrrl(.ro.\th esn-, idlh in tlre urec nl" firrJn'ial .",.,'t"i '.ii't"'i"'1 r-'l .rrpcr'i'inn \\'l'err ISct'i, r'L,'r l1 |ed ro 1|- 'lrri'r; u uulisl /irrlo r


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9S6 ]olu'nol. of Ecotttlrric l-iteraI.lu'e ,Yol' XL/-iI (Dr:celr er 20()6)Institutionr,rl lelbrlrs in these a:r:as arec']j Jjcu]t to irllpJerlieut aud thc1'ta]ie tjrr]e.Ecortor't-tic sci.^nce $p cally provides r'erJ ljt-Lle guidance on horv to proceed (Avinash K.Dix]t 00.1)' l3ut tlrc po1rrt Js that t]]eso dif ]_cu]ties c]o tlot ueed to stallcl in t]re rr'ar' of br--r',,,1 r',rrg lers rr' I,itiou.. r.rore 5pleLtlv,.. Jrrdllrore cale ulJy targetr:cl pclJicy injtiati\'es thatcarr lrave very porvetlul e 'fects ou ignitingiro"llr irr rlrr' 511o1l 1r111. \\ llp1 i..1'"lrrit' 'l ru sur1,tir, Br','urlr .l''ul,l rror hel, nr'[u,, '] rrjllr ul r' i. reluired ,o;,,111,1r, i' I

7 . Cottchrlhtg Re nurks]t is ]lo\\'tillle for'rr confession. s the pre-ceding discussior) orrght to have nacle clear,I 'illd I'earning frorrt Reforrtt a usefrt] allc]irnpoltalrt docurnent ir.i no snall partbeciruse its centlal theltes parallel tLose thatJ llar'i: bcell aclvtx:atjllg ]_or solle tillcl a]otr lrvith a r.ruruber of n.i)' oolJeagues at theKenrl:clr, Schooi (see Jn particulrrr llodrik2005a; lJausrnarn, Rodlil


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Rorlril;, Cood.bye \tr;ashingtott Consertslls, Ilellr.' \YtLshingtott CotLsionP 987rediscovelv is tl'rele bre ood rrervs r-iot just'ol l\oul tr"liotr ' btrt lirr llr r" o'rr'rIir''pr ofession as \\'ell.

llEFfirru\cEs\ | l. lll l-.,'' ' l. 5]l l''n |,' ' |'' ',l' ] l''l '' ' '\R'l '''' :nnl _||''r"],'nr' o:i lr''' 'lC.r,'.rr',i Dr'l1rr"r.r: ^, f r'-,Jt,,\,.r, ,riLr -\,,",, t,i L,., B r, r., q (5r369 1.101.rrclrar'rLz' \iil rirr'c D' 2003' "Deten narIts of Tl'ar]':lolicv Refor.in in Sub SaLer.rn Afritzr'" lountal of,\{rictn Et:ottotttir:s. l2(3)r 417 '13(]lri:rr. S1r:lolrrrr. errd N' .rrtin Rar.J]jon' 900']. "|IolvIllve the \\'orlcl.s Poorr:st Flrrxl slnce tLe EarJl'l9S0s!" \\iorld BLrnk Policr Rcsealch \\tolkingP.qrer 3J1lL,,,llii r p,.,,1 .,t D, .r l D.. l..r. 2nr ]'r.,r'll \\,,.1,1Crrt Po\(xty jn II.rlfl llorv Policv Refolm irnd ti'.ti"" ,riit c"' N'cet Intcnationl DeveloprlentGoJs.'' i;!'llrkl Daory'oplnll . 29( 1 1): 1737-1B02'Dilz-AlcierrcL o. cirlos' l9B5 Cood Bl'r: FinatcirrlI{' f i'r. ll'll" trr r:',,:^l ' -r 'l' l'tt!"tt tD;,.," ,,, E ,nr,' lcI" riln- ar'rr ., I' K l0Ol /,/r,i,- ,, ,,,1 L't, ,tt'\L ln i1'c orlts of c.)1 ]r'l.lr'l P in'ctn:P] i]]ct()n Ulri\'(.Isity Press'Eastel']\,. \\iil]j.lln. 2005' "Nat;rlrtal P()lic es andllconirrrric C}orvth: A RcLLpplaisal. Itt Hanlboolt off.\'t.,. (:.," r1,. \' l. / i. , 'l P {. ' 'r 1 S.

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