Chapter 11: Development Policymaking and the Roles of Market, State, and Civil Society

11.1. A Question of Balance

NATIONAL GOVERNMENTS

A help? Or a Hindrance?

National governments have played an important role in the successful development experiences of the
countries in East Asia, but in other parts of the world,it often appears to have been more of a hindrance
than a help, stifling the market rather than facilitating its role in growth and development.

(So, to address the confusion regarding the said matter, this chapter examines the balance of and
relationships between statwes and markets in the process of economic development.)

Topic Outline:

√ Development Planning: Concepts and Rationale

√ The Development Planning Process: Some Basic Models

√ Government Failure and Preferences for Markets Over Planning

√ The Market Economy

√ The Washington Consensus on the role of the State in Development and its Subsequent Evolution

√ Development Political Economy: Theories of Policy Formulative and Reform

√ Development Roles of NGOs and the Broader Citizen Sector

√ Trends in Governance and Reform

11.4 Goverment Failure and Preferences for Markets Over Planning

(The result of dev't planning have been disappointing, and it can be seen that the government policy in
many developing countries has been one of often exacerbating rather than reconciling these
divergences. So...)

What went wrong? Why has the early euphoria about planning gradually transformed into
disillusionmeny and dejection?

Failures of the planning process:

√ Deficiencies in Plans and their Implementation

-Government plans are often overambitious, and they try to accomplish too many objectives at once
without considering that some of these are competing or conflicting with one another.

√ Insufficient and Unrealiable data

-Unreliable data greatly diminishes the accuracy and internal consistency of economy-wide quantitative
plans.

√ Unacticipated Economic Disturbances, External and Internal

- The dependability of a country to the vicissitudes of international trade, aid, "hot" speculative capital
inflows, and private foreign investment, makes it difficult for them to engage in even short-term
forecasting, let alone long-range planning.

√ Institutional Weaknesses

(These weaknesses includes:)

- separation of the planning agency from the day-to-day decision-makinh machinery of government

-failure of planners, administrators, and political leaders to engage in continuous dialogue and internal
communication about goals and objectives

-the international transfer of institutional planning practices and organizational arrangements that may
be inappropriate to local conditions

-incompetent and unqualified civil servants

-cumbersome bureaucratic procedures

-excessive caution and resistance to innovation and change

-interministerial personam and departmental rivalries

-lack of commitment to national goals as opposed to regional, departmental, or simply provate

objectives on the part of political leaders and government bureaucrats.

-the political and bureaucratic corruption that in pervasive in many governments.

√ Lack of Political Will

- The lack of commitment and political will on the part of many developing country's leaders and high-
level decision makers often resulted to a poor government plan performance making the gap between
plan formulation and plan implementation wide.

√ Conflict, Postconflict, and Fragile States

- Violent conflict or the large-scale failure of a state results in a catastrophic failure of even the most
basic development objectives.

√ The 1980s Policy Shift toward Free Marketd

- As a result of the disenchatment with planning and the perceived failure of government intervention,
many economists, some finance ministers in developing countries, and the heads of the major
mechanism as a kwy instrument for promoring greater effixiencu and more rapid economic growth.

√ Government Failure

- The government regulations may improve industry efficiency, but poorly designed regulations could
stifle emerging industries or even facilitate corruption.

11.5. The Market Economy

12 Market-Facilitating legal and Economic Practices

1. Property rights clearly established and demarcated; procedures for establishing property rights and
transferring them

2. Commercial laws and an independent judiciary to enforce them, especially contract and bankruptcy
laws

3. Freedom to establish businesses in all sectors except those with significant externalities, without
excessive licensing requirements; analogous freedom to enter trades and professions and to attain
government offices

4. A stable currency and banking system, including a reliable and efficient

system for making transfers

5. Public supervision or operation of natural monopolies (industries with increasing returns to scale) as
occurs in industries where technological efficiency requires that a firm be large enough to supply a
substantial fraction of the national market

6. Provision of adequate information in every market about the characteristics

of the products offered and the state of supply and demand, to both buyers

and sellers

7. Autonomous tastes—protection of consumers’ preferences from influence

by producers and purveyors

8. Public management of externalities (both harmful and beneficial) and provision of public goods

9. Instruments for executing stabilizing monetary and fiscal policies

10. Safety nets—provisions for maintaining adequate consumption for individuals affected by certain
economic misfortunes, especially involuntary unemployment, industrial injuries, and work disabilities

11. Encouragement of innovation, in particular, issuance and enforcement of patents and copyrights

12. Security from violence, the most basic of all social foundations