growth policies no substitute for

Growth policies: No substitute for thinking

economics sB growth sB policy sB

I have just finished reading Chapter 2 of Rodrik's latest book (which

is a revised version of this "Growth Diagnostics" paper):

Most well-trained economists would agree that the standard policy

reforms included in the Washington Consensus have the potential to

be growth-promoting. What the experience of the last 15 years has

shown, however, is that the impact of these reforms is heavily

dependent on circumstances...We argue in this paper that this calls

for an approach to reform that is much more contingent on the

economic environment, but one that also avoids an anything goes

attitude of nihilism. We show it is possible to develop a unified

framework for analyzing and formulating growth strategies that is

both operational and based on solid economic reasoning.

The authors then offer a growth diagnostics framework that is

summarized by Rodrik here. The paper concludes with the following:

Across-the-board reform packages have often failed to get countries

growing again. The method for growth diagnostics we provide in this

paper should help target reform on the most binding constraints

that impede growth... As our discussion of El Salvador, Brazil, and

the Dominican Republic illustrates, each of these circumstances

throws out different diagnostic signals. An approach to development

that determines the action agenda on the basis of these signals is

likely to be considerably more effective than a laundry-list

approach with a long list of institutional and governance reforms

that may or may not be well targeted on the most binding

constraints to growth.

I agree with Rodrik's general message on the context-dependency of

growth policies. His offered framework is also useful for

policymakers. Yet it is no substitute for thinking by developing

countries' economists and policymakers: They need to analyze which of

the agenda are particularly relevant to their respective economies.

Rodrik puts it best: "The framework does not economize on inputs (the

thoughtfulness required to reach decisions), only on outputs (the list

of things that we recommend governments should do to get growth

going)".

PS: For a somewhat similar exercise for Indonesia (though it doesn't

seem to be using this exact framework), see the reports posted here

(particularly its Special Focus on Regions reports, on the left

sidebar).

PPS: Here is a set of papers commissioned by the Commission on Growth

and Development.

PPPS: Charles Kenny offers a review of new evidence on growth in the

last six years (his answer: Not very much!). HT: Marginal Revolution.

Labels: development, economics, growth, policy

posted by Arya Gaduh at 10:42 AM

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