I spend so much time playing at being a geek that I forget I once got a degree in international relations. But other people remember, so I got this email a couple of days ago:

I had a choice between two essay questions on the exam I was taking in a Global Politics class. The questions essentially flowed thus:

1. What should poor countries do to encourage their own development?

2. Have the IMF and World Bank had a positive or negative influence on global economics?

In my opinion, question 2 was harder to answer than question 1 and I felt a bit insulted that the prof would even put question 1 on the exam because it not only contained really lame phrasing but it also seemed just way too easy to answer. I chose to answer question 2 for this portion of the exam because I thought I would be able to put more thought and substance in question 2 than I would have in question 1. Dave said that question 1 was the really important one and that you would be able to explain to me why.

I’ll spare the casual reader my reply. If you’re curious, International Political Economy in 1000 words or less follows after the break.

The way you answer question 1 will inform your answer to question two. Beware seemingly obvious questions on essay exams. They are usually tricksy, tricksy traps for the unwary.

The first question’s phrasing, I would argue, is deliberate. What should *poor countries* do to encourage *their own* development? Much of the literature in international development actually focuses on the actions of rich countries within the global system¹ and less on poor countries.

There are several different theories on what poor countries themselves can do, but they tend to fall into two main camps, at least in the real-world policy debate (which is both ahead of and behind the academic debate). The first camp is the structuralists, which more or less believe the global system encourages the rich countries to exploit poor countries. There are many variations on this theme; Marxist class analysis to socialist center-periphery to historical path-dependency to what have you, but they basically say that, however it came about, the world system is set up to extract resources from poor countries, do the good work in rich countries, and sell it right back to them at a premium.

There are lots of sophisticated variations on this analysis, presumably some that actually account for the Asian Tigers, but most take this as their starting point. Their proscription for what poor countries can do independent of rich countries is generally one of ‘opting out’ of the global system in some way: import substitution to build up and preserve domestic manufacturing and thus move from raw materials exports to value-added goods, restrictions on foreign investment to prevent global corporations from getting a foothold and leveraging economic power over local affairs, or enforced land reform, among others.

The second camp are, crudely speaking, the market-oriented theories. They recommend some flavor of austerity program. They advocate opening up a country as much as possible to the global markets, light-handed regulation but a strong and impartial rule of law, privatization of state-owned enterprises, cutting of subsidies, banking reform, transparency, and paying for government operations through cuts in social spending. They view the transition from a socialist or socialist-tending economy to a market one as a necessary short-term pain for long-term economic gain. The global system is a positive force, helping to eliminate waste and inefficiency and guiding the economy to focus on sectors with comparative advantage. They argue that far from protecting local industries and encouraging economic progress, barriers to trade simply prolong or exacerbate economic problems by directing investment to non-competitive industries and insulating them from the market pressures that force them to improve.

The answer you choose to your first question will largely determine your answer to the second. While more concrete, the second question will basically fall out of those premises. The first camp find the
IMF’s actions post-1985 infuriating. They like the World Bank’s infrastructure investments, but are suspicious that their transparency initiatives are a disguise for multinationals arranging things to better suit them. The second group blame the IMF for enabling the Third World Debt crisis, but love IMF conditionalities. They view World Bank projects primarily as boondoggles but celebrate the Bank’s work on banking sector reform, including their famous report on the Asian Tigers that tended to validate their views (but was cast into doubt by the Asian Flu, subsequently slightly rehabilitated). You do have additional questions of rich-country-to-rich-country trade balances with the IMF, but most of the issues around the global economy that those institutions address have to do with the ill-termed North-South wealth gap (if you follow Jared Diamond, of course, you view it as a temperate-versus-tropical gap and change the subject when people mention Hong Kong or Qatar).

Nowadays there’s less (though not gone, both in academic and policy realms) argument over the fundamental ability of markets to generate wealth, but considerable disagreement over the relative value of the costs and resulting distribution of wealth. The biggest challenge to the first camp is a lack of demonstrable success since some feeble growth immediately following independence for India and a few African countries. The second camp has a better record, but must contend with some prolonged depressions and political instability during the restructuring process.

So basically most of the interesting questions — especially balancing political time versus market time (i.e., the market took something like 9 years to exceed 1989 levels of most economic measures in Poland after restructuring but went through something like 11 governments in that period in large part because each government got blamed for the pain of transition) — are contained within the first question. The second one gets at them obliquely and does deal with the role of rich countries, albeit indirectly. But there’s quite the minefield in the first question and a lot of issues, especially revolving around social values, political pragmatism, and even environmental concerns, not to mention a disagreement over the actual role of the market as what political scientists like to call an “authoritative value allocator”.

1 How those theories define the global system generally determines
their proscriptions and analysis of the behavior of rich countries. Return

Note, I didn’t say the field misses me that much…