The political economy of poverty, equity, and growth

477 Pages·1999·3.21 MB·English

by  Deepak Lal

The Political Economy of Poverty, Equity, and
Growth
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The Political Economy of Poverty, Equity, and
Growth
A Comparative Study
Deepak Lal and H. Myint
CLARENDON PRESS · OXFORD
GreatClarendonStreet,OxfordOX26DP
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©Deepak Laland H.Myint,1996
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Firstpublished1996
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Preface
This bookprovides a synthesis ofthefindings ofa multi-country comparativestudy financed bytheWorld Bank. The
Introductiondescribesthenatureandscopeoftheproject,aswellasitsintellectualdesign.Hereweneedonlynotethe
division of labour involved in writing this book, and our acknowledgements to the many individuals without whose
help this study could not have been completed.
Thebookconsists oftenchapters. LalisprimarilyresponsibleforChapters 1–2, 5–7, 9, and 10, Myintfor Chapters 3,
4, and 8. Wehavesoughttomake thebook intelligibletothegeneral readerwithsomeknowledgeofeconomics, say a
readerofTheEconomist.Technicaldiscussionsare putinstarredsectionswhichcanbeskippedbysuchreaderswithout
losing the thread of the argument.
Our major debt is to the authors of our country studies, without whom obviously this book could not have been
written. They are: David Bevan, Henry Bruton, Mauricio Carrizosa Serrano, Paul Collier, Gus Edgren, Edgardo
Favaro, Ronald Findlay, Claudio Gonzales-Vega, Jan Gunning, Bent Hansen, Angus Maddison, Oey A. Meesook,
Frederic Pryor, Douglas Rimmer, Simon Rottenberg, Antonio Urdinola, Richard Webb, and Stanislaw Wellisz. They
worked with various associates, who contributed to the country studies. These are: Claudio R. Contador, Annibal V.
Villela, SoniaMaria Rodrigues da Rocha,Luis A. Villela, Victor Urquidi,Jesus Reyes Heroles, RafaelIzquierdo (Brazil
and Mexico); Alwyn Young, Linda Lim, Pang Eng Fong, Carl Stone, Philippe Lan Shin Saw (Five Small Open
Economies); Pranee Tinakorn, Chayan Vaddhanaphuti, Martin D. Chrisney, Ukrist Pathmanond (Thailand); and
Victor Hugo Cespedes (Costa Rica). In addition a number of special studies were commissioned on cross-sectional
aspects of our subject. We are grateful to the authors of these: George Psacharopoulos, Gary Fields, Jandhyala B. G.
Tilak, Jere R. Behrman, Harold Alderman, Alexander Berg, Elliot Berg, and Zafitis Tzannatos.
Next we owe an immense debt to Anne Krueger, the thenVice-President of Economics and Research, and theVice-
Presidents on the Research PolicyCouncil of the time (1985), viz. Shahid Hussain, David Knox, and Joe Wood, who
approved this large and risky project, to be funded as part of the World Bank's comparative studies programme. We
hopethattheirtrusthasbeenjustified.WewouldalsoliketothanktheSwedishInternationalDevelopmentAgencyfor
providing partial funding for the study, and Bo Kalstrom for arranging this.
The project was overseen throughout its life of four years by an external
vi PREFACE
panel consisting of Dharma Kumar, Gerald Meier, Guido di Tella, Perry Anderson, and Shegiro Ishikawa. Their
inputs, at theperiodic conferences we heldtoco-ordinatethisvast project, wereindispensablebothinmaintainingthe
intellectual integrity of the various country studies and in monitoring the progress of the project. The draft of this
synthesis volume was discussed at a conference in Washington in September 1989, with the principal authors and
members of the external panel.
In addition Sir Alan Walters and Professors T. N. Srinivasan and Jean Waelbroek provided comments on this first
draft,whilstProfessorMarkBlaughasprovideddetailedcommentsonSectionsII–IIIintheIntroduction.Therevised
second draft was discussed at seminars in Japan, Malaysia, Singapore, and Thailand, and at a conferenceorganized by
the International Centre for Economic Growth in Mexico. The comments by the discussants at these seminars were
most useful, as were those by the anonymous reviewers for the World Bank's publications committee. This led to a
revised third draft in early 1992. By October 1992, the committee decided not to publish the book as a World Bank
publication. We are gratefultoAndrew Schuller,twoanonymous reviewers for theClarendon Press, and thedelegates
of Oxford University Press for their support in seeing this book in print. We are particularly pleased that, unlike the
other volumes in the series arising from the comparative study, this is the only one to meet the market test of not
requiring a WorldBank subsidy towards itspublication!The detailedcomments from oneoftheOUP reviewers were
particularlyvaluableinredraftingthisfinalversion.Giventhelongdelaybetweenthefirst and finaldraftsofthebook,
andtheexplosioninresearchonvariousaspectsofthesubject,thisfinalrevisionhasmeantavirtualrewriting ofparts
of the book. This we hope in fact strengthens the basic argument, which, based as it was on the country studies, has
notchanged. But bothofus havegrown older during thelengthy process ofcompleting thisstudy, with Myintretiring
completelyfromacademiclifein1993, andLalmovingtoUCLA. As oursubjectmatter isoneofthegrandthemesof
economics, we still hope that, even though the period of study of our countries was the end of 1985, the general
conclusions drawn willstillbe ofrelevance,particularlyas inthisfinal revision(mostlytoLal's chapters) wehavetried
to take account of the other literature on our subject-matter which has appeared to date.
This final revision, which has taken nearly another year, would not have been possible without Lal's being granted
leave of absence for the 1993–4 academic year by UCLA. He is also grateful to Professor Richard Layard, who
provided an academic home at the Centre for Economic Performance, at the LSE, during this period.
The help of various World Bank staff members has also been indispensable in the initiation and completion of this
project. We would particularly like to thank Armeane Choksi, Stephen O'Brien, and Surjit Bhalla (who
PREFACE vii
later joined our external panel on leaving the Bank) for their support of the project.
The project was administered from the World Bank by Oey Meesook (until 1986), and Deepak Lal (1985–7).
Thereafter (October 1987–June 1990) George Psacharopoulos directed the projectfor theWorld Bank and most ably
saw it through its inevitably stormy final phases.
The day-to-day administration of the project has been conducted by five full-time project administrators, who have
beenmost efficient, and without whose contributionthis projectwouldneverhave been completed. Theyare Sappho
Harrambolous, Josie Basinette, Jeannine Timmins, the late Celina Bermudez, and Susan Tamondong-Helin.
We have also been ably assisted by three research assistants who have worked full-time with us on the project.
Successively they were Martin Chrisney, Ahmad Ebrahimi, and Carole Willis.
For the final draft Joon-Mo Yang of UCLA ably assisted in the statistical time-series analysis of our growth series.
Finally, but not the least, we owe an immense debt to the four secretaries to the project,who apart from keeping our
daily lives in order have also efficiently undertaken the various organizational and production tasks in producing this
and the other volumes in the series with cheerfulness and efficiency. They are Leela Thampy, Janet Roddy, Monique
Caldwell,and Jane Halville. The final draft of thissynthesis volume was put together with great efficiency by Lorraine
Grams at UCLA.
WearemostgratefultoalltheseindividualsandtotheWorld Bankfor makingthisbook possible. Itis forour readers
to judge whether the effort and resources spent have been worthwhile.
D. L. and H. M.
London and Los Angeles
October 1994
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Contents
LIST OF FIGURES xvi
LIST OF TABLES xvii
INTRODUCTION 1
I.DESIGN OF THE COMPARATIVE STUDY 1
II.ANALYTICAL ECONOMIC HISTORY 3
1.The Logic of Comparative Studies 3
2.Forensic Story-Telling 5
3.Conclusion 7
III.POLITICAL ECONOMY 7
1.The ‘New’ Political Economy 10
2.Economics of Imperfect Information 15
3.Implications 15
IV.SYNOPSIS OF THE SYNTHESIS VOLUME 16
Notes to Introduction 19
1.POVERTY, EQUITY, AND GROWTH 25
I.WEALTH AND WELFARE 25
1.Real Income 26
2.Equality or Equity? 26
3.Poverty 29
4.Conclusions 33
II.THREE TYPES OF POVERTY 34
1.Structural Mass Poverty 34
2.Destitution 36
3.Conjunctural Poverty 36
4.Alleviating Destitution and Conjunctural Poverty 37