Winds of Change in Development Economics
Something is definitively going on in the world of development economics. On top of a poor growth record in the countries where the then dominating “Washington Consensus” was deployed in full force during the 1990’s and 2000’s, the global financial crisis has made revisionism cool and brought about a wonderful flowering of all kinds of interesting intellectual changes.
I was particularly struck, today, by one of the latests post on the World Bank blog, linking to a paper with the same title:
The post and the paper are not, as you might think, written by Erik Reinert, but by a World Bank economist by the name of Salomon Samen. It discusses, amongst other things, the importance and relevance of classical development economists such as Raul Prebish and Hans Wolfgang Singer:
Based on the Presbish-Singer hypothesis, free trade and its corollary specialization were to confine developing countries in the production of primary products which are subject to short and long term detrimental effects for developing countries. Hence, in order to stabilize export earnings, boost income growth, and upgrade value added, developing countries had to increase the variety of their export basket. In the light of the dismal economic performance of many developing countries that implemented trade restrictive protectionist policies in the 1960s, and 1970s, many policy makers have, since the 1980s, been seeking to expand their exports and have increasingly been recommending development strategies based on outward orientation including reduction of trade barriers and opening of international trade to foreign competition. Because export supply responses following first generations of outward oriented trade policy reforms have been mixed, expanding and diversifying exports remains a major concern for policy makers in many countries.
It will be interesting to see how long parts of “heterodox economics” will remain heterodox.