Fear, hope, and great transformations

By LaDawn Haglund Look just about anywhere in the U.S. economy today, and you will find bad news. Emergency after emergency strikes the financial system, resulting in multi-billion dollar taxpayer bailouts of Bear Stearns, Freddie Mac, and Fannie Mae, and now the collapse of Lehman Brothers. The housing market is in free-fall, with foreclosures at record highs. Unemployment is at its highest level since 2003, while underemployment continues to plague the working poor. The “misery index”, that is, the sum of the unemployment rate and the inflation rate, is rising faster than it has in nearly 30 years. Meanwhile, increasingly intense hurricanes fueled by global warming wreck costal cities as we fumble around, hopelessly inadequate to the task of reducing our dependence on fossil fuels, the main culprit behind the acceleration of greenhouse gases. It is at moments like these that I can’t help but remember Karl Polanyi. In his 1944 book, The Great Transformation, Polanyi referred to land, labor, and money as “fictitious commodities.” Applying excessive market rationality to these realms, he argued, distorts the substantive relationship between the economy and society in ways that create insecurity and threaten the social fabric. What we are experiencing is the predictable result of a societal restructuring that made market exchange the key organizing principle in places it doesn’t belong. Eventually something has got to give: business-as-usual is likely to lead to a breakdown in our financial, ecological, and/or human systems. Back here in Arizona, I am living a mild version of this narrative. A steadily increasing cost of living and a stubbornly fixed salary (due to spending cutbacks in education) has made it difficult for me to make my mortgage payments. Expensive gasoline adds to the woes, and not even my Prius can save me (though I am grateful to the Japanese for developing such a nice hybrid vehicle). Recently, when I was really feeling a pinch, I tried to refinance my house. But alas, in this economy—with a burst housing bubble, imploding mortgages, and foreclosures aplenty—my sorry case was met with a kindly “thanks, but no thanks.” So I find myself struggling to make ends meet like millions of other Americans. But what does this admittedly sad but ultimately manageable problem have to do with development economics? After all, at least I have a job, a car, and a house. I am certainly not poor. I have access to credit. And if worse came to worst, I would have numerous options: Look for a better job. Sell the house. Take the bus. These basic possibilities are not available to millions of the world’s poor. But bear with me, dear reader. I will explain. You see, over the last several decades, the United States has been experiencing a rich-country version of the market fundamentalism that was thrust upon the developing world by Washington in the 1980s and 1990s. This fundamentalism led to deregulation of the financial system, the removal of safeguards against speculation and greed, the dismantling of social safety nets, the easing of environmental regulations, and increasingly, the privatization of risk . The exception, of course, is the fiscal austerity policies that forced developing countries to limit deficit spending—the Bush Administration has not held itself to those same pesky standards, especially when it comes to spending on warfare. Given the terrible consequences for humans and the earth, it is particularly perplexing that market fundamentalism has gone so far for so long. As I argue in my manuscript, Limiting Resources: Market-Led Development and the Transformation of Public Goods, it is not just an ideological project spearheaded by political elites. It is at the core of economic thinking. In contrast to popular understandings of “public goods”—where education, health care, water, and infrastructure are ensured by government, with an implicit social agreement to promote well-being and justice for the people—economists are trained to evaluate public goods devoid of social content. “The public” (you and I) is reduced to prisoners’ dilemmas and collective action problems, while state intervention is incorporated mainly as a last resort to remedy market “failure.” One result of this thin understanding of the full social significance of public goods has been a turn to markets wherever possible, via unbundling, contracting, granting concessions, and privatization. At the same time, taxes have been reduced to levels that cannot sustain robust social programs. The resulting excessive reliance on markets has virtually depleted the pool of resources considered “public” and precluded important non-market alternatives, in developed and developing countries alike. The effects of “free” markets in money, land, and human beings (Polanyi’s “fictitious commodities”) in the United States illustrate the danger: Money. The abstraction “money” has only a tenuous connection with the real economy, as any trader will tell you. Regulation is imperative for checking usury and speculative finance, i.e., not allowing money to be just another commodity. The Asian and subsequent financial crises are a stinging reminder that money cannot fill an empty stomach. The current meltdown on Wall Street was preceded by decades of deregulation and the growth of a “shadow banking system” that now reaches far beyond our fair shores. The looming crisis is likely to be equally far-reaching. At this late stage, we can only hope that the severe dislocations resulting from efforts to institute a “self-regulating market system” in the 19th century—World Wars and a Great Depression—do not make a return in the 21st. Land. Despite unequivocal evidence that human-induced global warming is threatening not only stronger storms but also “heat waves, new wind patterns, worsening drought in some regions, heavier precipitation in others, melting glaciers and Arctic ice, and rising global average sea levels,” the Bush Administration has been unwilling to intervene in order to reduce emissions of greenhouse gases, cooperate with other countries on climate change, or invest adequately in alternatives. Though there were some meager incentive programs, these were all designed to not “rock the boat” of traditional market activity and adhered to the twisted logic that growth would ultimately protect the earth and lead to sustainability. Unfortunately, the magnitude of the climate crisis calls for visionary leadership at the highest levels—something that is clearly not going to come from this administration. Human life. Our abysmal, market-based health care system in the United State speaks volumes regarding how well markets protect human life. The United States ranks lower than every OECD country in infant mortality except Turkey and Mexico, and lower in life expectancy than all except Eastern Europe and Mexico. Even countries with much more modest resources, like Cuba and Costa Rica, do better because of public investment, according to a recent World Health Organization report. A litany of horror stories supports the conclusion that a for-profit medical system is inhumane and relatively ineffective in delivering “goods” essential to human life. In terms of labor, we see rising productivity levels being matched with stagnating wages, making it harder and harder for working people to make ends meet. According to Polanyi, society survives the disruption caused by attempts to institute a self-regulating market system through intervention and re-introducing non-economic norms and values to economic activity. This process often entails harnessing the state to ameliorate negative externalities and achieve positive ones. For example, regulation can limit the pursuit of money for money’s sake, as speculators look to “flip that house” (and reap huge profits) or Wall Street brokers demand greater and greater returns. Meanwhile, state-led development and investment in alternative technologies are going to be essential for finding ways to stop abusing the earth—sucking oil from its bowels through a pipeline while suffocating it with stinging pollutants through a tailpipe. Alternative energy is the future, and we need state action to get us there. Finally, state investment in strong social safety nets can help us care for one another where markets do not, and cannot. Rather than leaving us to fend for ourselves in some warped Social Darwinist experiment, we can create institutionalized safeguards to protect our frail bodies and fragile lives from the worst suffering and threats to our well-being. With a U.S. presidential election less than two months away, it is becoming increasingly clear what is at stake. “More of the same” market fundamentalism of John McCain’s party could be very bad for the sound and just management of money, land, and labor. But are Americans ready for the real changes needed to turn this ship around? After all, we are the poster children of over-consumption, and we tend to vote for political leaders with a willful disregard of the catastrophic consequences of our addictions: cheap oil, cheap food, and cheap goods. Let’s hope that the magnitude of the current crisis will awaken us to the issues that really matter. LaDawn Haglund received her Ph.D. in Sociology from New York University in 2005. She is Assistant Professor in the School for Justice and Social Inquiry in the Arizona State University, USA.

OECD vs Industrial Policy: Will South Africa be impressed?

by Nicolas Pons-Vignon Click here to see the OECD Policy Brief Economic Assessment of South Africa, 2008. When it comes to appraising economic strategies, some organisations display a remarkable level of consistency. The OECD, faithful to its neoliberal stronghold reputation, has just released a superbly ideological appraisal of South African economic policies. Beyond stating the obvious - that SA has an enduring unemployment problem and is marred with world-record inequality - the Paris-based organisation praises the "prudent" macro policies carried out since 1994 and claims that SA has benefited from trade liberalisation. And how should SA tackle unemployment, according to the OECD? Any idea? Yes, you have guessed right: it should make its labour markets more flexible. Economists in South Africa are growing tired of showing that the country's labour market is in fact way too flexible, allowing for a continuation of extremely harsh working conditions that many consider to be one of apartheid's worst legacies. As anywhere else, the only way to address structural unemployment is to... create employment. This is what some are trying to do in South Africa, through an ambitious, albeit still emerging, industrial policy. Unsurprisingly, the OECD is extremely worried about this and warns that "the emphasis on industrial policies risks preserving the apartheid-era pattern of protected national champions insulated from foreign competition and enjoying high mark-ups. This runs counter to the acknowledged need to enhance the level of competition in the economy. Also, the emphasis on government programmes and initiatives is at odds with the recognition of failures of government planning, coordination, and administrative capacity as one of the constraints to achieving faster and more widely shared growth." The OECD does not say if its reluctance to see Governments intervene is limited to Africa or if it considers that all countries that developed thanks to such intervention (namely, all now-developed countries) should not be taken as a serious examples for late developers. Let's hope that South Africans do not take this ideological, poorly documented and researched advice too seriously. As far as I'm concerned, I see it as a sign that something promising is happening with industrial policy in SA. For a reflection on what SA should do with the OECD's advice (i.e., not much), read Seeraj Mohamed's editorial.

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Nicolas Pons-Vignon is a senior researcher at the Corporate Strategy and Industrial Development (CSID) research programme at Wits University, South Africa. He was a doctoral researcher at the French Institute of South Africa (IFAS) until December 2007; in his PhD research, he analyses the impact of the outsourcing of forestry operations in South Africa, focusing on the link between corporate restructuring and rural poverty. He holds an MA in Public Administration from Sciences-Po (Paris) and an MSc in Development Studies from the School of Oriental and African Studies (London). Nicolas is the initiator and course director of the African Programme on Rethinking Development Economics. He worked as a consultant at the Paris-based OECD Development centre, where he researched violent conflicts in developing countries. Prior to this he was a project officer in London, Paris and Rabat for PlaNet Finance, an NGO which supports micro finance institutions.nicopv@gmail.com

Putting Short Term Stability Before Long Term Growth: Fifty Years Is Enough

by Ben Fine

This article has been published as a Policy Brief (No. 12) by the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G24). Blog authors are grateful to the G24 for allowing it to reproduce it; copyright remains with the G24.

It is fifty years since Jean-Jacques Polak published his classic article “Monetary Analysis of Income Formation and Payments Problems” in the IMF Staff Papers. This paper provided the theoretical basis for the IMF’s financial programming, and continues to do so today. This is remarkable in and of itself. The world economy has gone through major changes over this period, as have corresponding fashions within economic theory as triumphant Keynesianism gave way to varieties of monetarism in the wake of the collapse of the post-war boom.

We also have had fifty years of development economics, during which there have also been shifting and competing perspectives from modernization through the Washington consensus and beyond, to notions of the developmental state, as attempts have been made to understand why the success of East Asian NICs should contrast so much with achievement elsewhere. Is it credible that across this material and intellectual ferment, the “Polak Model” should remain sacrosanct?

To his credit, Polak’s initial contribution was extraordinarily modest and qualified in its aims. He made it crystal clear that the main problem addressed is a temporary balance of payments deficit in a developing country, this gap usually the result of excessive domestic credit to fill the gap arising out of a fiscal deficit. He presumed that the only reliable data available are those concerning monetary variables, and that the only corresponding policy variable is control of the domestic money supply.

The model only seeks to determine the level of nominal income, with its distribution between the output level and the price level to be determined by some other means. In this respect, in principle, the model is not monetarist since it must violate one or other of the assumptions that prices are fixed (at the world level) or that output is fixed (at full employment). In practice, not without justification, financial programming is heavily associated with the ideology of monetarism because of the pessimistic stance taken on productive potential.

It has targeted balance of payments and/or fiscal deficits with shifting instruments across countries and over time as fixed exchange rates have given way to floating exchange rates, and control of inflation and liberalization of money markets have been emphasized more or less to suit. Today, for example, the IMF is more likely to advise appreciation of the exchange rate to bring down inflation in middle-income countries than to address foreign or fiscal deficits, although these remain a priority for low-income countries, especially in Africa.

One criticism of Polak is his making virtue out of necessity. Even if monetary variables are the only ones that can be measured and controlled, they are not necessarily best for remedial action. A patient with a broken leg is not best treated with a thermometer to take temperature and aspirin to bring it down, even if these are all that is available in the hospital. This apart, Polak can be judged to have appropriately sought, but failed, to constrain the use of his model for purposes for which it was not designed.

He did, for example, refine the model, in a joint article in 1971, by adding extra variables and equations. But, as was explicitly recognized within this contribution, this was nothing more than an elaboration of the Hicksian IS-LM-BP model, standard across every undergraduate textbook.

This prompts three observations. First and foremost, such a model was constructed in the context of developed countries, raising doubts over applicability to developing countries. Second, as has remained the case throughout the life of financial programming, the model cannot address issues of development as its scope is confined to the so-called short run, over which everything to do with development is taken as fixed. Third, it is ironic that the Polak model began to embrace Keynesianism explicitly just as the approach was falling into disrepute with the stagflation of the 1970s.

Significantly, in the second half of the 1980s, the IMF did seek theoretically to reconcile growth or development objectives with short-run macroeconomic adjustment in proposing a marriage between its Polak model and the World Bank’s growth model. Three further observations follow.

First, the model was fundamentally flawed, bound by export pessimism (as if the world economy did not grow) and leading to declining levels of productivity increase over time. In other words, it remained heavily bound to the short run, and essentially to zero per capita growth in the long run. Second, ironically, this was when new growth theory had begun to flourish, suggesting how productivity increase could be generated over time, but the marriage model was bound to old growth theory in which productivity increase is exogenously determined. And, third, Polak reacted strongly against any attempt to forge a marriage between financial programming (confined and only appropriate to the short run) and growth theory. Indeed, in a personal communication commenting on the marriage model, Polak suggests:

My view is that it is not a worthwhile project, and each subject should be approached on its own, provided the practitioners are fully aware of any recommended policies on the other objective (which to be sure has not always been the case between the Fund and the Bank). A possible simile, somewhat limping of course: the jobs of a schoolteacher and a paediatrician are both to do good to a child, and each should be aware of the other … but the professions should remain specialised for greatest efficiency in each field.

This is well and good as far as it goes, but it neatly sidesteps what has been a major criticism of the stabilization policies of the IMF and the structural adjustment policies of the World Bank, the negative impact of what is adopted in the short run on longer run performance. The latter is better seen as attached to an evolving economy over time, rather than as some given equilibrium around which appropriate policies are targeted. Polak, and his model, simply do not address this issue as he is only too aware.

The recent turn to poverty reduction has intensified the failure to observe the reservations that Polak has expressed over the use of his model. The first, and, for some time, the only model underpinning PRSPs uses financial programming as its organizing framework. It does so while assuming that there is a single labour market and full employment, thereby, for the convenience of the model, abolishing the major sources of poverty – unemployment and low wages -- in one stroke. This is even justified on the grounds that the model is universally and conveniently applicable across all countries.

It is certainly not the case that the Polak model for financial programming determines IMF policy. Indeed, it allows for considerable discretion. But it does set a framework within which policy is discussed, one which prioritizes the short term over the long run, and financial functioning and targets over the traditional concerns of development. It is time for a fundamental rethink and a new framework – one both recognizing, rather than subordinating itself to, increasing financial volatility, and genuinely engaging adjustment with developmental goals, with poverty alleviation and growth as starting points, rather than add-ons.

For a fuller discussion, see Ben Fine, "Financial Programming and the IMF", in B. Fine and K.S. Jomo (eds), The New Development Economics: After the Washington Consensus, Dehli: Tulika and London: Zed Press

Ben Fine is Professor of Economics at the School of Oriental and African Studies, University of London, and Director of the Centre for Economic Policy for Southern Africa at SOAS. Recent books include “Social Capital versus Social Theory: Political Economy and Social Science at the Turn of the Millennium” (2001); “Development Policy in the Twenty-First Century: Beyond the Post-Washington Consensus” (2001); “The World of Consumption: The Material and Cultural Revisited” (2002); “Marx's Capital” fourth edition (2004); and “The New Development Economics: A Critical Introduction” (2006). His research interests include "economic imperialism" or the relationship between economics and other social sciences, especially social capital; the material and cultural determinants of consumption, particularly food; privatisation and industrial policy; and development theory and policy.

In Argentina, the Rich are Taking to the Streets

by Leandro Serino Some Argentineans have reverted to one of the country's favorite sports: reclaiming the streets. This time, however, streets and roads are not occupied by the unemployed or by civil servants or workers from declining industries. Instead, the protests come from agricultural producers and a selective group of Argentina's urban middle and upper classes; paradoxically, some of the groups who benefited most from the recent economic recovery.

The protests started when the government modified the export tax regime on March 11^th. To understand their causes, it is useful to look at the recent history of the application of a tax to Argentina’s exports of meat, soybeans, maize, wheat and related products. Export taxes were re-established in Argentina during the last economic crisis, in 2002. At the time, the rationale for the policy was simple. Argentina is an exporter of wage goods whose prices, like those of many other commodities, are determined in international markets. This means that, all other things being equal, the 200% nominal devaluation that took place in 2002 would have caused domestic food prices to skyrocket. In a context of massive unemployment and record poverty levels, it was necessary to truncate the link between international prices and domestic ones. And this is what export taxes actually do and did, for they establish a wedge between these two prices, thereby inciting local producers to sell to the domestic market.

(To have an idea of the problem this policy was trying to address, imagine -if you can- today's food price inflation, raising the concerns of international organizations such as the IMF, the World Bank and various Central Banks in both developed and developing countries, and multiply it by a three digit factor.)

The system had remained in place since then, with export taxes occasionally increasing. The second justification for this policy, even after the economic recovery, was not very different from the first one. The stable and competitive exchange rate policy implemented in Argentina (to counteract the de-industrialization experienced in the 1990s and promote new competitive sectors) is only politically sustainable in a wage-good exporter country if prices do not jump with a devalued exchange rate. Hence, until productivity and wages rise, export taxes have a role to play.

By the end of 2007, a third reason for the tax arose as increases in international food prices accelerated, fuelled by Asian giants’ economic growth, substitution of certain crops to produce fashionable biofuels, and even by speculation. The recent change to the export tax regime intends to address this new phenomenon, linking domestic prices to developments in international markets. (See ‘Mad, bad taxes on food’, The Economist, March 29^th-April 4^th, 2008)

This time, however, the change in export taxes is different from previous increases, for it establishes a scheme of moving export taxes. In the new regime, export taxes are not fixed but follow changes in international primary commodity prices, increasing when international prices rise and decreasing if international prices fall. In the current scenario of booming international prices, where the price of certain crops has almost (or more than) doubled in less than six months, modifications to the export tax system and the design of alternative policies (involving not only export taxes but also long-term policies for small agricultural producers and particular products, as well as countercyclical macroeconomic policies) were certainly necessary.

Protests started after the government announced the first type of policies (the change to the tax system). They emerged as a response to the lack of long-term policies for the agricultural sector, but also because, in a context of high international prices and expectations of further increases, flexible export taxes imply lower (extraordinary) benefits for the most profitable sector in the Argentine economy. The large amounts of present and future income at stake, taken for granted by some producers as a fair reward to their productive efficiency, thus represent the fundamental important reason behind the recent protests – which are likely to continue.

The dispute over extraordinary benefits, however, in no way justifies three weeks' of lock-out and piquetes affecting the entire Argentine population and especially its most deprived section. While it is fair to say that these benefits are in part a consequence of technical change and of the extension of the land frontier, they are also linked to a particular exchange rate regime and international context.

The conflict is still unresolved and open, and is transforming the distribution of ‘abundance’ as one of the fundamental political economy disputes of the 21^st century.

Note

Argentina’s newspapers cover this issue daily. See Pagina12, Clarin or La Nacion (in Spanish) and Buenos Aires Herald (in English).

Leandro Serino is a PhD Candidate at the Institute of Social Studies (ISS) in The Hague, where he also completed a Masters in Development Economics in 2003. In recent years, Serino devoted most of his time to his PhD research, which focuses on the question of structural change in countries with abundant natural resource endowments, like his own country Argentina. During his ‘free’ time, Serino participated in different projects in the fields of development economics and applied macroeconomics, at the University of General Sarmiento, the ISS, ECLAC Buenos Aires and the Ministry of Economy and Production of Argentina.

Rethinking Development – opening post, by Nicolas Pons-Vignon

There is something reassuring in the knowledge that, despite the growing homogenization of the world, and the enthusiasm or despair it generates, new forms of art, of individuality cum resistance are emerging. Mondovino , the brilliant documentary on the world of wine by Jonathan Nossiter, not only praises but epitomises this critical dynamism – it feels unique, but promises more subtle, respectful yet uncompromising works. And yes, this inspiring way of looking at the world requires an acute political awareness – whether one is talking about wine or about anything else. In the face of a phenomenon which many of the forthcoming contributors to this new blog will certainly discuss in insightful, often disagreeing terms – namely globalization, neither blind optimism nor hopeless pessimism can be good guides. As John Sender wrote in 1999, in an article which questioned the prevalent “Afro-pessimism”, “Thinking about development in Africa requires holding at least two sets of ideas in one's head at the same time. It is not sufficient to stress the ubiquity of failure, malnutrition, disease, predatory states and war, or to become overwhelmed by revulsion in the face of the misery still experienced by so many Africans. In addition, it must also be recognized that some important aspects of the lives of millions of ordinary people have been transformed over the last five decades. It is on the basis of a clear perception of the complexity and unevenness of all these processes, as well as a critical analysis of the consequences of economic policies in the past, that politically realistic development strategies can be formulated.” The last sentence of this quote could, in my view, provide a good motto – or mission statement, to borrow from the colourful vocabulary of ex-MBA students – for the Rethinking Development blog. A number of economists, of all ages and origins, have agreed to contribute regular editorials; they come from different perspectives, but are all critical of mainstream neoclassical economics and of its political corollary – neoliberalism. Far from being a fad, constructive opposition to the academic dominance of neoclassical economics (in economics as well as in other social sciences) and to the political influence of neoliberalism, is highly needed and soundly inspiring. It is also, in our case, guided by the desire to provide credible policy alternatives. While the mainstream is remarkably uninterested in debating with its critics, and while this attitude is only possible because mainstream economics is actually dominant, we must not forget that it is far from having taken over every mind. In fact, the quality of the opposition can induce some enthusiasm, as soon as one can glance at its diversity and its geographical spread. Such a feeling of inspiring strength and potential surely overwhelmed me when I attended the African Programme on Rethinking Development Economics (APORDE, the African brainchild of CAPORDE) in May 2007 and the Annual Conference on Development and Change (ACDC) last December. Even if many battles remain national or regional, few can be won alone – and Ben Fine was quite right when he told me that the reason why many Marxists prefer arguing with each other, rather than engaging with what they all agree to be nonsense, is that people tend only to fight battles they think they can win. It is a fact that heterodox economists have to behave in an inclusive way if they hope to influence debates and policy. Yielding to the temptation of factionalism is a left-wing disease which was harmful in a past where capitalism could seem doomed; nowadays it is as good as a capitulation, so powerful has capitalism become, in all parts of the world and in so many parts of our lives. Capitalism has certainly been very positive in many of its effects – in Europe, America, Asia, and even in Africa, as Sender argues in his article. It has allowed more people to live, rather than die as infants, and has enabled a diffusion of well-being enhancing technology. Not all technology developed under capitalism has arguably enhanced well-being, and technological diffusion has certainly been remarkably uneven. But, as Robert Parker, the über-wine critic, says of the impact of his “naïve American” approach to the wine industry, it has brought about a form of democracy. New wine drinkers (the upper end of the new, growing world middle-class) want to enjoy their wine now and do not care about the elitist, “old world”, notions of patience and terroir. Yet, as another character in the film notes, Parker is promoting wines that can be (and are often) made in California and Bordeaux, or anywhere else – though increasingly by Californians and Bordelais. This encapsulates the very ambiguous nature of capitalist ideology – it certainly knows how to appeal to the new generation produced by capitalism – but it is levelling the playing field in a certain way, in the interest of those who are forging this ideology. And who are devoting large amounts of money, effort and talent (ever wondered why the cleverest people in business work as spin doctor?) to convince us that what is good for them is good for everyone. It is up to us to contest the battlefield for ideas and to draw interest in and support for progressive alternatives which would benefit the majority rather than sharpen inequality. In her remarkable new book, Escape from Empire. The Developing World’s Journey Through Heaven and Hell, Alice Amsden suggests that American influence on developing countries was rather positive – by imperial standards – until the 1970s, when the US allowed (and sometimes supported) non-communist developing countries to do it their way, i.e. to choose and pursue their own economic policies. This behaviour was motivated by the belief that success over Soviet Russia required a spill over of the benefits of capitalist development. Then, because inter alia of the trauma of the Vietnam debacle, Americans reverted to an older, rigid form of laissez-faire: do it our way. Needless to say, the impact of the free-market ideology in the developing world has been horrific, destroying recently-formed state apparatuses, slowing investment and precluding the emergence of large, domestic capitalist firms. Foreign investment predictably failed to generate the growth in output and employment that could have lifted out of poverty those countries whose economy was still fragile at the time of Empire shift. Amsden acknowledges that her distinction between the two American empires may not be an entirely accurate characterization – but she rightly stresses that the shrinking of space for experimentation and free thinking about the most appropriate strategies dealt a severe blow to the development dynamic of the post-war era in many countries. There is no doubt that we are facing a strong, adapting and influential opposition; the staged demise of the “Washington Consensus” in the 1990s is a sign of this strength. The refining of the dominant paradigm thanks to the crucial contribution of New Institutional Economics, which allowed for the selective inclusion of some of the more shallow criticism of the Old Consensus, has been remarkably cosmetic when one looks at the real world. Contributors to this blog will surely touch on this, as well as engage theoretically with the flaws of the Post-Washington Consensus. The latter is the same wine, except that it is matured in new-oak barrels which give it a palatable taste at first. A taste so palatable in fact that it has appealed to populist critics of neoliberalism, who have concluded numerous alliances with its new avatar in the name of big, ill-defined words – think fair-trade, MDGs, or even democracy. In a 2005 paper, Mushtaq Khan shows how crude the thinking behind the “democracy is good for development” argument is; he then brilliantly demonstrates that a political economy approach can provide a robust basis for a realistic (vs. populist) development policy. Far from offering an alternative, the neopopulists have been incorporated into the mainstream – and we will make sure we engage them as well, for pipedreams are the worst form of drunkenness the poor can experience. Thanks to the articles that will flesh it out in the future, I hope this blog will come to be regarded as a reliable source of imaginative, critical and relevant analyses of development issues. That it will help inspire and connect those who feel that something is wrong with the current status quo with those who research, think of and fight for credible, progressive alternatives. To borrow one last line from probably the most endearing character in Mondovino, Hubert de Montille, who highlights the humility and scepticism which have always guided the freethinkers (libre-penseurs): “My son is more mainstream; he likes order. I like order, but I like disorder, too. Why not?” Cheers!

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Nicolas Pons-Vignon is a senior researcher at the Corporate Strategy and Industrial Development (CSID) research programme at Wits University, South Africa. He was a doctoral researcher at the French Institute of South Africa (IFAS) until December 2007; in his PhD research, he analyses the impact of the outsourcing of forestry operations in South Africa, focusing on the link between corporate restructuring and rural poverty. He holds an MA in Public Administration from Sciences-Po (Paris) and an MSc in Development Studies from the School of Oriental and African Studies (London). Nicolas is the initiator and course director of the African Programme on Rethinking Development Economics. He worked as a consultant at the Paris-based OECD Development centre, where he researched violent conflicts in developing countries. Prior to this he was a project officer in London, Paris and Rabat for PlaNet Finance, an NGO which supports micro finance institutions.nicopv@gmail.com

References Alice Amsden (2007), Escape from Empire. The Developing World's Journey through Heaven and Hell, MIT Press Mushtaq Khan (2005), “Markets, States and Democracy: Patron-Client Networks and the Case for Democracy in Developing Countries”, Democratization Vol. 12, No. 5 John Sender (1999), “Africa's Economic Performance: Limitations of the Current Consensus”, The Journal of Economic Perspectives, Vol. 13, No. 3