1963-2013 - 50 years of Research for Social Change

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Back | Programme Area: Special Events (2000 - 2009)

International Economic Policy (Draft)



The struggles of the new nations that emerged in the previous century to develop their peoples and the stressful link between these struggles and their integration into the international economy constitute the basic ground for the context and recent history. These struggles involve overcoming “structural” disadvantages in the sense that there are basic socio-economic barriers that have to be overcome and that there has been no continuum of development like an escalator that countries can smoothly ride up to higher levels. The term “developing country” in this text is used as a short-hand for the set of countries also called “less-developed,” “middle-level,” and “transition” which must overcome socio-economic constraints, political, institutional, and private sector weaknesses to develop themselves. Whether or not increased dependence on the international economy assists these aspirants in overcoming these obstacles is part of the intellectual fabric of the past and the unfinished weaving of future policy innovation.

In the 1950s, during the era of the disassembly of colonial systems, the question of how to reduce poverty and redress the imbalance against developing countries was answered through programs of national development, including extensive state intervention to create modern industries and a marked disengagement of the domestic economy from international markets. The configuration of international markets and institutions, such as the International Monetary Fund (IMF) and the World Bank, set in place based on the lessons learned from the worldwide depression of the 1930s, conformed to the theories and practices of the new field of development economics, which emerged in this period.

The initial post-War global financial system, managed through the IMF under fixed exchange rates, for example, provided national governments with the means to independently inflate or deflate their economies, as appropriate. This system began to break down in 1971, when the United States suspended the convertibility of dollar into gold.

Failures in many national development programs and the developing country debt crisis of the 1980s instigated a rethinking of the old approach. Beginning in the early 1980s, the World Bank, instead of focusing solely on financing investment projects in developing countries, began to assist these countries in undertaking policy reform packages under the rubric of “structural adjustment programs.” This new approach sought to promote greater productivity (and consequently development) by permitting economic pressures, including those from international competition, to determine which industries a developing country would retain.


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