1963-2018 - 55 years of Research for Social Change

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

Development Economics: Coping with New Challenges, Especially Globalization (Draft)

As is well-known, development economics fell into disrepute in the West, especially in the USA, with the rise of neo-liberalism from the late seventies. This coincided with the denunciation of Keynesian economics with the simultaneous occurrence of inflation and slow growth, seemingly contradicting the Philips’ curve trade-off associated with the ‘neoclassical synthesis’ or cooptation of Keynes.

The eighties began with Carter appointee US Federal Reserve chief Paul Volcker’s sharp reversal of developing country growth of the seventies, with the UN promise of a New International Economic Order, following the 1973-5 oil price hike, subsequent commodity price booms and low real interest rates, thanks to Anglo-American commercial bank recycling of petroleum revenue to lend to developing country governments and high inflation.

Thus, the Reagan-Thatcher decade began with the debt crises of Latin America, Africa, Eastern Europe, Korea and the Philippines, enabling the post-Bretton Woods International Monetary Fund (IMF) to take over macroeconomic policy with its stabilization policies and the World Bank to require indebted governments to abandon development policies in favour of economic liberalization through structural adjustment policies.

In the World Bank, the McNamara era associated with the intellectual leadership of Hollis Chenery gave way to the appointment of Anne Krueger as Chief Economist and Deepak Lal as head of research soon after the publication of his Poverty of Development Economics.

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