Towards effective management of economic restructuring

Abstract

Among developing countries there has been a widespread shift during the past decade from state control of the economy to deregulation and liberalization. The World Bank has played a leading role in promoting this change. Evidence suggests that nearly as many developing countries have experienced a decline in growth rate as the number that has experienced improvement. There is, however, some evidence that substantial deregulation by relatively statist economies improves the growth rate, though there is no evidence of a monotonic relationship, positive or negative, between deregulation and improvement in growth rate. There is a wide variation in the economic response (as measured by growth rate) to liberalization, not only overall but also in every major region. This suggests that not just the content of economic restructuring but its phasing and management may critically determine whether liberalization yields positive or negative economic consequences. Several country cases indicate alternative modes of restructuring, and a critique is offered of the World Bank s structural adjustment programme in the light of these case studies and other research findings. The role of the state in economic liberalization is discussed and it is argued that appropriate phasing of economic restructuring and its management by the state may significantly improve the growth rate of the economy. It is argued that economic structuring is not just an economic but also a political and social process and must be anchored in a wider range of motives besides the economic motive, and attention must be paid to the effective management of not only the macro but also micro aspects of economic restructuring. In particular, the benefits of having dynamic professional managers head various organizational instrumentalities of restructuring are highlighted, as also the benefits of various innovations in governance. Several hypotheses on the successful decontrol of highly controlled developing economies are offered.