Not all ideas from economists have succeeded
View(s):By Quintus Perera
Though it is important to have useful, relevant development economics, sometimes what development economists prescribe (for the economy) is not suitable.
In other words, not all ideas from economists have succeeded.
This view was expressed by Prof Jomo Kwame Sundaram, Assistant Director General, Economic and Social Development, FAO in his presentation at the opening session of a 2-day symposium on “Re-imaging Development: An Ideas Exchange, held in Colombo recently and organized by the Centre for Poverty Analysis (CEPA).
He said that over the past decades generally welfare of the people has improved; growth continued while living standards have risen. However the simultaneous growth of inequality has undermined these achievements.
He said that finance is a good servant but a dangerous master and in its role in modern economics, it is dangerous for finance to dictate. He said that the thinking should be that the financial systems must be more inclusive. Yet for the last 25 years they have not gone beyond microfinance as an alternative, he said and ‘surely financial inclusiveness has more to offer than micro finance’.
Prof Sundaram said that international financial liberation has made three claims which have proved wrong which are:
(1) If the barriers to finance are removed, capital would flow from rich to poor countries. But it went in the opposite direction. The net flow of funds was largely to the US with a relatively smaller flow to developing countries. The flow has not resulted in an increase in investment, but actually there was a slight decline.
(2) Costs of funds was expected to go down, it it has not, and
(3) Some sources of volatility have declined (interest rate and exchange rate fluctuations) but new sources of volatility have appeared.
In trade liberalization, primary commodities have lost ground to manufacturing products, Prof Sundaram pointed out. At the same time prices of tropical agricultural products have declined relative to temperate agricultural products. He said that finally prices of consumer goods in the West have declined significantly because of mass production in countries like China and India.The need to think of a new deal globally, he said have to be focused on the food challenge and the climate change for a strong inclusive recovery process. This new thinking should help them to ensure that the gap between north and south closes and does not continue to grow. Sunil Bastian, former Chairperson, CEPA speaking on ‘Development as politics – Reflections on post 1971 , 1989/90 and 2009’ said that development is about the relationship between the state and the society and social policies are one way of managing this relationship.
He said that the country’s social vision of the 1940s is contained in reports such as the Land Commission, Kannangara (education) Commission and Health Report. And this vision had four elements such as protecting the peasantry, food subsidy, universal rights and distributive justice.
Mr Bastian said that his vision broke down in 1970s and the response to this was the repressive state of 1989 – 90 when the centre re-established controls. Then, he said emerged the response of post neoliberal poverty alleviation through Janasaviya and Samurdh programmes and in post 2009, the Sri Lankan President said that they did not need political reforms but only development.
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