kickingawaytheladder.docVIP

Kicking Away the Ladder “Good Policies” and “Good Institutions” in Historical Perspective Ha-Joon Chang, Faculty of Economics and Politics, University of Cambridge 1. Introduction There is currently great pressure on developing countries from the developed countries, and the international development policy establishment (IDPE) that they control, to adopt a set of “good policies” and “good institutions” to foster their economic development. As we are all familiar with, the “good policies” that they want are basically conservative macroeconomic policy, liberalisation of international trade and investment, privatisation, and deregulation. The emphasis on “good institutions” is more recent. This has come about because of the recognition on the part of the IDPE that what they see as “good policies” have failed to produce good economic results in most developing countries because of the absence of supporting institutions. So, for example, it is said that, if private property rights are not well protected, price deregulation will not lead to greater investment and higher growth, because the potential investors cannot be sure of reaping the gains from their investments. As a result of this new thinking, increasingly, the IFIs and many donor governments are attaching “governance-related conditionalities” to their loans and grants. The key institutions they recommend include democracy, “good” bureaucracy, an independent judiciary, strongly protected private property rights (including intellectual property rights), transparent and market-oriented corporate governance and financial institutions (including a politically independent central bank). As we all know, there have been heated debates on whether these recommended policies and institutions are appropriate for developing countries. However, curiously, even many of those who are sceptical of the applicability of these policies and institutions to the developing countries take it for granted that these were the p