Views at conference: Second-generation reforms call for varied approaches to institution building and growth
| Author | Sara Kane Deputy |
| Position | EditorIMF Survey John Starrels, IMF External Relations Department |
| Pages | 375-377 |
Page 375
Sound social, political, and economic institutions are now widely accepted as necessary complements to the sustained implementation of sound macroeconomic policies and the attainment of high-quality growth. Transparency in government and financial activities; good governance; sound legal, regulatory, and supervisory frameworks; and fiscal policy sensitive to the social and economic needs and situation of its citizens-all these elements have been combined under the rubric "second-generation reforms." Many questions about the reform process remain unresolved: what is the relationship between first- and second-generation reforms; how universally applicable are they and how can country ownership of a program be reconciled with internationally agreed codes and standards, how effective have they been so far, and where do we go from here?
Representatives from academia, government, the private sector, and multilateral institutions tackled these and other questions during a conference organized jointly by the IMF Institute and the Fiscal Affairs Department on November 8 and 9. IMF Managing Director Michel Camdessus provided welcoming remarks, and World Bank President James Wolfensohn delivered the keynote address.
By the early 1980s, Camdessus said, much of the world had come to realize that macroeconomic stability was not enough to ensure sustained growth. The need to eliminate market distortions and inefficiency provided the motivation for a first generation of reforms.
The acceleration of globalization during the past decade and its long-term implications provided much of the impetus for the second generation of reforms, Camdessus noted. Few would now dispute the need for sound social, political, and economic institutions. For this reason, first- and second-generation reforms should not be seen as sequential. Indeed, the institution building typically associated with the second generation often can and should occur in parallel with the first generation.
Poverty is central to the activities of the World Bank, James Wolfensohn said. If you want stable growth, you must also address the social and poverty issues and related structural issues, thereby creating a "virtuous circle" of sustained, high-quality growth whose benefits accrue to all levels of society.
Second-generation reforms must also address the question of how to build consensus in a society, Wolfensohn said. How a society moves forward, in terms of both reforming its structure and in the program it adopts, must be controlled by the society itself.
The concentration of political power determines the formulation of institutions that influence the outcome of political decisions, no matter what type of government, according to Robert H. Bates of Harvard University. There is no reason to expect that a particular kind of government will be best in terms of the expected choice of policies.
Political analysts, Bates said, tend to view policies as the result of deliberations from a single entity that chooses policies to facilitate attainment of those objectives. But policies typically emerge from competitive political processes, in which diverse interests advance competing alternatives, resulting either in the victory of one or in a compromise among several. The type of government is immaterial, Bates said, because even within a single-party or totalitarian state, competing interests and internal political conflicts are rife.
In his response, Anthony Lanyi of the University of Maryland...
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