Stability with Growth: Macroeconomics, Liberalization and Development (The Initiative for Policy Dialogue Series)

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Stability with Growth: Macroeconomics, Liberalization and Development (The Initiative for Policy Dialogue Series)
Joseph E. Stiglitz,Jose Antonio Ocampo,Shari Spiegel,Ricardo Ffrench-Davis,Deepak Nayyar | 2006-11-09 00:00:00 | Oxford University Press, USA | 352 | Economics
There is growing dissatisfaction with the economic policies advocated by many international financial institutions. This book presents an alternative to "Washington Consensus" neo-liberal economic policies by showing that both macro-economic and liberalization policy must be sensitive to the particular circumstances of developing countries. One-size-fits-all policy prescriptions are likely to fail given the vast differences between countries. This book discusses how alternative approaches to economic policy can better serve developing countries both in ordinary times and in times of crisis. Written by the leading names in the field, this book introduces the issues and the objectives of macroeconomic policy from various perspectives. It also presents an analysis of macroeconomic models and policy perspectives on stabilization and capital markets liberalization from conservative, Keynesian and heterodox perspectives.
Reviews
The authors defend a heterodox approach to the choices available in economic policies. Like the Keynesians, they see an important role for government in economic matters.

Their economic goal is real stability and long-term sustainable and equitable growth of well-being. They also make the crucial distinction between developed and developing countries. For the latter, economic volatility is much higher, economies are smaller and less diversified, capital and insurance markets are less developed, social safety nets are often non-existent, and their ability of absorbing trade and capital account shocks is limited.



Stiglitz et al. base their prescribed policies on `real' macroeconomics and `real' variables. Their fundamental aim is to attain the highest potential level of the employment of capital and labor. The real variables are growth, stability of real output, unemployment, poverty and inequality. Auxiliary variables, like inflation, are only important for their impact on the real ones: `A government that fails to provide employment for essentially everyone who is willing to work has failed in one of its primary obligations.'



Stiglitz et al. base their policies on `real' microeconomics: supply of cash and credit by banks and governments (social security), wage and price rigidities, market imperfections (bad investments) and balance sheet effects (on banks and businesses). They argue that central banks should target competitive exchange rates and low interest rates and prescribe increased government expansion policies if necessary.

Specific heterodox issues are an efficient national accounting framework, the reduction of risk (insurance) and the impact of international institutions (IMF) on domestic economies.



In the last part of the book, the authors torpedo the infamous IMF policy of capital market liberalization (CML). CML has pernicious effects on economic stability, reducing profits and investment (incentives). It has vicious distributional consequences for the poor (unemployment) and small businesses (bankruptcies). Most importantly, CML affects the autonomy of the democratic process and true national sovereignty.

The authors prescribe CMI (Intervention) with tariffs, quotas or indirect measures like banking regulations, or CMR (Restrictions) to fight corruption.



This superb economy handbook, with an excellent bibliography, is a must read for all students, scholars, professionals and laymen.


Reviews
A must read! This book is an excellent primer for any person with a genuine interest in the current debate on how developing countries can achieve stable and pro-poor growth. The arguments, while technical, are well laid out--the book takes on complex issues and presents them through clear examples of developing country successes.



Most of us recognize that the conservative policies of the IMF didn't work, but have not found a clear voice to supplement the multitude of critiques with real solutions. This book truly fills that gap-- one can find a comprehensive and clear framework for the alternatives to neo-liberal economic policies. Stability with Growth focuses on the central fiscal and economic issues facing the governments of developing countries today, such as open economies and capital account liberalization, with a focus on just what the title implies: how can a country grow without inviting crisis? The ideas are cutting edge and bring the reader into the next generation of where economic policy reform is (or should be!) heading. Highly recommended.

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