The Politics of Economic Policy Reform in Developing Countries
Because of politics, some economic policy reforms are adopted and pursued in the developing world, and others are delayed, and resisted. Economic reform is inherently a political act: It changes the distribution of benefits in society, benefiting s...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/09/692847/politics-economic-policy-reform-developing-countries http://hdl.handle.net/10986/19783 |
| Summary: | Because of politics, some economic
policy reforms are adopted and pursued in the developing
world, and others are delayed, and resisted. Economic reform
is inherently a political act: It changes the distribution
of benefits in society, benefiting some social groups, and
hurting others. Social groups may oppose reform because of
doubts about its benefits, or because they know it will harm
their economic interests. The author shows how three types
of reform - currency devaluation, the privatization of state
enterprises, and the elimination of consumer (food)
subsidies - affect the utility of nine different social
groups (including international financial institutions).
When governments try to privatize state-owned enterprises,
for example, more social groups with greater political
weight are likely to be disadvantaged than helped. Urban
workers, urban bureaucrats, urban students, and the urban
poor, are likely to "lose out" and will strongly
oppose privatization. But the ruling elite, and urban
politicians are also likely to at least partly resist
privatization, fearing that such reform will reduce their
economic "rents". More social groups, and power
points thus oppose privatization than favor it, so this
policy reform is likely to be delayed, or not implemented at
all. However, social groups do not possess an absolute veto
over economic reform, and policy reform can (and often does)
occur, despite the opposition of certain social groups. It
depends on the aggregate political weight of the groups
opposing reform. For example, as the author shows, five
social groups, either wholly or partly, oppose eliminating
consumer (food) subsidies, but the combined weight of those
groups is only roughly equal to the political weight of the
four social groups - international financial institutions,
the ruling elite, urban politicians, and urban capitalists -
that favor this reform. Politically, consumer subsidies can
be eliminated, or reduced, if the right kind of concern is
shown for opposing social groups. |
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