The Political Economy of Economic Reform

Abstract

The policy reforms attempted in developing countries over the past 3 decades have yielded varied results, with some, such as in East Asia, leading to very good outcomes in terms of economic growth. But, there are many others where it has not been possible to implement reforms or where reforms have achieved poor outcomes. The record in Papua New Guinea (PNG) and the Pacific island countries (PICs) has been similar, with good responses to reform attempts in some countries and disappointing results in others. During this period, ideas about what is important for growth and development have changed significantly, from the early focus on the notion that the lack of development was due to a shortage of capital and the need for transfers of savings from wealthy countries to poor countries, to the subsequent focus on correcting price distortions through structural adjustment programs, and to the recent focus on the basic institutions underpinning the economic and political performance of countries (for a discussion of the changes in development thinking over the past 30 years or so, see Duncan and Pollard 2002).