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The Political Process and Management of Economic Change

image of The Political Process and Management of Economic Change

Successful implementation of economic reform is largely dependent on the political and social environment in which they are introduced. This paper was commissioned because Commonwealth countries have an interest in understanding the dynamics and management of economic reform. Dr Abbey emphasizes the importance of mobilising political support for the reform process, and identifies the obstacles met at both the design and implementation stages. He considers: how the interests of different groups should be balanced; the nature of the political environment; information asymmetries; the competence and capacity of the bureaucracy to manage reform programmes; the role played by donors; the new emerging role of the state; the need for strong institutions to support reforms; and good government. The paper stresses that political stability is essential to effective adjustment and economic growth, and emphasizes the need for the state to modernise its processes.

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The Nature of SAPs and Experiences with Reform

The successive oil price shocks of the 1970s and associated debt accumulation, together with high world interest rates, slackening demand and declining commodity prices in the early 1980s were the origins of economic policy reforms. Growing external and internal imbalances were compounded by tightening capital markets. Starved of private capital and faced with growing disequilibrium, developing countries turned to the Bretton Woods Institutions (BWI) - the World Bank and the International Monetary Fund (IMF) - for assistance, which increasingly was offered only on the basis of structural adjustment conditionality, incorporated in the specific policy reform packages known as Structural Adjustment Programmes (SAPs).

English

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