Implications for Policy Reform

So far our analysis has concentrated on the perspective of political credibility. We have been able to show that (i) differences in political credibility can help to explain differences in the economic performance of countries and (ii) political credibility can be built through reputation, openness and participation. These findings suggest that political credibility should be a prime focus of policy reform in LDCs. In this chapter we will show that this is not taking place. In traditional policy reform political credibility and related considerations play no role. There are newer approaches to policy reform in LDCs that do take account of incentive problems of governments, but they are still embryonic. Later we will discuss the lines along which policy reform should be designed from a credibility perspective.