New Directions in the World Economy

Participation in international trade provides a Variety of benefits to the developing countries. They may obtain gains through resource allocation according to comparative advantage; the exploitation of economies of scale and increased capacity utilization; improvements in technology; increases in domestic savings and foreign direct investment; and increased employment.

This essay will report on the results of research on the policy responses of developing countries to exogenous (external) shocks in the 1973–8 and 1978–83 periods. It will further examine the economic performance of outward-oriented and inward-oriented developing countries in the light of the policies applied.

This essay will examine distortions in product and factor markets in developing countries, and the interaction of these distortions in respect to the development strategies applied. The analysis will concentrate on policy-imposed distortions, where departures from efficient resource allocation result from policy actions; these contrast with distortions resulting from market imperfections.¹

The policy prescriptions of the Cambridge Economic Policy Group (CEPG) for the United Kingdom are well known. They involve all-round protection of British industry that would allegedly permit reaching simultaneously higher output levels, lower unemployment rates, and lower inflation rates. Since first presented in February 1975, the views of the Cambridge Group have been several times and have been repeatedly subjected to criticism.¹

‘Dependency,’ or ‘Dependencia’ in the Latin American literature, is a many-splendored thing. It has had a variety of interpretations and has been the subject of a vast literature over the last two decades. Rather than attempting to provide a review of these — often conflicting — writings, this essay sets out to analyze the key propositions of the dependency school that are common to most, if not all, of those under its banner.

The ‘Adding-Up Problem,’ or the ‘Fallacy of Composition,’ has been with us for some time. In presenting the favorable economic results of countries following outward-oriented policies, or advocating the adoption of such policies in other countries, one often encounters the objection: ‘But what would happen if everyone did the same?’ The implicit, or explicit, contention is that there would not be enough markets, or that protectionist reactions would be triggered in the developed world, as a result of the onslaught of exports by the developing countries.

This essay will examine the effects of economic incentives on exports in general, and on agricultural exports in particular, in the developing countries. Section I will introduce a simple econometric model to estimate the effects of price incentives on exports. In Section II, the model will be applied to the exports of goods and nonfactor services and to merchandise exports. In Section III, the same model will be used to indicate the effects of price incentives on agricultural exports. Sections IV, V, and VI will present information on the responsiveness of merchandise and agricultural exports to incentives in the 1960–73, 1973–8, and 1978–81 periods, respectively, by making use of intercountry comparisons.

This essay examines the experience of sub-Saharan Africa with economic incentives in general, and agricultural incentives in particular, and analyzes the effects of these incentives on economic performance. Section I of the essay reports on the findings of an econometric investigation on the responsiveness of exports to incentives. Section II reviews changes in the export market shares of sub-Saharan African countries pursuing different development strategies. Section III examines changes in export market shares for four sub-Saharan African countries, Tanzania, Kenya, Ghana, and the Ivory Coast. Sections IV and V provide a comparative analysis of agricultural policies and performance for two pairs of these countries: Tanzania and Kenya (Section IV) and Ghana and the Ivory Coast (Section V).

The essay will begin by describing the principal features of the common agricultural policy of the European Economic Community and indicating the effects of this policy on the level of agricultural self-sufficiency and on agricultural exports in the Community (Section I). This will be followed by a review of changes over time in average rates of agricultural protection in the EEC, Japan, and the United States (Section II). Information will further be provided on the welfare cost of industrial country agricultural protection (Section III) and on the possible effects of the removal of such protection on trade and economic welfare in the industrial and in the developing countries (Section IV). The essay will next consider the incentive policies applied by the developing countries and the potential welfare effects of these policies (Section V). Subsequently, the combined effects of agricultural protection in the industrial countries, developing countries, and the European socialist countries will be analyzed (Section VI). In the conclusions, the policy implications of the findings will be drawn.

There has been a sea change in attitudes towards public enterprise around the world in recent years. In Western Europe, the United Kingdom and, since April 1986, France have set out to privatize public enterprises on a large scale. In the case of France, this represents not only a reversal of the nationalizations undertaken by the previous socialist government in 1981, but companies nationalized in 1945 are also being privatized.

This essay sets out to examine Mexico’s possibilities in the world economy in general and in the North American area in particular, and to consider the choice of policies that may be applied to exploit its possibilities to best advantage. As an introduction to the discussion, Section I will review the policies applied in Mexico during the 1973–83 decade of external shocks. In turn, Section II will examine the extent to which Mexico has exploited its comparative advantage in trade in manufactured goods. Finally, Section III will focus on policies that may permit Mexico to cope with its debt problem and to ensure rapid and sustained economic growth in the future.

Mexico has been a central actor in the debt saga that has unfolded in recent years. In August 1982, the suspension of the servicing of its external debt precipitated the debt crisis. Subsequently, Mexico became the first recipient of an IMF loan package arranged with the participation of government and commercial bank creditors.

This essay will analyze changes in economic policies in Hungary that began with the December 1978 resolution of the Central Committee of the Hungarian Socialist Workers’ Party (for short, Party resolution). The impetus for policy change was provided by Hungary’s growing indebtedness, with its deficit in convertible currency trade reaching $1.2 billion in 1978, equivalent to 6.7 percent of the gross domestic product.¹

This essay will analyze the policies that may be employed to improve the performance of the Hungarian economy. After indicating the need for a restrictive macroeconomic policy and for the efficient promotion of exports, the essay will concentrate on the conditions existing in factor markets. Recommendations will be made for modifying the relative prices of labor and capital and improving the operation of markets for these productive factors in Hungary.

This essay will briefly review the economic reforms introduced in China after 1978, analyze the performance of Chinese agriculture and industry following the reforms, and examine prospective changes in the future. In regard to the individual topics, the experience of European socialist countries and, in particular, that of Hungary will be noted, based largely on the writings of the author.¹

Nearly five years have elapsed since François Mitterrand assumed the presidency of the French Republic and a socialist-dominated assembly was elected. There have been considerable changes in the rhetoric as well as in the policy measures taken during this period. While references to ‘class warfare’ and to the need for a ‘radical break with capitalism’ were made in Mitterrand’s speeches prior to the 1981 elections, he subsequently spoke about ‘the community of a mixed economy’¹ and, finally, in his televised statement of 15 January 1984, stated that ‘it is the enterprise that creates wealth, it is the enterprise that creates employment, it is the enterprise that determines our living standard and our place in the world hierarchy.’

In presenting the draft law on nationalizations in French industry and banking to the National Assembly on 27 September 1981, ‘the lack of a true industrial policy’ was adduced as the principal reason for the proposed actions. It was claimed, in particular, that ‘it is necessary for the state to have the instruments for efficient interventions and for the planned orientation of the country’s development. The most important of these instruments is the enlargement of the public sector.’ The enlarged public sector was to be the spearhead of modernization of the French economy, with the state providing the funds for the requisite investments. Modernization appeared as the key word in statements made by socialist leaders, who repeatedly claimed that ‘there are no condemned sectors, only outdated technologies.’

In March 1986 a new majority was elected under the flag of economic liberalism and Jacques Chirac took over the reins of the government from Laurent Fabius. The purpose of this essay is to evaluate the record of the new government in the first year of its existence.

The focus of this essay is the measures of protection applied to trade between developed and developing countries. This choice reflects concern with the adverse repercussions of recently imposed protectionist measures in the two groups of countries as well as the increasing importance of mutual trade for their national economies.

The world trading system is at the crossroads. Despite repeated declarations made by developed country governments of their intention to resist protectionist pressures and to roll back protection, new measures have been introduced to limit imports to the detriment of their own and their trading partners’ economies. Also, some large developing countries have responded to external shocks and the subsequent debt crisis by increasing import protection.

This essay has set out to examine Japan’s trade policies towards developing countries by reference to actual trade flows and by utilizing information obtained from the governments of countries of the Pacific area as regards Japanese trade practices. Section I will present empirical evidence for the year 1973 on the extent of Japanese imports of manufactured goods from developing countries in relation to the imports of the other developed nations from these countries. Section II will review changes in Japanese imports from the developing countries during the 1973–83 period, placing it again in the context of the developed country experience. In Section III, Japanese trade practices affecting imports from Pacific area developing countries will be described, drawing largely on communications received from official sources in Hong Kong, Korea, Singapore, and Taiwan. In the conclusions, the available evidence will be brought together in evaluating Japanese trade policies towards developing countries in general and towards the countries of the Pacific area in particular.