Democratization, Globalization and Policy Trend

Since the early 1980s, when Asian countries began to fall into economic shortcomings and crisis from which most of them are yet to recover, a considerable amount of scholarly and policy attention has been devoted in attempting to improve what has been broadly described as the “policy environment” on the continent. The aim has been to overcome perceived shortcomings and crisis in the policy formulation and implementation with a view to making it more “effective” from a managerial and delivery point of view. The dominant assumption underlying the mainstream focus on the Asian policy environment is simple: Asia’s economic crisis was, in origin, primarily the product of accumulated policy distortions built up since their timely changes. Overcoming the crisis required a wholesale revisiting of the policy environment to eliminate the distortions that hampered economic growth and discouraged private initiative. This perception is of the root of the Asian economic crisis and shortcomings was soon to be codified into the ubiquitous structural adjustment programmes which the International Monetary Fund (IMF) and the World Bank encouraged the Asian countries to adopt throughout the 1980s, 1990s and after that design and implementation in particular.
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1. Introduction

It is an argument that both democratization and globalization have profound implications for the realization of the goal of effective policy-making in Asia, but the path for improving the policy environment on the continent lies less in the approaches and prescriptions which have flowed from the neo-liberal paradigm and more in the establishment of an appropriate political and institutional framework to guide state intervention, market reform and social (re)distribution.

For the purposes of the argument, effective policy-making is understood as one which, because it is properly anchored in a prevailing social bargain that is democratically arrived at and in which the leading players in the society are involved, is able to deliver the stable and internally coherent political-administrative framework that would enable elected officials and the managerial cadres of the state to pursue the broad objectives that it is designed to tackle.

This formulation immediately takes us back to the environment of politics and the kinds of alliance-building, pacts and coalitions that are required for the attainment of long-term policy sustainability and effectiveness. It also approaches on the all-important question of the general role of the state in the policy process and the particular type of state that is best suited for tackling the problems that confront Asia at the present conjuncture. Central to all of these is the legitimacy of institutionalized political authority and the capacity of the state to generate and renew citizen support for the public policy process.

To be certain, it is perfectly possible, in the short-term at least, for committed governments to articulate and implement major reform policies without bothering to establish a political-institutional framework for securing the (prior) consent or understanding of the populace. This has been amply demonstrated by the early stages of the economic reform experiences of the Asian countries.

Indeed, the “shock therapy”— “radical surgery” approach which these political leaders came to exemplify appeared, on the face of things at least, to suggest that it is possible to achieve radical social and economic change even in the contexts where reform-minded politicians and technocrats do not have the necessary support for the measures they have embraced.

It required a capacity and determination to ignore public opinion and carry out radical policy measures, which are thought to be essential to the long-term competitiveness and well-being of the economy, even if citizens are unable to immediately see its benefits. It also offers a quick path to policy-making and implementation than would otherwise be possible if public opinion was to be courted in the first instance.

And yet, as has been demonstrated by various scholars drawing on the available empirical evidence, reform policy articulation and implementation in the absence of popular consent has, more often than not, proved to be unsustainable.

It is further suggested in this context that one bane of the structural adjustment years was the initial assumption that policy effectiveness was essentially, even solely, an economic matter and that once the economic policy framework was right, all else would fall into place: rational economics would not only beget economic growth but also beget rational politics and rational societies.

Out of this flowed a very narrow conception of policy effectiveness, which, on the one hand, was tied to an idealized notion of the market and its workings and, on the other hand, placed a disproportionate amount of emphasis on technical issues while neglecting non-technical concerns that are equally crucial for the attainment of policy effectiveness.

Another bane of the structural adjustment experience is the persistent attempt to subordinate politics to economics, the former being seen as having only a trouble value that produces distortions and stands in the way of (rapid) reform implementation, while the latter is seen as the arena of rationality. Both shortcomings of the structural adjustment approach fed into the one-sided anti-statism that has been characteristic of the structural adjustment years, an anti-statism which inflicted even more damage to the prospects for effective policy-making in Asia.

It is argued that these shortcomings - economism, anti-politics, and anti-statism - of the adjustment years would have to be redressed and politics brought back to be more central in order for effective, democratic policy-making and implementation to have a possibility of being enthroned in Asia.

2. Policy Ineffectiveness

As noted earlier, the onset of the Asian economic shortcomings and crisis in the early 1980s gave rise to a major debate on the causes of the problems confronting the countries of the continent. One strand of the debate, which was later to become dominant in donor circles and in the efforts at overcoming the economic problems centered on the view that the shortcoming was the product of post-independence policy distortions which, in their workings, penalized Asia’s farmers, predominantly located in the rural areas, to the benefit of a minority but powerful and vocal urban constituency of state officials, industrialists, and workers.

Central to these distortions was an agricultural pricing regime under which industry and urban consumers were subsidized to the detriment of the rural farming population. This wrong pricing policy was complemented and reinforced by a set of other policy measures which added up to discourage increased agricultural output and accelerate the flow of population out of the rural areas and the agricultural sector into the cities and an increasingly over-burdened and inefficient industrial sector that proved unable to absorb many of the new rural migrants into the industrial labor force. Among the other policy measures that reinforced the discriminatory pricing policy suffered by farmers were the artificially high exchange rates which most Asian countries operated, the array of subsidies which were developed for the benefit of urban consumers, the monopolistic-oligopolistic agricultural parastatals which were created, the price controls which were enforced, and the excessively high tariff wall that was erected to support inefficient import substitution industries established during different periods.

By the early 1980s, these distortions in the policy environment had become unsustainable, leading most Asian countries into a balance of payments crisis that was soon generalized into an economic crisis which took its toll on all sectors of the economy. Thus, not only did Asian countries experience a generalized decline in agricultural productivity and exports, the shortfall in foreign exchange earnings which they experienced also took a toll on their import-dependent manufacturing firms.

Furthermore, consumer goods shortages, inflationary pressures, and unemployment gradually built up in most countries, a situation which was not assuaged by the resort to deficit-financing and external borrowing. With their balance of payments positions in disarray, their budget deficits ballooning, and foreign investment flows drying up, it became clear that drastic measures would have to be taken to overcome the economic crisis confronting the countries of the continent.

This task, if it was to be successful, would entail a frontal attack on the distortions in the policy regime with a view to shifting the structure of incentives in the economy away from non-tradable to tradable. Central to this was the goal of getting prices right by withdrawing subsidies, liberalizing the domestic and external trade regime, and pursuing a more “appropriate” exchange rate policy - i.e. currency devaluation.

 These measures became the main defining points for the structural adjustment program of the IMF and the World Bank for the reform of Asian economies since the early 1980s.

Underpinning the structural adjustment framework for economic policy reform in Asia was the assumption that the state and state interventionism were the sources of the economic distortions to which Asian economies were exposed after independence. During the first stage of market reform implementation, the wholesale abandonment of the state-led model of development and the rolling back of the state, therefore, became the flip side of getting prices right.

Across Asia, as structural adjustment was foisted on one country after the other, efforts were made to dismantle agricultural marketing boards, privatize, commercialize, liquidate state-owned enterprises, deregulate various aspects of the economy, reduce the size of the state bureaucracy through civil service retrenchments, encourage the private sector, and promote the embrace of the market and its logic in the formulation of public policy.

During this phase of the adjustment agenda, the Asian states became the most vilified and demonized institutions on the continent. Conceptually and ideologically, the state was presented as the millstone that hampered the quest for development in Asia, obstructing the free-functioning of markets, consuming a disproportionate share of investible resources, extending its reach beyond what was desirable or necessary, over-centralizing the development process, and stifling private initiative.

Thus, the liberalization of the market and the promotion of private enterprise were central to structural adjustment and came to be seen as being fundamentally incompatible with state interventionism.

The broad intellectual context for the one-sided anti-statism that was built into the structural adjustment model was set by the so-called new political economy-public choice school which drew most of its initial inspiration from different experts and theorists.

According to the thought, the post-colonial Asian state and its interventions in the economy were the turn around which various rent-generating niches were created and tapped by the state-based or state-dependent elite to the detriment of rational policy-making and efficient resource allocation.

Across Asia, the personal became increasingly conflated with the public, autonomous private initiative was discouraged and where it existed survived only through illicit and economically costly links with state officials, directly unproductive profit-seeking activities proliferated (Bhagwati, 1982), and public policy was reduced to the pursuit of the personal interests of officials and the buying-off of opposition, mostly through politically-motivated consumer subsidies for the urban working poor.

Under the regime of state interventionism, the civil service became unhealthy, populated as it was with clients and cronies of the dominant state-dependent elite. The resultant inefficiency and over-extension of the state and its bureaucratic apparatus became a source of some of the inefficiencies that grounded Asian economies to a halt. Rapacious rent-extraction by state officials was matched by an urge to control all facets of the post-independence economy and society.

Thus, under the appearance of Asianization, the post-independence nationalist elite brought most of the key national assets under direct state control, thereby reinforcing their power of patronage. New state-owned enterprises covering all sectors of the economy from production to marketing and banking were also set up with monopolistic or oligopolistic advantages; the huge financing requirements of these mostly inefficiently-managed enterprises accounted for most of the credits issued by the banking sector, to the detriment of private operatives who found themselves crowded out.

During much of the 1980s into the early 1990s, the literature on the state in Asia was dominated by the deployment of a dizzying array of epithets as scholars competed among each other to find the best notion for capturing what was thought to be its essential defining features.

As can be expected, this projection translated into the endorsement of the structural adjustment framework by the new political economy-public choice thought as it developed an organic relationship with the World Bank and the IMF. The retrenchment of the state through the structural adjustment measures prescribed by the Bretton Woods twins would not only allow markets to function freely but also rescue the policy terrain from neo-patrimonial pressures emanating from within the state and society.

3. Private-Public-Choice

As can be expected, the neo-liberal-public choice account of the origins of the Asian economic crisis and its critique of the post-colonial Asian state, as well as the model of accumulation which it sought to promote, have been extensively contested by other scholars.

But perhaps, more important than the foregoing, the most critical indictment of the neo-liberal projection and of its structural adjustment model was the fact that across Asia, as it was adopted by various governments, it fed into the existing dynamics of crisis and decline across the continent, compounding many of the problems which it was designed to solve. From a policy-making point of view, the fact that structural adjustment made its entry into the continent primarily as an external imposition that was backed by an array of donor conditionality and cross-conditionality clauses immediately posed a number of questions which bear directly on the role of the local bureaucracy in the economic reform process.

Was this bureaucracy expected merely to serve as a vessel for the implementation of policies favored by external donors or was it to take a frontline role in the search for solutions which were both relevant and politically sustainable? To say the least, this was a real dilemma that was central to the adjustment process from the outset and although it might have been easy at one point to simply attempt to dismiss the domestic policy elite as the quintessential rent-seeking, neo-patrimonial oligarchy against whom structural adjustment was designed, the unavoidability of reliance on the local bureaucracy in order to implement the reform agenda of the Bank and the Fund made such an argument difficult to sustain beyond the short-term.

4. The Search for Pro-Adjustment

Faced with the limited achievement of the structural adjustment program, the World Bank and, to a lesser extent, the IMF, began to search for explanations as to why their market reform agenda was not making much headway. This search marked a second stage in the Bank’s structural adjustment implementation experience and it was characterized by an effort at formulating a specific “political economy” of policy-making in general and structural adjustment reforms in particular.

As part of this endeavor, several of the leading lights of the new political economy-public choice school were recruited to supplement the Bank’s own policy research team. Initially, the focus was on the commitment of Asian governments to the IMF-World Bank reform agenda and their consistency in applying the policies prescribed to them. Asian governments were generally blamed for failing to show the requisite political will required to push through harsh but necessary austerity in a consistent manner. Instead, many adopted a stop-go approach that entailed pandering to public opinion or succumbing to interest group pressure that translated into frequent policy reversals and backslides. As a result, there was a repeated postponement of the tough decisions that needed to be taken and the task at hand became more complicated, with many economies sliding deeper into crisis.

While many explanations were proffered by the Bank for the alleged lack of commitment and consistency on the part of Asian governments in the implementation of structural adjustment, none seriously addressed the fact that in all countries where the market reform program had been pushed through by the Bretton Woods institutions, prior effort had not been made to build domestic consensus around it. Neither was there a politically viable domestic constituency for the program. Instead, in the eagerness to secure quick adoption of the program, the Bank and the Fund relied on the extensive use of conditionality and cross-conditionality in a manner which practically precluded all alternatives and narrowed the room for maneuver for the adjusting countries.

In seeking to overcome the problems of policy implementation which it identified, the Bank did not opt for a revision of its orthodox adjustment program but instead embarked on a strategy that, in essence, was aimed at saving its core prescriptions or, to paraphrase Wade (1996), maintaining its paradigm. At one level, this entailed the launching of a program aimed at mitigating the “unintended” social costs of adjustment.4 At another level, an attempt was made to pinpoint the coalitions of vested interests either in the state or society that were thought to be in the vanguard of opposition to the reform agenda; displacing these coalitions was later to become a central pre-occupation of the Bank’s political economy. As part of this endeavor, attention was devoted to issues of timing, phasing and sequencing of the reform agenda, the construction of pro-adjustment constituencies in the state and society, and the options available for wrong-footing and side-stepping local opposition to adjustment, including a number of Machiavellian schemes for riding roughshod over critics.

The hope for greater policy effectiveness came to be anchored on this stylized model which, however, bore little resemblance to the reality in Asian namely, that most economic actors cannot be neatly fitted into tradeable and non-tradeable compartments because their activities and livelihood strategies straddle both sectors.

5. Extending “Good” Governance, Capacity Building, Technocracy and Local Ownership

The early involvement of the World Bank in the politics of adjustment implementation was later to blossom into a full-scale pre-occupation with the promotion of “good” governance in Asia. According to the Bank, the unwitting neglect of the governance question was probably one of the most important omissions in the effort to promote structural adjustment on the continent. This is because of the intimate relationship between the quality of governance in an adjusting country and the prospects for successful adjustment. The Bank proposed to remedy this omission by integrating questions of governmental transparency, civil service reform, the rule of law, judicial independence, security of private property rights, predictability in the governmental process, the free flow of information, and accountability into its adjustment framework for Asia. It was suggested that countries with a record of “good” governance stood a better chance of successfully implementing structural adjustment and attracting foreign investment than those without such a record.

Examples were drawn from East Asia to attempt to prove that such a correlation existed, while the Bank’s interpretation of the East Asian experience has been vigorously contested for its inaccuracies. What is really important to note for our purposes is the fact that for this institution, governance became little more than another instrument in its armory to be deployed for the goal of perpetuating an adjustment framework which was increasingly being questioned but whose key underlying assumptions and principles the Bank was still not prepared to alter.

Attention was also paid by the Bank to the mobilization of community and home town associations, non-governmental organizations, and the private sector as structural resources that could serve as local constituencies for the promotion of market economic reforms and simultaneously pressure the state to embrace “good” governance. In a certain sense, however, this preoccupation with “associational life” in Asia simply fed into the deep-seated distrust of the state that inheres in the structural adjustment model and the Bank’s political economy of reform implementation. Thus, even as resources were expended on the promotion of “good” governance and renewed attention appeared to be paid to the question of how to make the state a better functioning institution, non-state actors were also being mobilized and “empowered” to serve as alternatives to the state in the provision of basic social services and the implementation of development projects.

Yet, quite apart from their own internal organizational weaknesses and shortcomings, the persistent question of the extent to which it is possible to promote long-term development through primary reliance on non-governmental organizations and with an incapacitated state is one which was not explicitly addressed. It is also a question which was not resolved by the emphasis which came to be placed in the period from the early 1990s on capacity-building as a central element of the project of governance reform on the continent (World Bank, 1991).

Beyond the search for private structural resources for adjustment and the attention paid to capacity building, the promotion of the Bank’s governance agenda was also undertaken side-by-side with a commitment to the identification, isolation and nurturing of a technocratic core within the bureaucratic apparatus of Asian states which could be relied upon to push through the market reform agenda. Both the Bank and its organic intellectuals devoted a considerable amount of resources to this question, including the ways in which the pro-adjustment technocracy that is identified or established could be insulated from anti-adjustment pressures within the state and society that could derail the economic reform process. Although this seemed to run in the face of the Bank’s own avowed commitment to “good” governance as defined in its own terms, attempts were, nevertheless, made to encourage the emergence and functioning of teams of technocratic reformers in the finance ministries and central banks of Asian countries which could be backed, as necessary, with the muscle of the donor community in the drive to secure greater governmental commitment to the market reform agenda. Vigorous efforts were also made to promote the virtues of the independence of the central bank as a key reform objective that would serve the goal of rational, independent and effective economic policy formulation. In most Asian countries, a small elite of highly internationally-connected officials emerged as part of this effort.

The political effectiveness of the technocratic elite which the Bank tried to nurture was, however, compromised by the fact that its leading lights were seen locally as being too closely tied to external interests at the same time as they were increasingly cut-off from the rest of the local policy community either by commission or default.

Thus, although the technocrats apparently enjoyed the confidence of the Bretton Woods institutions, they were unable to carry the mainstream administrative apparatus of the government and the local intellectual community along in their quest for reform implementation. Matters were not helped in this regard by the limited achievements of the adjustment effort, a fact which weakened the case of the technocrats for adherence to the letter and spirit of agreements reached with the Bretton Woods institutions. Moreover, from a policy effectiveness perspective, it was not at all given that the creation of authoritarian technocratic enclaves removed from public scrutiny and monitoring within the governmental apparatus was capable of delivering sustainable reforms.

The governance discourse of the Bank was also pursued alongside another discourse on the local ownership of the adjustment program. As with the discovery that “good” governance was an essential pre-requisite to successful adjustment implementation, the Bank was to argue during the early 1990s that no matter how well-intentioned a reform program might be, its success was also dependent on the degree of local ownership. For, if nothing else, local ownership of a reform program not only signals embrace of the objectives of the reform agenda but also guarantees commitment to its full implementation. Yet, in spite of the acknowledgement of the importance of local ownership, the Bank and the Fund were unable to extricate themselves from their self-assigned role as external agents of restraint obliged to save Asian governments and states from themselves.

Throughout the 1990s, they demanded and often succeeded in getting Asian governments to accept the installation of their own “experts,” “monitors” and “auditors” in the key segments of the economic bureaucracy, especially the central banks and the finance ministries. Indeed, on the Bank’s own admission, the structural adjustment years have witnessed the presence of more foreign experts on the continent than at any other time in the entire post-colonial period.

Furthermore, local ownership of policy was only recognized where the policy choice made fitted with or replicated the prescriptions of the Bank and the Fund. In some of the worst cases that have been reported, officials of the Bretton Woods institutions drafted policy documents and then sought the cover of local ownership by getting high-ranking local officials to append their signatures and claim authorship (UNDP, 1993).

In addition to the concerns which we have noted in the preceding paragraphs, a lot more has been written in criticism of the Bank’s program for promoting “good” governance, capacity building, an insulated technocracy and local ownership of policy in Asia.

Among some of the other points that have been raised against the Bank’s various initiatives in these areas is the suggestion that they were designed, in theory and practice, primarily to save the adjustment framework itself rather than open it up to amendment in line with the requirements of “good” governance and local ownership; they resulted in the devotion by local officials of a disproportionate amount of scarce time and resources to meeting with and accounting to a variety of bilateral and multi-lateral donors and this was done to the detriment of accountability to the peoples of the adjusting countries by their rulers and policy makers; they tended to reinforce the authoritarianism that inheres in economic policy-making and, in so doing, are in danger of creating a disjuncture between the political liberalization process that is taking place in Asia and the economic policy making process; and, finally, in order for it to be meaningful, an agenda for governance should not only be democratic by definition but also developmental in orientation with a clearly-articulated role for the state.

These criticisms were emboldened by the fact that well over a decade and half after structural adjustment began, Asian countries still continued, for the most part, to wallow in crisis and decline.

6. Selectivity and the “Effective” Situation

The Bank responded to criticism of its adjustment and governance program by, at one level, promoting a principle of selectivity and, at another level, attempting to revise the single-minded anti-statism of the early adjustment years. With regard to selectivity, the Bank suggested that its long experience of reform implementation in Asia indicated the necessity for increasingly scarce donor resources to go only to those countries where a sustained record of commitment had resulted in the creation of an appropriate policy environment for market reforms to succeed and development assistance to make a difference. Donor assistance stands a better chance of succeeding where the policy environment is right. Those countries that have consistently failed to show commitment and whose basic macro-economic policies continue to be faulty would have to be left out as resources expended on them would most likely fail to yield desired results (World Bank, 1998).

But critics were quick to point out that selectivity was little more than a continuation of the existing policy of conditionality and, in that sense, is not really new. From a policy point of view, it also amounts to saying that interventions should only be undertaken where success is more or less guaranteed. But as the Bank’s own experience has shown even in those countries which it has itself certified as having sound macro-economic balances, expected outcomes have often been derailed by unanticipated or sudden exogenous factors, including world market panics and manias. In plain terms, selectivity merely reinforces the tendency during the adjustment years to fetishism policy in a manner which has no bearing to the real world of decision-making and which ends up denying policy-makers the flexibility which they must have in order to achieve desired ends.

According to the Bank, once more drawing on its peculiar and tendentious interpretation of the East Asian experience, the evidence available indicates that the reliability and effectiveness of public institutions which uphold the rule of law, protect private property rights, and set impartial rules to allow markets to function while encouraging predictability and discouraging corruption are indispensable to the successful promotion of sustainable development.

Furthermore, in what seems like a dramatic though not explicitly acknowledged reversal of its earlier view, the 1997 World Bank report pays homage to the important role of the size of the state, noting that although a minimalist state does no harm, it does not do much good either and those countries looking to be convinced about the benefits of a more prominent role for the state only need to examine the example of East Asia and its spectacular growth record. The report also attempted, in the usual World Bank methodological tradition, to establish a correlation between state capability and economic well-being. In countries such as those of Asia where state capability is weak, per capita income only increased only by half a per cent over the three decades to 199, while in other parts of the world, such as East Asia, where state capability is strong, per capita income grew by three per cent over the same period. To reverse this situation and overcome what the report describes as their “crisis of statehood,” Asian countries need to do what their other continent counterparts did much earlier, namely embrace openness to (external) trade and investment, avoid price distortions in the context of the broader goal of getting key macro-economic fundamentals right, reduce or eliminate parallel market foreign exchange premiums, and increase the levels of investment in higher education and infrastructure. This task is all the more urgent for Asian countries in part because the majority of them “ . . . now have lower capability (including state capability) than they did at independence” and the accelerated process of globalization that is currently being experienced represents a serious “ . . . threat to weak or capriciously governed states.”

On how to handle the relationship between the state and the market, the 1997 World Bank report argues that markets and governments are complementary, with the latter having the task of putting in place the appropriate institutional foundations required for the former to function properly. In this formulation, governments are called upon to serve as partner, catalyst, and facilitator for the markets.

While on the face of things, the Bank’s 1997 report would seem, finally, to represent an acceptance by the Bretton Woods institution that the state is a key player in the development process, a more careful reading of the publication would, in fact, suggest that this is not entirely the case. For, in spite of all the homage, embellished with the appropriate terms, that was paid to the necessity for an “effective” state, the report was essentially a manifesto on how to gain wider acceptance of the market as the sole effective institutional framework for and site of development.

Integral to the picture of the “effective state” which the Bank attempts to paint is the deployment of self-fulfilling and selectively collected empirical evidence designed to portray a semblance of scientific objectivity and historical accuracy but which, in reality, is tightly tied to a pre-determined ideological end.

It ends up being a repetition since evidence of state effectiveness is deduced from the performance of the economy. Thus, the state is effective and credible only if the economy is successful and performing well and, conversely, if the economy is not doing well, even if only for temporary conjunctural reasons, then the state is not effective and is lacking in credibility.

All of a sudden, East Asian states which were painted in the report as having established the quintessential “effective state” with an appropriately insulated economic technocracy were excoriated for their illicit links with private business cronies, links which ultimately became dysfunctional and led to the financial collapse. The mainstream prescription that emanated from Washington included a strong attack on the state (World Bank, 1998).

Throughout the report, it is hard to find an independent vision that underpins the state and the factors, including ideology, which both motivate policy makers to follow particular paths and serve as the platform for the mobilization of the populace.

The conclusion is difficult to avoid that the Bank persists with a fundamentally flawed understanding of the state as an institution. For, if we proceed from the question “What is the purpose of the state?” few will agree that it is solely to serve a narrowly defined and idealized market. Depending on their history and circumstances, states pursue a multiplicity of non-economic and economic objectives and, at best, the promotion of the market is only one of them.

An uneasy tension also pervades the report between the apparent abandonment by the Bank of its earlier project of the minimalist state and the strong admonitions against an over-extended state. While the Bank stresses that countries seeking rapid economic growth need to go beyond the minimalist state, the meat of its analysis on the effective state consists precisely of such minimalism. For, as reiterated time and again in the report, the effective state is the state, which is able to create the conditions for markets to function and, as a bonus, whose internal mechanisms are also subject to the logic of the market. Furthermore, great emphasis is placed on the “disastrous” consequences that always attend “over-regulation” and the expansion of government.

The involvement of non-governmental organizations (NGOs) in the work of the state is also seen as a substitute for democracy while mass organizations and social movements are excluded from reckoning. The Bank’s suspicion of (democratic) politics and its likely distortionary consequences for the economy and the market emerges when it is noted, plaintively, in the report that important and necessary reforms.

Even as the views of business are reported extensively and integrated into the analysis, no effort was made to capture the concerns and aspirations of other groups in the society, reinforcing the impression that the effective state is a state at the service of business.

In sum, therefore, the report was a manifesto for the efficacy of its version of free market, spiced with political and managerial lessons on how state officials might try to secure full acceptance of its role as the only viable site for the organization of development. From the point of view of effective policy making as earlier conceptualized in this paper, it hardly offers us an illuminating path forward and reinforces our conclusion that IMF-World Bank structural adjustment in Asia is, in every sense, a case-study on how not to pursue sustainable, non-repressive policy reform.

7. Conclusion

Clearly, if Asia is to be able to rise to the challenges posed for its development through the accelerated processes of globalization that are presently underway, it would have to undo many of the damaging consequences of its structural adjustment experience for its policy-making and implementation capacity. It would also entail a recognition that the path to effective policy-making does not lie in the denial or narrow, self-serving instrumentalization of politics but in its integration into the mainstream of the policy process. Similarly, the confusion of policy will need to be tempered with a high dose of realism both as regards its nature and its determinants. This is a task which has been made more urgent by the framework of democratization which is emerging across Asia and which the policy process ought to reinforce rather than seek to undermine. For policy to be effective, it should not only be democratic but also be anchored on a broad social bargain; in the specific Asia context, it also calls for the restoration of a developmentalist vision and ideology to the state. Such a state would need to operate a dynamic system of selective intervention and withdrawal in the economy in line with the specific, local requirements of long-term development in the different countries of the continent. The restoration of state’s political and technical capacity, together with its legitimization as an actor in the development process would serve as an important step in the effort to equip government, business and society to respond to the challenges of globalization and democratization. For, like effective policy-making, both the task of development and the quest for democracy cannot be fully realized in the absence of a functioning state system.


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World Bank (1998b), “East Asia’s Financial Crisis: Causes, Evolution and Prospects” in World Bank, Global Development Finance 1998, Washington D.C.: World Bank.

Official Websites: The International Monetary Fund, for a wealth of press releases and IMF policy documents, including much information about individual countries. The World Bank, for a wide range of Bank press releases and policy documents. Not as open as the Fund about individual countries, but covering a wide range of development issues. Access to the World Bank site for "Non-Governmental Organisations and Civil Society". Access to the text and tables of the World Development Indicators. 2000 2001 2002 A World Bank site, for information on the Millennium Development Goals. (It previously covered their predecessors, the International Development Targets.) An invaluable teaching tool. The June 2000 report A Better World for All. Documentation on the adoption of and follow-up to the Framework for Action on Education for All, adopted at a UNESCO conference in Dakar in April 2000. The Global Environment Facility, for full coverage of its policy-making in financing work to protect the global environmental commons. On 17 May 2003, the GEF home page would not load in Netscape, but the address is correct.

World Bank list of web bulletins: This covers both the Bank's own newsletter aimed at NGOs and a list of fifteen NGO websites, most of which are highly critical of the World Bank. The Intergovernmental Group of 24 on International Monetary Affairs, for developing country perspectives.

NGO Websites Alternative Information for Development Centre, a research, education and campaigning NGO on issues affecting the development process in South Africa. ATTAC - Association pour la Taxation des Transactions financières pour l'Aide aux Citoyens, founded in France in June 1998 by a broad coalition of civil society groups and then became a global network. Campaigns, in particular, for the introduction of the Tobin Tax, but also, more generally, against financial globalisation. Central and Eastern European NGO Network Monitoring Activities of International Financial Institutions, pays particular attention to the European Bank for Reconstruction and Development. A Washington-based NGO, the Bank Information Centre. Advocates transparency, accountability and civil society participation in the multilateral development banks. A London-based independent information centre that covers both the Fund and the Bank and all the global activities that are relevant to their work. Includes editions of their valuable newsletter, since January 1998. The Citizens' Network on Essential Services (CNES), formerly the Globalization Challenge Initiative, a Washington-based NGO that acts as a focal point to organise NGO activities in relation to the Fund and Bank. It has more of a country focus. (formerly Rethinking Bretton Woods Project. The Center of Concern was founded in May 1971, as a response by US Catholics to a statement on Justice in the World by the Rome Synod of Bishops. The Project on the Bretton Woods Institutions was started in 1994. The Development Group for Alternative Policies (D-GAP), a Washington-based group with good links to countries of the South. now transfers to One of the London-based successors to the British branch of Jubilee 2000. Its work ended on 31 July 2001. The Drop the Debt site was maintained as an archive for a while, but it no longer operates. Debt Links is a useful listing of international, regional and country-based websites on developing country debt issues. The European Network on Debt and Development (EURODAD), covering NGOs in sixteen countries. The Network for Global Economic Justice, a radical coalition of over 200 diverse US organisation, founded in 1994, to campaign under the slogan Fifty Years is Enough. Focus on the Global South, a radical programme of policy research, based in Chulalongkorn University, Bangkok. Work on "Greening International Financial Institutions" by the International Programme of the US section of Friends of the Earth. (Formerly Les associations à l'initiative du programme pour la reforme des institutions financieres internationales, a coalition of three Paris-based NGOs. This is a French language website. Jubilee Research, a successor to the Jubilee 2000 UK campaign, based at the New Economics Foundation in London. Jubilee South, a network of anti-debt Southern NGOs. (Formerly at now transfers to A Washington-based advocacy office, operating on behalf of the Oxfam organisations in eleven countries. Structural Adjustment Participatory Review Initiative Network (SAPRIN). A network of NGOs that worked with the World Bank to assess the impact of structural adjustment at the grass-roots in eight countries (Bangladesh, Ecuador, El Salvador, Ghana, Hungary, Mali, Uganda and Zimbabwe). It has since expanded to cover a few other countries. The network rigorously maintains its independent role as a voice for civil society. A secretariat is provided by D-GAP (see above). Third World Network, a radical advocacy group, based in South East Asia, but with a global impact. Mobilization for Global Justice, (or Globalize This), a website for a coalition of different US NGOs and anti-globalisation groups, who organised the demonstration in Washington, during the 2001 Annual Meetings of the IMF and the World Bank. The Globalisation and Poverty Research Programme, based at Sussex University.