From: dean@vexcel.com (Dean Alaska)
Subject: Re: Development policies
Organization: VEXCEL Corporation, Boulder CO
Date: Fri, 18 Dec 1992 21:27:16 GMT

In article <1992Dec18.164247.17939@ke4zv.uucp> gary@ke4zv.UUCP (Gary Coffman) writes:
>In article <1992Dec15.155957.12052@vexcel.com> dean@vexcel.com (Dean Alaska) writes:
>>After some discussions here with Gary, John and Stein, I wanted to tie a
>>few ideas together.  Readers might ponder why World Bank economists
>>did not realize that the huge export boom they promoted would not
>>lead to the commodity price plunge that occurred.  Did they forget
>>about supply and demand.  Also, just who was expected to absorb the
>>huge trade surpluses that would result?  Export strategies appear to
>>be working for a few countries in Asia, but can they work for a large
>>number of countries or is this a zero-sum game?  Is a strategy that
>>works for a few countries and fails for dozens to be recommended?
>>
>>What follows is an extended excerpt of the history of this policy in
>>Morocco.
>[deleted]
>>
>>In the early days of the export-oriented model, in the mid-1960's,
>>Morocco was able to finance most of its own modernization, but soon
>>external financing was called upon to pay for greater and greater chunks
>>of this policy.  On the early 1970's the country depended on external
>>credit sources for 23% of the cost of its _politique des barrages_ (all
>>projects, not just the dams themselves).  By the mid-1970's, as dependency
>>on outsiders for food and farm inputs grew and the prices of both
>>skyrocketed, the proportion of outside funds needed amounted to _half_
>>of the modernization bill.  A huge gap between 1980 and 1984 brought the
>>external financial share to 76% - which meant an equally huge increase in
>>the national debt.  Debt, which in 1970 was a bearable 18% of the GNP,
>>hit 110% of the GNP in 1984.  Part of the debt explosion was also due to
>>the drastic drop in world market prices for phosphate, one of Morocco's
>>major exports.
>
>This type of increasing deficit financing would be seen as a red flag
>by any rational private investor. This kind of government borrowing and 
>international (government financed) lending is a recipe for disaster as 
>the above quote shows. The World Bank and the IMF have few success stories 
>they can claim for their policies which are founded on collectivist and 
>statist thinking by academic financiers playing with money for whose steward-
>ship they are not held responsible.
>
>The alternative, of course, is for countries to make themselves attractive
>for private foreign investment and development. This brings new jobs and
>income to workers, tax revenue to the government, and a climate of prosperity
>that fosters other investors, domestic and foreign, to start more businesses
>catering to the new found flows of wealth.
>
>Gary

What Gary fails to recognize is that his recommendations are exactly what
the World Bank was trying to do.  That they continued to enforce this
policy after it had failed, leading to the deficit spending that he
criticizes is probably the result of an unwillingness to admit that
they were wrong.  Also, although describing the World Bank strategy
as statis may be true but I fail to see how it was collectivist.
-- 
==============================================================================
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	- Benjamin Franklin			dean@vexcel.com