The privatization process in Russia necessitates a reexamination of one of economics most sacred tenets. Under the wrong circumstances, private property rights can become a destructive force, not the constructive force for economics growth and political stability that economists have always taken for granted. In Poland, a carefully crafted privatization effort was set in motion only after the essentials of a market infrastructure with checks and balances had been instituted. As a consequence, Poland escaped the oligarchic capitalism, corruption, and massive theft schemes such as Loans for Shares that haunts Russia today and discredits and undermines the entire reform effort. This paper locates the chief culprit for the failure of structural adjustment in Africa at the conceptual level rather than the weak implementation capacity of African governments.
Policies are often in conflict due to the inconsistencies within the adjustment model.
Despite its name the model excludes vital structural features of African economies. The reliance on neo-classical microfoundations in adjustment leads to a series of errors which preclude the generation of policy options that could signifantly develop African countries. Drawing on institutional economic theory, the paper points to an alternative approach aimed at the structural and institutional transformation of African economies. The recent East Asian crisis raises questions about the ability of the IMF to perform its traditional role stabilizing financial markets and preventing transitory financial dislocations from becoming contagious in an economic and financial system that is virtually seamless, timeless and borderless. The new global economic paradigm requires more than patches.