Political Preference Functions and the Market for Public Policy Reform (1989)

1'.1. Demand for ReformFrom Turkey to the Philippines and Guinea, from New Zealand to Peru, p)Ucymake=l are reducing trade barriers, selling off stateowned enterprises, repealing govammentregulations, and otherwise opening their societies to increased opportunities for investment and economic growth..Even in Communist bloc countries, there is increasing evidence of reform otpublic policies.This is especially true in China.Russia, and selected eastern European countriea.In the case ot less-developed countries (LDC), many external influences exercised by the World Bank, International Monetary Fund (IMP), Agency for In.ternational De,velopment (AID), and other bilateral donors have increased the demand for reform of public policies.Intbe case of agriculture, the demand for reform has come from many sources.The willingness to pay for reform of agricultural policies in industrial countries is suggested by the estimates that have been made of the distortions that res.ult from such policies.In the case of direct consumer and taxpayer costs, the Organization for Economic Cooperation and Development (OECD) has recently estimated that these costs are approaching $280 billion annually, a figure double the level of five years ago.The general equilibrium effects of such policies show that they not only burden taxpayers and consumers but also adversely affect employment in the rest of the economy_ Recent studies published by the Center for iQtematiCJDal EconoDUcainAwstra1ia and reportedtbia last May at the AD1erican Enterprise Inatitutesuggeet that tOO.a8 costa are staggering.According to the general equilibrium anaIysisthathasbeen conducted &n.dassuming agricultural protection in the OECDcountriea were eliminated, LDes would gain$26biUion.and would experience a. 2.4~rcent per year reduction in external public debt (Looand Tower).Coincidently, inr~ ~trialcountrieswoutd gain $17 million from reduced needs orLDCs for aid.Using a similar model, Stoeckel and Breclding have estimated that, by removing protection in the four European Community (EO) countries, approximately 3 million jobs would be generated, and manufacturing exports would be increased by 5 pexcent.For the United States, Robinson,Kilkinny, and Adelman have estimated that the unilateral removal of agricultural protection will generate a $10 billion gain in U. S. gross national product (GNP), a $26 billion reduction in government deficits, and a $36 billion increase in investment.These general equilibrium effects identify a number of other potential losers to current agricultural and food policies in the developed world.The burden that is placed on various groups to finance the transfer of w'ealth and income to agricultural producers within the industrialized oountries exceeds by an order of magnitude of at least two what farmers receive in the way of subsidization.Regardless of whether we believe the above estimates are reliable or accurate, there can be little doubt that the economic gains from effective reform of public policies which transfer income and wealth to agricultural producers far exceed the losses that would be experienced by these producers." Su,pply of1J.eformIn light. of the above denumu8, why is there so little public sector reformsnpply?Speeifica11y, in light 01 the large potential benefits of policy relorDl.why is it as yet unrealized?Ananswertbatprovides.many insightsisprovid,~ by the JWtion of aml '".market-not aconven~,:~ economic market but apolitical economic market.Political and