Gerald Helleiner's chapter 27 discusses the role of multinationals, which have accounted for a large share of foreign private investment into developing countries. He highlights high transaction costs stemming from protracted and ultimately futile haggling over transfer prices, and efforts by developing countries to "unpackage" such choice tidbits as high technology know-how from the investment, countered by the efforts of multinationals to avoid commitment of their own money to the target country because this would weaken their bargaining position should their partner try to modify the original contract by threatening to make the investment unviable. This guerrilla war has been interspersed with truces as one or the other party made promises that it often did not keep; a climate of constant disputes has been more effective in generating bribes than in promoting development. Hopefully, the climate will improve.

The largely theoretical chapter by Squire discusses the project appraisal methodology which should guide public funds to the most fruitful uses; 24 out of 27 countries that were surveyed by the World Bank questionnaire had an office or offices charged with the evaluation of projects, but Little and Mirrlees39, cited in Jimenez's chapter, are probably right in stating that the sophisticated project evaluation method which they, Squire, and others have developed is little used; Jimenez acknowledges this as he concludes that "agencies such as the World Bank should make every effort to encourage developing countries to discount future net benefits and to use border prices for tradables40." Rodrik and Jimenez41 cite Kaufmann's re-estimate of rates of returns from 1,200 World Bank projects in 58 countries, which show that those returns are correlated with indicators of the quality of macro management. Whether the relation is causal is discussed below.

Anne Krueger highlights in chapter 40 the extremely poor record of investment in public enterprises, which have accounted for a large fraction of capital investments in many countries. Citing Bardhan, she mentions that "In India, for example, 62.1 percent of total "productive" capital and 26.7 percent of total labor in industry was in the public sector by 1978-79. Yet those enterprises accounted for only 29.5 percent of value added in manufacturing.42" Such figures are a dime a dozen and similar statements could be made about many other developing countries, including such populous ones as India, Egypt, and China. A nonnegligible proportion of investment in public enterprises must be seen as a form of conspicuous consumption. The work force of these enterprises is a privileged and politically influential group, and it is proving very difficult to plug this drain on development funds that could be used far more effectively in such areas as education and infrastructure.

# 9.6) Technological Progress and Its Implementation

Pondering Evenson and Westphal's fundamental chapter is what led me to think of growth accounting from a source and mediation rather than from a use point of view.

39 2:21:1126, and Little and Mirrlees (1990).

> 40 Such project evaluation units as do exist are more concerned with such special issues as credit terms and the transfer of pieces of technology than with applying the elaborate procedures that were devised by Northern economists. 41 3:45:2964, 3:43:2804-5; the paper cited is Kaufmann, D. (1991).

> 42 3:40:2529. The source is Bardhan (1984).

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