develop, and where it is impeded from development. Government spending decisions affect not only the opportunity for new PSD but also the cost of inputs and transactions to existing enterprises. Further, in Cote d'Ivoire, the government role in the economy has left it with revenue flows and economic interests (such as those of public enterprises, see below) that it actively protects, often at the expense of private enterprises.

For nearly two decades after independence, the Government of CMte d'Ivoire (GCI) provided one of the most welcoming policy environments for private enterprise in West Africa, attracting enormous foreign investment and bringing the benefits of rapid economic growth to its citizens. Government investment in infrastructure, education and health services have in many respects improved opportunities for private investment. It could even be argued that, up to a point, the government's commodity price stabilization policies schemes effectively mitigated the adverse effects on farmers of declines in coffee and cocoa prices and improved productive efficiency in the sector.

On the other hand, where government takes on activities which private enterprise is better able to perform (which may include the provision of publicly financed goods), it may reduce social welfare. Furthermore, where resources for private activity are scarce or where government financing of its activities is expensive, a dollar of government expenditure can cost more than a dollar in foregone private activity. In these cases, an argument may be made for the reduction in scope of government activities in favor of imperfect private markets. In Cote d'Ivoire, the general burden of deficit spending and the specific burden of inefficient public investments and government monopolies have rightly brought into sharp question the contribution of government spending- both its composition and overall level -- to development. The relatively low cost of foreign goods compared to domestic goods has compounded this imbalance. This, in turn, has resulted in a loss of competitiveness and has led to contracLionary policies of a kind particularly damaging to the private sector - and to long term development.

- Government Expenditure Crowding In: In the CMte d'Ivoire's heyday, the first eighteen years of independence, it can be plausibly argued that public investment and its financing "crowded in" private investment in two ways. First, the government was able to finance its deficit by borrowing abroad instead of depleting domestic savings, expanding the total pool of money and hence the amount of money available for private investment.'9 Second, by undertaking projects (e.g. infrastructure development) complementaru to private sector activity, it encouraged private investmen **t** o grow alongside with public investment. Whether or not this argument is valid, however, the situation

I "...foreign borrowing broadened the monetary base causing credit to expand and thus helped to "crowd-in" private investment. With a pegged interest rate and no limitations on credit, public investment induced steady increases in income and therefore savings. Indeed, with declining levels of indirect tax rates, increased savings could have financed alone [sic] the large fiscal deficits. With foreign borrowing, the surplus savings was available for domestic capital formation." [J. P. Hiey, "Ivory Coast - Stabilization and Adjustment Policies Study", WIDER, 1987] 20