What Produces Economic Success?

Abstract

Some 20 years ago, it would have been relatively easy to come up with an answer to the question posed by this chapter’s title. Economic success, it was thought, could be achieved by loosening the governmental controls that held markets in poor countries in their grip, and by freeing up private economic activity. The strategy was clear: reduce barriers to imports, remove price controls and other market impediments, bring public spending under tight rein, and sell off public enterprises. Such was the nature of the consensus around these policy solutions that researchers that came of age around this time (like me) found themselves driven to do political economy analysis rather than normative economic analysis. After all, it seemed like all the important policy questions had already been answered. We knew what governments needed to do; what was needed was to understand why they failed to do it.²

I am grateful to Ricardo Ffrench-Davis, José Luis Machinea, Jaime Ros, and Andrés Solimano for helpful comments. I remain solely responsible for errors.