A World Fit for People. - book reviews

Economic development, as an academic subject, has been difficult to define. Today it not only includes the general meaning of economic progress and better standards of living given to it by Adam Smith, but also the study of Third World economic goals, methods, plans, and programs. The ideas and prescriptions for betterment of the developing countries (as the scope of the "Third World" expanded to encompass them in the post-war period) came from practices of the democratic industrial countries of the West and the socialist countries of USSR and eastern Europe. These practices as applied to different continents and economic conditions have been fragmented since there was no unified theory or approach that could solve both the diverse conditions of poverty and the pre-industrial state of such societies. The scope of the general concept of economic development has recently expanded again to include the study of transformation of east European societies and economies into democracies with market based economic systems. So once again, social, political and economic aspects of societies are part of the unified study of economic development.

The economic development literature did not challenge political structures in the developing countries as they related to the success or failure of policies regarding economic development. The advisers of developing countries attempted to work within whatever political structure existed. The focus in economic development was on programs and their implementation in an ad hoc manner in each country since there was no common framework that could be borrowed from the industrialized countries. The end of the Cold War in 1990-1991 and the disintegration of communist-socialist, and authoritarian regimes that is underway currently has brought back the holistic concept of economic development as used by Adam Smith.

A World Fit for People (New York and London: New York University Press, 1994) is a collection of 55 essays presented by academics, practicing experts on economic development and government officials at the second Round Table Conference on Global Change held at Bucharest, Romania in 1992 under the auspices of the United Nations Development Programme (UNDP) Development Study Programme. (The first Round Table was held at Antalya, Turkey in 1990) The Round Table was initiated by the UNDP Development Study Programme under the leadership of Uner Kirdar, Senior Advisor to the UNDP Administrator and Director of the Development Study Programme and co-editor with Leonard Silk, economic columnist and author, (formerly with the New York Times and currently with Pace University's Lubin School of Business as Distinguished Professor of Economics, and the Graduate School of the City University of New York where he is Senior Research Fellow of the Ralph Bunche Institute on the United Nations.)

Kirdar and Silk state in their Introduction, "We want to make the world fit for ordinary people hoping for a better life for themselves and their children." To achieve this broadest of goals of economic development, the editors also precisely relate political conditions to economic development when they conclude that "political and economic freedom are indivisible. Democracy and political stability cannot be ensured without economic and social progress. There cannot be development without democracy, nor can there be democracy without development."

This collection has four parts: Political Reconstruction, Economic Development, Human and Ecological Values, and Countries in Transition. Each part is divided into two or more chapters. The essays, written by experts with training in economics, politics and government, sociology, and management of national and multilateral government agencies and departments, are of consistent high quality. They are logically sequenced so as to allow the reader the benefit of understanding the evolution of the policies or programs under discussion. Stimulating summaries of the issues and arguments appear at the beginning of each of the main parts of the book. These summaries or introductions written by one or both of the editors with one or more of essayists involved are most useful in learning the scope of policy issues covered in the essays that follow.

Part 1 on Political Reconstruction has essays written by Kishore Mahbubani, Shafiqul Islam, Lord Judd of Portsea, Turgut Ozal, Volkmar Kohler, Flora Lewis, Peter Jankowitsch, Dankwart A. Rustow, Saburo Okita, Lawrence R. Klein, Andrew Schotter, Joseph S. Berliner, Masahiro Sakamoto, Louis Emmerij, Carl Tham, Benjamin Bassin and B. O. Abu Affan. The first group of essays are far ranging. The West, North-South relationships, global change, interdependence among countries including democratization of the world are all touched. These essays create a base for broader policy questions faced by the world community and stress the importance of political and governmental institution building in order to make it possible for societies to function in the interest of their people. The essays dealing with political and economic changes cover the evolution of political-economic systems of mixed market economies from the extremes of communism-socialism, on the one hand, and pure market economy-authoritarianism-fascism on the other. A combination of good democratic process and a functioning market economy is generally what is prescribed in these essays as a way to make this world a place fit for people. The question of relationship between democracy and efficiency of the market is examined in subsequent essays. It is suggested by the authors that the empirical evidence of democracy being essential to economic efficiency is inconclusive. But it is generally agreed and asserted that democracy improves economic conditions as it permits operation of the market mechanism.

Part 2 on Economic Development has essays by G. Arthur Brown, Paul Streeten, Nemir A. Kirdar, I. G. Patel, Goran Ohlin, Alexander Love, Makoto Taniguchi, Ravi Gulhati and Keith Bezanson. There are papers on economic policy and its underlying models and on international aid in support of development. The role of government in investment, in infrastructure, creation and management of public enterprises, providing and enforcing rules and regulations on private enterprises and other interventions in the economy is found to have helped the developing countries temporarily in the 1950s and 1960s. During the last two decades, mostly negative results from this heavy role of government in the economy seem to have been attained. Thus a major shift in the Third World toward abandonment of this public sector led model for economic development has occurred in favor of the market based economy, where private enterprise takes the center stage. An open economy, with internal liberalization and competition among market participants, is the new paradigm for economic development. The role of government in the achievement of economic progress is nevertheless found to be high in the absence of a fully developed industrial state and a functioning of the market mechanism in developing countries.

Also raised is the question of whether developed industrial countries have done enough for the Third World countries in terms of technology transfer, foreign aid and opening of their markets for imports from them. While financial markets have become global and the turnover of daily financial flows is almost as large as the annual flows of global trade in goods and services, the developed countries have also stopped being engines of growth. It is not obvious that liberalization of financial markets in developed economies leads to higher economic growth, at least in the short term.

Part 3 on Human and Ecological Values covers human, social, cultural, ethical, religious values, women and family, self-respect and environmental aspects of progress. The papers are by Mahbub ul Haq, Mary Chinery-Hesse, Talat Sait Halman, Charles William Maynes, Gedaliahu G. Stroumsa, Princess Basma Bint Talal, Nicholaa Malet de Carteret, Joseph C. Wheeler, Neva Goodwin and Sveneld Evteev. Relationships between governmental structures, social values and economic development are examined. The authors discover the emergence of a new philosophy of putting people first, a focusing of ". . . national and international policies on improving the education, skills, job opportunities, and personal liberties of the people and on correcting the social ills - the abuses of human rights, the racial, ethnic, and sexual discrimination, and the environmental degradation that threaten people's lives." Good governance, the correction of market failures and social ills, a strong role of private organizations, improvement in the role and status of women, and respect for human rights are advocated to improve the quality of life.

Part 4 on Countries in Transition is the largest section of this book. Papers here are contributed by Norman Scott, Holland Hunter, Shafiqul Islam, Daniel Daianu, Christian Ossa, Salvatore Zecchini, Adrian Nastase, John Brademas, David Gold and Persephone Economou, Yaman Baskut, David Bryer, Oleg T. Bogomolov, Anatoli Zlenko, Andteas Gummich, Josef Pajestka, John S. Flemming, Nicholas Georgescu-Roegen, Josef M. van Brabant, and John Williamson. This part appropriately highlights the challenges and opportunities spawned by the breakdown of communist-socialist regimes not only in Eastern Europe during the 1980s but in the former Soviet Union itself in December 1991. This event has instantly changed the ideological, political, and arms race maps of the world. Peace between East and West is the first gift to the world from the collapse of communism. Reduction in the arms race and economic benefits, along with political and personal freedoms, are other fundamental benefits of this dramatic and colossal change in the world. But there is also a challenge to realize these benefits.

How to transform the former socialist and economically dead societies into capitalist ones is the first question addressed in Part 4. The answer presented is that (i) the transformation is a long run process and requires patience; (ii) each country in transition should be treated on its own representing a unique set of economic conditions; (iii) people in these countries have to rely mostly on themselves; (iv) industrial countries are unlikely to offer massive aid; (v) growth of the world economy is vital to these countries; (vi) over-optimism and inflation should be avoided; (vii) governments in these countries should take responsibility for creation of employment lest the public becomes restless for the old regimes; (viii) restoration of old and creation of new industry should allow for pollution abatement; (ix) innovation should be encouraged; (x) the target should be a combination of government support and private enterprise to achieve a functioning and effective mixed economy.

The second question examined is the importance of integrating the transition economies with the world economy, especially the economies of the West. Expansion of trade, investment and financial transactions with the West are deemed to be vital for the success of an abrupt change in political and economic life in transition economies. Aid and financial resources in support of education, technology, and trade and investment from the West are important for the transition to end in the existence of democracy and market economies in these countries. The multinational and transnational corporations are found to be in a position to help through myriad economic activities, such as investment, trade, and transfer of technology, between the transition economies and the rest of the world.

How long will it take for the transition economies to learn and to practice democracy, and to obtain a market economy working at a reasonably high degree, is the third question. Political transition is slow, but steady and economic transformation is even slower. Political reform is important but examples from other parts of the world indicate that economic reforms and better living conditions precede political reform. The policy choices between "shock therapy" and gradualism are also examined in the context of individual countries such as Russia and the Ukraine. Rapid privatization and freeing up of controlled prices may create economic dislocations and unemployment but profits and industrialization will help mitigate the hardships from this type of economic shock therapy. Expanded trade among the transition economies, and between them and the Western economies, is seen as one result while trade among republics of the former Soviet Union experiences a precipitous fall. Thus it is expected that the structure and composition of trade will change. It is further argued that the transition countries need financial help from private capital markets, Western governments, and multilateral institutions such as the IMF and the World Bank.

It is appropriate to conclude this review with the words of Boutros Boutros-Ghali, Secretary General of the United Nations, from his Foreword to A World Fit for People, ". . . a new, integrated approach of peace, development, human rights, and democracy requires a profound rethinking of many conventional ways of looking at these issues." This volume ". . . will provide a stimulating source of ideas and analysis on current trends in international political, social, and economic life. Studies of this type are an indispensable prerequisite if we are to rise to the conceptual and political challenges the world now faces." This reviewer concurs.

S. K. Kaushik, Ph.D., is professor of finance at the Lubin School of Business of Pace University, Graduate Center, 1 Martine Avenue, White Plains, NY 10606.

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