Academic journal article Harvard International Review

The End of the Cookie Cutter: Economic Development in the Modern World

Academic journal article Harvard International Review

The End of the Cookie Cutter: Economic Development in the Modern World

Article excerpt

The Washington Consensus was developed in 1989 to describe the "standard" reform package promoted for developing countries by the International Monetary Fund (IMF), World Bank, and the US Treasury Department. These prescriptions encompassed fiscal policy, interest rates, trade liberalization, foreign investment, exchange rates, privatization strategies, deregulation, and property rights.

Some regarded these policies as right and useful; others felt that the prescriptions were "cookie cutter" and used by rich nations to force poor nations to submit to them politically before they could receive significant amounts of aid or debt relief. My view is that the top down, linear, structuralist model of change works fast, but is painful and hard to sustain. The underlying assumption was that if you just get these things right, all other good things like social justice and high wages happen too. But that was wrong.

The evidence suggests things must be done in concert with slow, long-term changes focusing on cognitive aspects of change: progressive values, attitudes, beliefs, assumptions about life, and complex mental maps. It must also be done with explicit, informed business strategies that are export-oriented, based on high and rising wages, and true competitive advantages. Rwanda may be a good example of this more complex, integrated approach.

The Washington consensus did inform many of Rwanda's policies. Fiscal and monetary outcomes are good. Remittances, and foreign investment, which made its June 2013 target of US$1.5 billion, are both increasing. Inflation, which has been driven by rising global energy and food costs, is the lowest in the region. Rwanda now exports food, and overall food security is the best in East Africa. The liquidity and capital sufficiency of the banking system continues to improve. Regional trade is increasing. The exchange rate is stable and government has coordinated policy measures (including lowering taxes and transportation costs and improving agricultural information to producers) to mitigate global supply shocks. Tax collection continues to improve and regional policies are being harmonized. The Diaspora Bond was launched and over-subscribed--it met the demand of a new class of investors in the nation.

But Rwandans, simultaneously, have worked on additional things too:

Fostering progressive values

56 percent of the Parliament is women, which leads the world. Other key posts include the Ministers of Foreign Affairs, Gender, Health, and Justice; the Chief Executive of the Rwanda Development Board; and the Founder of the National Airline. …

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