FINANCE & DEVELOPMENT

The September issue of F&D has a series of articles on the “Washington Consensus” and the needs to modify that consensus on the basis of experience since the term was coined in 1989. John Williamson says that it seemed to him at the time that almost everyone in Washington agreed on the ten points he mentioned in his original background paper for a conference on Latin American economic reform.

In retrospect, the reformer’s agenda looks pretty good. Williamson in a new book suggests that we need now to recognize several points inadequately addressed 15 years ago:
· The importance of crises in the economic evolution of the region, and the need to improve crisis management and prevention;
· The need to complete liberalization, especially correcting imbalances resulting from the way liberalization was carried out;
· Recognize the importance of institutions, and increase emphasis on institution building; and
· Increase emphasis on income distribution, and on the redistribution of income through pro-poor policies.

Peter Heller gives us a useful article on the need for governments to undertake long term planning on meeting the “long-term fiscal challenges posed by, among other things, aging populations, climate change, the growing interconnectedness of the global economy, security issues, and technological changes.”

The issue also includes information on the effects of natural disasters on development. Some striking findings:
· The numbers of “natural disasters” are increasing (perhaps in part to Global Warming);
· In the 1992-2001 decade, 2,730 disasters claimed more than 500,000 lives, affected two billion people, and caused US$684 billion in damages (This does not count the loss of economic development resulting from the aftermath and recovery from such disasters);
· The 77 poorest countries now average about three disasters per year, each;
· Their losses equal 13.4% of GDP (as compared with 2.5% of GDP in the world’s richest countries).
The articles go on to note that people are moving by the tens and hundreds of millions to zones where disasters are more likely, and in the process making the disasters that do occur affect more people.

The F&D issue seems to underline a lot of the themes of the Knowledge for Development movement. Macro-economic policy is improved by the application of knowledge distilled from analysis of experience. Now that we better understand the long term nature of some of the problems we face, we better apply that understanding to long term planning to meet those problems (and we better improve our understanding of those global systems problems). In the case of natural disasters, I think a part of the reason that rich countries suffer less proportionately than do poor, is that they utilize knowledge better to get people and property out of the way of natural events.