External Development Finance and the Multilateral Financial Institutions

Abstract

The search for ideas which reduce or eliminate poverty has produced a voluminous literature in the post-war period, as an increasing number of former colonial territories became independent states. One recent study has noted that thinking on development has shifted repeatedly during the past forty years.¹ For most of the post-war years a large role for the state was the dominant strategy. The current emphasis is on the market-driven or market-friendly model which points to the private sector as the engine of growth. In this model, government’s responsibility is not to manage development in detail, but to provide a stable macroeconomic foundation and ‘to do more in those areas where markets alone cannot be relied upon.’² Essentially this means improving the social and economic infrastructure and promoting a framework for sustainable development. It also implies that capital spending by the government is a crucial variable. There are areas for which the private sector will not take responsibility.