Abstract
Fairness. A level playing field. Accountability. These remain the elusive but sought after ends of a massive effort to change institutions, organizations, and practices on a global scale, transforming inward-looking, inefficient, and corrupt economic arrangements and policies into market-oriented economies that create incentives for individuals and firms to invest, save, trade, and work. Arguably, this wide-scale movement to strengthen markets, and to create them where they did not previously exist, has led to significant improvements in macroeconomic performance. Broad trends over the past two decades suggest that where economic reforms have taken hold, investment and employment rise, trade expands, and economic growth rates increase. The social and economic disruptions associated with economic reform are far from trivial. In many early reformers, criticism of market-based development strategies is becoming more visible. Yet the longer-term, macroeconomic benefits of liberalizing an economy are often seen as sufficiently compelling to justify the short-run costs.
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Notes
Recently, a new research literature has begun to develop a more nuanced understanding of rent seeking and its effects on development, and to address the interactions of rent seeking, “re-regulation, and economic restructuring. For example, see Timothy Mitchell, Rule of Experts: Egypt, Techno-Politics, Modernity (Berkeley: University of California Press, 2002).
See David Knoke, Franz Urban Pappi, Jeffrey Broadbent, and Yutaka Tsujinaka, Comparing Policy Networks: Labor Politics in the U.S., Germany, and Japan (New York: Cambridge University Press, 1996).
See, e.g., Ilya Harik, “Privatization: The Issue, the Prospects, and the Fears,” in Ilya Harik and Denis J. Sullivan, eds., Privatization and Liberalization in the Middle East (Bloomington: Indiana University Press, 1992), 1–23.
World Development Report, 1996: From Plan to Market (New York: Oxford University Press, 1996), 22, makes the (dubious) claim that liberalization depoliticizes access to resources. This view is also expressed in Volker Perthes, “The Syrian Private Commercial and Industrial Sectors and the State,” International Journal of Middle East Studies 24, no. 2 (May 1992): 207–230.
As one recent study emphasizes, “it is commonly argued that losses from economic reform are concentrated among specific groups—namely, those who were privileged or subsidized by the previous status quo …” Joel S. Hellman, “Winners Take All: The Politics of Partial Reform in Postcommunist Transitions,” World Politics 50, no. 2 (January 1998): 206.
My use of the term “network” is drawn from recent work in network theory in sociology, in which units of analysis cut across what are typically recognized as institutional or juridical boundaries. Networks of business and state actors who collaborate to manage access to economic benefits—disregarding their formal juridical separation into private and public actors—are a prominent example of this phenomenon. Much of the literature on the political economy of liberalization presents an image of state and private actors as existing on opposite sides of a boundary. This project takes into account that they often are interconnected in ways that overwhelm the idea that they represent distinct and coherent categories of actors. See Walter W. Powell, “Neither Market Nor Hierarchy: Network Forms of Organization,” Research in Organizational Behavior 12 (1990): 295–336.
The importance of managing groups of winners and losers to ensure a winning coalition in support of reform is the theme of John Waterbury, “The Political Economy of Economic Adjustment and Reform,” in Joan M. Nelson, ed., Fragile Coalitions: The Politics of Economic Adjustment (Washington, DC: Overseas Development Institute, 1989), 39–56.
On the tension between the logic of politics and the logic of economics, see Thomas Callaghy, “Lost Between State and Market: The Politics of Economic Adjustment in Ghana, Zambia, and Nigeria,” in Joan M. Nelson, ed., Economic Crisis and Policy Choice: The Politics of Adjustment in the Third World (Princeton: Princeton University Press, 1990), 257–319.
One common strategy is delegation—shifting responsibility for economic policy-making to technocrats insulated from political pressure. A second involves strategies of coalition management to balance the political influence of either winners or losers. For an “exclude the winners” approach, see Hellman, “Winners Take All.” For an approach more concerned about the political impact of losers, see John Waterbury, “The Political Management of Economic Adjustment and Reform,” in Joan M. Nelson, ed., Fragile Coalitions: The Politics of Economic Adjustment (New Brunswick: Transaction Books, 1989), 39–56.
See Ira W. Lieberman and John Nellis, eds., Russia: Creating Private Enterprise and Efficient Markets, Studies of Economies in Transformation Series No. 15 (Washington, DC: The World Bank, 1995).
See also, Steven L. Solnick, Stealing the State: Control and Collapse in Soviet Institutions (Cambridge: Harvard University Press, 1998). Michael McFaul estimates that “insiders—that is, Sovietera enterprise directors, in cahoots with trade-union officials loyal to them— gained controlling shares at three-quarters of all large enterprises.” “Russia Needs True Reform, Not Higher Taxes,” New York Times, August 4, 1998.
Luigi Manzetti, Privatization South American Style (New York: Oxford University Press, 2000).
Note that the World Bank regards Morocco, Tunisia, and Jordan as examples of successful, if incomplete, reform. See Nemat Shafik et al., eds., Claiming the Future: Choosing Prosperity in the Middle East (Washington, DC: The World Bank, 1995).
On the experience of economic reform in the Middle East, see Henri Barkey, ed., The Politics of Economic Reform in the Middle East (New York: St. Martin’s Press, 1992);
Nemat Shafik, ed., Economic Challenges Facing Middle Eastern and North African Countries: Alternative Futures (New York: St. Martin’s Press, 1998);
Christian Morrisson, Adjustment and Equity in Morocco (Paris: Development Centre of the Organization for Economic Co-operation and Development, 1991);
and Iliya Harik, Economic Policy Reform in Egypt (Gainesville, FL: University Press of Florida, 1997).
This variation in labor’s response to reform is a central theme in Marsha Posusney, Labor and the State in Egypt: Workers, Unions, and Economic Restructuring, 1952–1996 (New York: Columbia University Press, 1997).
Anne O. Kreuger, ed., Economic Policy Reform: The Second Stage (Chicago: University of Chicago Press, 2000).
See Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, NJ: Princeton University Press, 1995);
Robert Boyer and J. Rogers Hollingsworth, eds., Contemporary Capitalism: The Embeddedness of Institutions (New York: Cambridge University Press, 1997);
Miles Kahler, “Orthodoxy and Its Alternatives: Explaining Approaches to Stabilization and Adjustment,” in Joan M. Nelson, ed., Economic Crisis and Poliry Choice: The Politics of Adjustment in the Third World (Princeton: Princeton University Press, 1990), 33–61.
Along these lines, see Mancur Olson, “Why Poor Economic Policies Must Promote Corruption: Lessons from the East for All Countries,” in Mario Baldassarri, Luigi Paganetto, and Edmund S. Phelps, eds., Institutions and Economic Organization in the Advanced Economies (New York: St. Martin’s Press, 1998), 9–51.
Dani Rodrik, “The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will It Last?” in Federico Sturzenegger and Mariano Tommasi, eds., The Political Economy of Reform (Cambridge: MIT Press, 1998), 209–239.
Alice Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989);
and Robert H. Bates, Markets and States in Tropical Africa: The Political Basis of Agricultural Policies (Berkeley: University of California Press, 1981). Interestingly (if a bit of a digression), for Amsden financial liberalization is a tool that state elites use to discipline industrialists who threaten to exit from the privileged economic arrangements in which they are embedded. Although Peter Evans relies heavily on Amsden for his own account of Korea in Embedded Autonomy, he seems not to realize how powerfully Amsden’s argument challenges his claims about the impact of developmental success on state autonomy. Evans argues that success creates new possibilities for industrialists to develop alliances with multinationals, and thus undermines the capacity of autonomous states to manage economic growth. He tells us that developmental states become their own “gravediggers.” Amsden, on the other hand, argues that industrialists prefer embeddedness, view market liberalization as a threat, and that state elites will manipulate industrialists’ fear of competition to preserve their control over economic decision-making.
See Mushtaq H. Khan and K. S. Jomo, eds., Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia (Cambridge: Cambridge University Press, 2000).
This is certainly the view, e.g., in John Waterbury, Exposed to Innumerable Delusions: Public Enterprise and State Power in Egypt, India, Mexico, and Turkey (New York: Cambridge University Press, 1993).
Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton: Princeton University Press, 1995), 58.
For example, there is a widely held view that the size of the state is negatively correlated with economic performance, based on the assumption that large bureaucracies create greater possibilities for predatory and rent-seeking behaviors. However, as one author has recently argued regarding Africa: “with respect to larger bureaucracies being associated with lagging national incomes, the inverse comes closer to the truth.” Arthur A. Goldsmith, “Africa’s Overgrown State Reconsidered: Bureaucracy and Economic Growth,” World Politics 51 (July 1999): 520–546.
Within the Middle East, which is not the only region characterized by such out-comes, this is reflected in Béatrice Hibou, “From Privatising the Economy to Privatising the State: An Analysis of the Continual Formation of the State,” in Hibou, ed., Privatising the State (London, Hurst, and New York: Columbia University Press, 2004), 1–46;
and Dieter Weiss and Ulrich Wurzel, The Economics and Politics of Transition to an Open Market Economy: Egypt (Paris: Development Centre of the OECD, 1998).
I use the term “messy” here in a technical sense, to refer to environments characterized by a high number of interactions over time among a large set of actors. On messy research agendas, see Peter Evans and John D. Stephens, “Studying Development Since the Sixties: The Emergence of a New Comparative Political Economy,” Theory and Society 17 (1988): 713–745.
Gary Becker, “Political Competition Among Interest Groups,” in Jason F. Shogren, ed., The Political Economy of Government Regulation (Boston: Kluwer Academic Publishers, 1989), 16.
See also Becker, “A Theory of Competition Among Pressure Groups for Political Influence,” The Quarterly Journal of Economics 98 (1983): 371–400.
For instance, see Anne Kreuger, ed., Economic Policy Reform: The Second Stage (Chicago: University of Chicago Press, 2000).
Thrainn Eggertsson, Economic Behavior and Institutions (New York: Cambridge University Press, 1990), 279.
In her politicized view of markets, there’s a sense in which Chaudhry’s book falls into this generation of literature as well. See K. A. Chaudhry, The Price of Wealth: Economies and Institutions in the Middle East (Ithaca: Cornell University Press, 1997).
Stephan Haggard and Steven B. Webb, “Introduction,” in Haggard and Webb, eds., Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York: Oxford University Press, 1994), 8. The link between democracy and interest-group models is explicit, and poses questions about exporting such models to nondemocracies that are relevant and important. They have been dealt with to some degree in the literature, but are beyond the scope of this work.
All of the text quoted is from Stephan Haggard and Robert R. Kaufman, “Institutions and Economic Adjustment,” in Haggard and Kaufman, eds., The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State (Princeton: Princeton University Press, 1992), 27–28. It is striking how little impact this very insightful and self-reflective critique—now a decade old—has had on subsequent research.
Mark Granovetter and Richard Swedberg, “Introduction,” in Granovetter and Swedberg, eds., The Sociology of Economic Life (Colorado: Westview Press, 1992), 9.
This tension between the “undersocialized” view of individuals in economics and the tendency of some economic sociologists to construct “oversocialized” views has received a fair amount of attention. See Mark Granovetter, “Problems of Explanation in Economic Sociology,” in Nitin Nohria and Robert G. Eccles, eds., Networks and Organizations: Structure, Form, Action (Cambridge: Harvard Business School Press, 1992), 23–56.
Stanley Wasserman and Joseph Galaskiewicz, eds., Advances in Social Network Analysis: Research in the Social and Behavioral Sciences (California: Sage, 1994), xii.
Alain Degenne and Michel Forse, Introducing Social Networks (London: Sage, 1999), 2–3. For me, the emphasis here on the inductive foundations of network analysis is another reason the approaches are useful for the kind of data-rich projects that are represented in the working group.
David Knoke, Franz Urban Pappi, Jeffrey Broadbent, and Yutaka Tsujinaka, Comparing Policy Networks: Labor Politics in the U.S., Germany, and Japan (New York: Cambridge University Press, 1996), 9.
This is true of Wellman and Berkowitz, eds., Social Structures: A Network Approach (New York: Cambridge University Press, 1988), despite the inclusion of several chapters that don’t lend themselves to formalization. I wonder, though, whether the linkage of economic sociology and network analysis, which postdates the chapters in Wellman and Berkowitz, reflect the methodological opening up of an approach that had previously been largely formal in its orientation.
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Heydemann, S. (2004). Introduction. In: Heydemann, S. (eds) Networks of Privilege in the Middle East: The Politics of Economic Reform Revisited. Palgrave Macmillan, New York. https://doi.org/10.1057/9781403982148_1
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