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Industrial Policy for Restructuring: Best Practice Policy Instruments in a Market Economy

  • Year: 1998
  • Author(s): Rakesh Mohan

Following the debt crisis of the 1980s a large number of developing countries, particularly in Latin America and Africa, and to a lesser extent in Asia, have undergone what have been termed as ‘Structural Adjustment Programmes’. A certain degree of orthodoxy has developed around these programmes although clear evidence on either their success or failure is still inadequate and widely debated. Most of these programmes advocate a rapid opening of hitherto protected economies; substantial degrees of deregulation to free the private sector from government interference; restructuring of the government budget to reduce fiscal deficits, often through the cessation of subsidies to different parts of the economy; movement towards privatisation of public enterprises and, increasingly, greater involvement of the private sector in infrastructure provision. Lately, there has also been growing recognition of the importance of simultaneous action on social sectors, in particular the delivery of services such as education, health and nutrition, and directed measures for alleviating the suffering of those most affected by structural adjustment policies. This set of measures are generally covered by the term ‘social safety net’. Typically, although the ideal direction of policy action is known there is less advice on how such action is to be taken and what is the appropriate sequencing of actions affecting different parts of the economy. There has also been a debate on how fast or slow the pace of structural change should be.