This paper briefly tackles the main points on coherence contributed by
AER during roundtable discussion at the International Conference on
Financing for Development. It begins to describe coherence as
associated with consistency and integrity of policies while at the same
time, allows flexibility and resists rigidity. The paper then asserts
that coherence does not assume a single correct model of development,
and coherence means that the rules are not only fair but also enforced
and applied fairly. In conclusion, it reiterates two important
challenges towards strengthening the coherence of the Monterrey
outcome. One, encourage pluralism in the formulation of development
policies, and encourage heterodox approaches to development. Two,
secure fair rules, and ensure that such rules are fairly enforced on
all parties. In the same vein, reject unilateralism that weakens global
governance.
Presentation on Coherence to the Ministerial Round Table (B4) at the
International Conference on Financing for Development, Monterrey,
Mexico, 20 March 2002
Coherence is associated with consistency and integrity of policies. At
the same time, coherence allows flexibility and resists rigidity. In
this context, I wish to tackle two points as contribution to the
roundtable discussion:
First, coherence does not assume a single correct model of development.
Within the framework of a market economy, there are different
development models. (Even different socialist regimes have adopted the
market economy.) What matters of course is that each model of
development is coherent.
The East Asian miracle illustrates clearly that market-friendly
policies can exist side by side with interventionist developmental
policies, that trade openness can co-exist with some import
substitution, that the rule of law and informal governance arrangements
can be reconciled, etc.
The point is: We can broaden the range of choices of strategy and
policies. And we do hope the Monterrey outcome will acknowledge and
encourage this.
Prominent economists such as J. Stiglitz, J. Sachs, D Rodrik, R.
Kanbur, et al have championed the broadening of choices. But
policymakers and multilateral institutions are slow in accepting much
less enforcing this. Even the Financing for Development (FfD)
Conference is cautious in promoting non-orthodox policies. For
instance, the proposal for a currency transaction tax, first developed
by J. Tobin, has not gained much headway in the FfD.
The controversial Washington DC (or the adjusted Washington Consensus)
is still the overarching economic and development framework. The limits
or shortcomings—or for many others, the failure—of the Washington
Consensus agenda have been laid bare by a succession of crises in the
past few years. The financial crisis in many countries and their
devastating social impact should become a humbling experience to the
proponents of the Washington Consensus.
It is high time we explored the heterodox approach. And heterodoxy
suggests that we do not throw away the applicable elements in the
orthodoxy.
Second, coherence means that the rules are not only fair but also
enforced and applied fairly. What is disturbing is that the existing
global governance institutions have condoned double standards.
Take the issue of accountability. Many heads of developing countries
have been criticized for bad governance, including lack of
accountability. In many cases, they deserve to be criticized. In the
Philippines and in Indonesia—in the region where I belong—the people
have learned the art of chasing away bad leaders when formal rules of
accountability break down.
But what about the accountability of the powerful, say, the
International Monetary Fund (IMF)? Many scholarly papers have argued
that the IMF was responsible for the worsening of the financial crisis
that hit several East Asian countries in 1997. Some mea culpas were
expressed, but no accountability measure has taken place. (The IMF
managing director then, M. Camdessus, has even been rewarded by the FfD
conference by way of being designated as the special envoy of the UN
Secretary-General.)
On another front, we see the rhetoric on freer trade fly in the face of
unilateral protectionism, exemplified most recently by the protection
given by the US government to the steel industry. This is just but one
example of US unilateralism. The disregard for rules exhibited by the
number one power in the world seriously undermines the institutions and
arrangements that promote global partnership.
To conclude, we reiterate two important challenges, inter alia, towards strengthening the coherence of the Monterrey outcome:
Encourage pluralism in the formulation of development policies, and encourage heterodox approaches to development.
Secure fair rules, and ensure that such rules are fairly enforced on all parties. In the same vein, reject unilateralism that weakens global governance.
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