Harvard prof pushes reform measures

Governments in the East Asian and Pacific region should identify and prioritize economic reform measures and not be limited by the Millenium Development Goals (MDG) or the Washington Consensus, a Harvard University economics professor said.

Prof. Dani Rodrik pointed out that several countries in the Asia Pacific region registered impressive economic growths utilizing formulas that ran counter to the Washington Consensus which, among others, called for trade and financial liberalization, privatization and deregulation.

"The old conventional wisdom, called the original Washington Consensus, was undertaken by the Latin American countries. And where are they now?" Rodrik said in a presentation at the Asian Development Bank (ADB).

Between 1960 to 1980, the Latin American region registered an average growth rate of 2.8 percent as against an average rate of 3.3 percent for East Asian nations, which includes the Philippines.

But between 1980 to 1990, growth contracted by 0.8 percent in Latin America versus an average growth rate of 5.6 percent for the East Asian region.

The East Asian region grew by an average of 6.4 percent between 1990 to 2003 while the Latin American region improved slightly by nearly one percent.

The People’s Republic of China, for example, grew by an average growth rate of 7.1 percent at a time when its average tariff rate was 31 percent, among the highest in the region, and at a time when it was not yet a member of the World Trade Organization (WTO).

Vietnam grew by 5.6 percent with a tariff barrier range of between 30 percent to 50 percent while India grew by a modest 3.3 percent with tariff barriers of up to 50 percent.

In the case of the Philippines, Rodrik merely classified it as "the extraordinary exception among the exception of nations within the East Asia and Pacific region that failed to register impressive growth rates."

However, Rodrik, who teaches International Political Economy at Harvard’s John F. Kennedy School of Government, clarified that he is not against the Washington Consensus nor the MDG.

"Rather, a pragmatic and diagnostic approach is to identify priorities by asking where the binding constraints on growth are. Make the approaches country specific or individual nations rather than see it as solution for all," he said.

He said that the nature of binding constraints change over time, thus sustaining growth requires ongoing institutional reform to maintain productive dynamism, and increase resilience of economy to external shocks.

"The approach empowers countries to do their own analyses; it warns ultilateral organizations against uniformity and restricting policy space; it offers useful frameworks for discussion on what and why policies are to be done; and it employs economists in their proper capacity," Rodrik added.