Book notices Lauchlin Currie and focus in objectives and terms of refer- cal stability, a strong cadre of technicians, The Role of Economic Advisers ence; sensitivity to national goals and condi- and a sound resource base, Colombia en- in Developing Countries tions; modesty and feasibility of proposals joys many advantages over other countries Greenwood Press, Westport, CT, U.S.A., 1981, rather than recommendations for sweeping even at its per capita income level. Short- xiv + 270 pp., $27.50. reforms; and provision for policy imple- term macroeconomic measures are often mentation. The actual results of policy ad- more effective in steering growth there than Dr. Currie's book fills an important gap in vice, according to Dr. Currie, have been elsewhere. Dr. Currie's focus on markets development literature. After more than 40 mixed in Colombia. In fact, the contribution and demand expansion as a means to spur years' experience advising governments, he of development and aid agencies—in pro- growth is particularly well placed in the Co- tries to pull together the threads and to seek moting the physical integration of the coun- lombian situation, and it is also a message a greater consensus on appropriate devel- try, supporting macro and sectoral policies, worth emphasizing in many countries where opment objectives and policies. Dr. Currie and in fostering capital markets—has per- these factors are neglected. However, many played a central role in the formulation of haps been greater in Colombia than the others have severe supply constraints, not New Deal policies in the United States in the author recognizes. He may also have under- simply relating to physical capital, but per- mid-1930s; he led the first World Bank study stated the potential role of the international haps more important, to human capital, skill mission—to Colombia, in 1949; and there- community in the developing world. levels, and management capabilities. This after he has been advising the Colombian The author's personal convictions on de- study of Colombia and of the five countries Government. He is, therefore, in a unique velopment are reflected in the book's con- chosen for comparisons—Brazil, Hong position to reflect on the role of economic clusions. It is noted, for example, that in Kong, Republic of Korea, Singapore, and advisers. complex macroeconomic areas, there is no Taiwan—is not likely to help these others The book arises out of the author's experi- effective substitute for trained national econ- adequately. On the other hand, a full com- ence with macroeconomic advice—notably omists. It also emphasizes the importance of parative discussion of developmental expe- advice on monetary, exchange rate, tax, and not recommending policies that could im- riences is not the purpose of the book. price policies—and with sector and project pede growth—as would measures to slow or Dr. Currie sums up his reflections: "The advice, before addressing more general de- reverse rural-urban migration and mobility. less developed a country, the greater the velopment issues such as the role of market Another lesson the book passes on is that a need to satisfy basic human needs and forces versus specific policies. The process "direct assault" on mass rural poverty re- lessen inequality. But the less developed the of development, according to Dr. Currie, quires a degree of administrative expertise country, the greater the danger that giving strengthens a country's capacity to adapt—a beyond the capacity of most developing top priority to these objectives will tend to process implying "profound changes in hab- countries. The solution lies in increasing the extend the period of underdevelopment its, attitudes, customs and training." These demand for labor outside agriculture to raise Therefore, advice and aid are likely to be cultural changes are far more important than the incomes of the gradually declining num- more effective the more they facilitate and the quantifiable improvements in physical bers engaged in agriculture. This lesson promote ... transformations and reinforce output and economic conditions that so runs counter to the practice of many de- rather than obstruct natural or market much of the literature emphasizes. Through- veloping country governments and donor forces." He concludes that "The greatest out, the book combines insights specific to institutions. contribution a government ... can make to his experience with Colombian develop- How far can conclusions based on experi- development is the initial adoption of policies ment, many of which are relevant to other ence in Colombia (or in any single country) that lead to a sustained period (ten years or countries as well. be applied to other developing countries? more) of high economic growth." Various principles for fruitful external as- With a coalition government of the presiden- sistance and advice are set out: coherence tial form that has experienced relative politi- Guy Pfeffermann and Wood Thomas Frances Stewart and Arjun Sengupta; edited by Salah nomic Order, reviews the main sources of The book covers seven major areas of Al-Shaikhly dissatisfaction and provides a range of alter- concern and presents proposals for a re- International Financial native proposals to solve the problems of the formed international monetary order: (1) Re- Cooperation: A Framework for system. The authors claim "the interest of cycling. The authors argue that developing Change development as the major consideration," countries will continue to require major Westview Press, Boulder, CO, U.S.A., 1982, but take into account the interests of the transfers of resources. The recycling by xxviii + 204 pp., $24 (cloth), $10.50 (paper). other parties in the world economy, namely, commercial banks—the major source of fi- The central theme of this interesting book is the industrial countries and the members nancing in the 1970s—should continue, but that the current international monetary sys- of the Organization of Petroleum Export- additional resources can be channeled by tem provides an unsatisfactory framework ing Countries (OPEC). Unfortunately, the strengthening existing public institutions and for international trade and payments and book's analysis ends in 1981, and some im- by creating new organizations, such as a therefore requires far-reaching reforms. The portant elements of the system it seeks to Third World Agency, that would move funds book, issued by Oxford University's Center reform have changed since then—OPEC from OPEC to the Third World directly. for Research on the New International Eco- surpluses in particular. (2) Improvement in international financial 42 Finance & Development I March 1983 ©International Monetary Fund. Not for Redistribution mechanisms. The uncertainty about loan In general the "South" should attempt to in- ment and conditionality recommended by terms could be reduced by loans denomi- stitute its own Bretton Woods. the Fund and to some extent by the World nated in special drawing rights (SDRs), by The authors indicate that most of the pro- Bank. The authors question conditionality using other forms of indexing, or (for fi- posals require a degree of cooperation that and present alternative lines of action. It is nancing imports to the developing world) by is not present in existing organizations that indicated that Fund programs place empha- a global loan guarantee scheme. (3) Low- are viewed as efficient—the World Bank, the sis on the control of inflation and on a turn- income countries. Aid could be increased Fund, and the regional development banks. around in the balance of payments without and redirected to the poorer countries in the But the book fails to point out that reform an explicit emphasis on the fulfillment of form of direct transfers, interest rate sub- would require a shift of attitudes within the basic needs or on income distribution. What sidies, and loan guarantee facilities. (4) Con- organizations as well as a modification of the is not recognized is that initially all corrective ditionality. The conditionality associated with institutional environment. Therefore, it is un- programs have to deal with major adjust- the Fund's financial support is reviewed crit- realistic in assuming that success of the re- ments of aggregated demand to keep them ically. Other sources of finance and alterna- forms described is likely. in line with available resources. These ad- tive policy packages are explored. (5) Inter- Past developments are discussed with justments are not determined by different national currency. The book dismisses particular poignancy and balance, and in a objectives, economic philosophy, or the po- proposals for commodity-backed interna- well-documented fashion, based on material litical system, but by the economic reality tional currencies as impractical and supports issued by international organizations. The imposed by prevailing international eco- the use of the SDR to provide better control relevance of the changes the book proposes nomic conditions and the circumstances of on international liquidity and to transfer re- is unfortunately somewhat dated. The large the particular country. The adjustment has to sources to the developing world through a OPEC surpluses, on which it bases many occur in any event, and some alternatives link between SDR allocations and conces- proposals, have narrowed for many OPEC proposed in the book may be more painful, sional finance. (6) World economic manage- countries since 1981 and were reversed into with more reduction in efficiency and greater ment. In light of the alleged vacuum in world large deficits for others. In consequence, the costs in terms of income distribution, than economic management, it is proposed that a industrial countries are returning to the tradi- would have occurred in the context of a Fund World Development Council be founded, ini- tional surplus position they experienced program. Finally other proposals are errone- tially as an advisory body. (7) South-South prior to the oil price increase of 1973, there- ously based on financing as an alternative cooperation.