nm0969: accent on growth [0.7] our interest in the agriculture sector [0.7] 
somewhere lagging behind where the other ideas about agriculture [0.2] it's 
shiny shiny shiny [0.6] er [0.2] big capital investments in machinery 
irrigation [0.3] and the like [0.4] er the attraction the siren call of [0.3] 
large scale farming [0.4] and the siren call [0.4] of easily transferable 
technology [1.4] okay [0.4] all of that trucks ahead [0.6] from the fifties [0.
3] and sixties [0.5] through to the early nineteen-seventies [0.5] and in the 
early nineteen-seventies [0.4] we get an accumulation of doubts about whether 
[0.5] development [0.2] is really again about economic growth alone [0.9] and 
last week we'd just got to those doubts [0.5] and what were the doubts [0.5] 
rising inequality [0.7] and [0.2] the massive differential between the favelas 
[0.4] of the hillsides of Rio [0.5] and the luxury apartments down in Ipanema 
[0.5] Leblon [1.0] Barra da Tijuca [1.0] and the enormous disparities you would 
see in Mexico City [0.6] between the swanky houses at the western end of town 
[0.4] and the slums up to the north of Mexico City [1.4] political 
disappointments were there [0.5] and [0.4] 
particularly in what had happened in [0.4] the newly independent states of 
Africa [0.4] and the [0.2] recently independent states [0.3] of Asia where 
dictatorship reign [1.1] er disappointments about the lack of urban jobs about 
the degree of informality [0.6] of petty enterprise that people were 
undertaking [0.4] in the cities [0.4] the idea of Arthur Lewis that there was 
this ability to transfer from the traditional to the modern [0.3] sector that 
this would soak up unemployment [0.3] and create higher marginal productivity 
of labour [0.3] did not seem to be working [0.5] and that seemed to be owing to 
the inappropriate transfer of capital intensive [0.3] agriculture industry [0.
3] and anything else [0.3] from the north to the south [0.8] okay those are are 
all the doubts [0.8] now you need to know a little bit of history [0.3] to 
understand [0.3] how doubt crystallizes into action [0.6] if you'd opened up 
books on [0.2] development in the early nineteen-seventies [0.4] you would have 
seen [0.2] 
an awful lot of influential books [0.5] really arguing that development was not 
just a game [0.5] in [0.5] economic growth [0.8] look here's here's an 
influential [0.3] book [1.3] R-W Gee nineteen-seventy-five [0.6] Redistribution 
with Growth [0.6] published on behalf of the World Bank in nineteen-seventy-
five [0.5] this was a series of essays by some of the foremost development 
economists of the time [0.7] and it argued the following [0.5] that there was 
no trade-off between distributional objectives [0.3] and economic growth [0.6] 
in other words [0.2] if you wanted the fastest and best return on capital [0.4] 
put it into small scale industry [0.4] put it into artisan industry [0.4] put 
it into the urban informal sector [0.3] and put it into small scale farming [1.
2] R-W Gee argued that that would give you faster rates of growth than 
investing in large scale formal enterprise be it urban [0.3] or rural [0.8] now 
this was wonderful news [0.3] to have academics argue this [0.3] because it was 
two for the price of one [0.7] bet on the smallest and you not only get equity 
[0.3] but you also get faster economic 
growth [1.2] but the real spur i suppose to the changes of the nineteen-
seventies [0.2] come from the events of nineteen-seventy-three [1.3] now 
nineteen-seventy-three is [0.8] one of the more interesting years of the last 
century [0.9] er [1.7] nineteen-seventy-three is the height of a world economic 
boom [0.7] now remember what we saw last week the world economy grew steadily 
[0.7] er betw-, in the nineteen-fifties and nineteen-sixties at rates that we 
don't think we've seen sustained [0.4] before or since in the recorded history 
[0.3] of humanity [0.6] and those rates steamed on ahead [0.5] into the early 
nineteen-seventies and culminated [0.4] in a huge boom period [0.3] which 
lasted [0.4] seventy-two [0.2] seventy-four [0.8] just about every country in 
the world had a boom period seventy-two seventy-four [0.4] if you like the [0.
2] macroeconomic shorthand [0.9] world economies economies throughout the world 
overheated [0.3] during seventy-two seventy-four [0.5] and that overheating [0.
3] pushed up [0.6] the price of all commodities [1.3] of all primary 
commodities [0.8] they all went 
up [0.7] now one that everybody knows about [0.6] is the one that went up in 
October seventy-three [1.0] the world commodity whose price quadrupled [0.2] in 
October seventy-three [1.1] what commodity was that [0.3] 
sm0970: oil 
sm0971: oil 
nm0969: oil [0.8] it was the first time that the Organization of Petroleum 
Exporting Countries had flexed its muscles [0.4] and said let's see what we can 
do [0.5] and led by Saudi Arabia those oil exporting countries in OPEC [0.3] 
said what happens if we [0.2] unilaterally raise the price of oil [0.3] by four 
times [0.3] and they tried it [0.2] and it stuck [0.8] and the world oil price 
rocketed upwards [0.3] now that's the one that attracted all the attention [0.
8] well [0.3] most of the attention [0.7] except in seventy-three the world 
wheat price [0.4] and all other cereals was dragged up [0.5] by more than 
double [0.4] by more than double i think it's triple [0.6] may even be more 
than three times [0.4] the world wheat price [0.2] spiked [0.8] now [0.8] that 
world wheat price [0.3] spiked [0.3] was caused in part and probably largely [0.
5] by a harvest failure in the Soviet Union [1.2] and [0.2] as the Soviet 
Union's harvest 
failed the Soviet Union imported about twenty-five-million tons extra [0.3] of 
cereals [0.5] in seventy-three [0.7] that was a very large rise indeed [2.1] er 
and it [1.1] blasted the price of of wheat [0.6] now wheat was also dragged 
upwards by the general inflation of the time [0.5] but the effect of the rise 
in the wheat pr-, c-, er wheat price [0.3] was dramatic on people interested in 
food policy [1.0] and the the the real story that we've got there was an 
American commentator writing in Time magazine [0.7] he said [0.4] you have seen 
what Americans are doing on the forecourts this year [0.2] wait till they're in 
a bread queue [0.6] now what's the amre-, reference to the American forecourts 
[0.7] when the world oil price went up by four times something happened in the 
oil supply chain [0.6] and for a brief period Americans had undersupply of gas 
[0.5] and it led to queuing on American forecourts [0.4] and Americans with 
large gas guzzling cars found themselves queuing for fuel [0.7] and [0.2] 
inevitably in a very large country there were one or two well publicized 
incidents yeah [1.0] some drunken redneck in some place got out of his large 
car having queued for forty minutes picked up a shotgun and said right you fill 
this one up right now mate or that's it yeah [0.7] one or two incidents like 
that you you can imagine [0.4] and this gripped the imagination of American 
policy makers [0.3] if Americans behave like this when they have to queue a 
little while for gas [0.4] what happens when they have to queue for bread [0.6] 
yeah [1.9] why queue for bread well the wheat price had gone up [1.0] now [0.2] 
you also have to understand that during the sixties [0.8] world population 
growth rates had risen [1.1] the grates had risen so not only was world 
population going up [0.5] but it was going up exponentially [0.5] and the rate 
was increasing [1.3] at that rate you reach infinite population fairly quickly 
[0.7] fairly quickly [0.5] what nobody knew then [0.4] is what we all know now 
[0.6] and that was the arrow that looked like that [0.8] but none of you can 
see this er [1.9] let's let's do the job properly [0.8] er [0.2] where are we 
[2.6] see if 
you looked at world population growth rates during the twentieth century [0.7] 
and that's nineteen-fifties so and [0.3] we're talking now about nineteen-
seventy [0.5] you've got a pattern that looks something like this [3.6] yeah [1.
2] and people looked at that and they said wow [0.4] you know [0.3] any number 
you like [0.2] by the end of the twentieth century [0.7] unimaginable numbers 
by [0.8] twenty-twenty-five [0.5] yeah [0.3] any projection [0.4] that took the 
c-, the the the trends at that time reached an Olympic amount of of population 
very quickly [0.8] people said look [0.2] if that's what's happened to 
population growth rates [0.8] and if [0.2] agricultural growth is good but not 
spectacular [0.2] what's going to happen [0.7] so we got the th-, the old 
favourite geometrical growth of population versus something looking like 
arithmetic growth [0.5] of [0.2] farm output equals [0.3] famine [0.2] yeah [0.
8] equals Thomas Malthus [1.4] bunch of guys published a book in the late 
sixties called Famine nineteen-seventy-five [1.2] was it Famine nineteen-
seventy-five i think so [0.7] they were actually right about Famine nineteen-
seventy-five what they didn't realize was where it'd be and what the extent of 
it was be [1.0] but you see when people looked at that and then they looked at 
this wheat price [3.6] 
nm0969: is it [0.4] 
this is the first stage of the food crisis apocalypse [0.7] and so in seventy-
three or seventy-four we have something called the World Food Congress [0.4] 
convened by the Food and Agriculture Organization of Rome [0.4] and it meets to 
deal with the world food crisis which c-, surely has come to rest [0.8] with [0.
2] the world [1.5] that is a huge spur [0.2] to changing development ideas the 
idea that the food is now in aggregate short supply and we've got a supply-side 
crunch [0.4] in food [0.4] a supply-side crunch [2.1] now [2.3] what do you 
need to know [0.5] you need to know that history makes fools of us all [2.2] 
that graph there [0.9] it doesn't [0.3] carry on [0.4] like that [0.4] what 
happens to it is it starts going like this [1.1] yeah [1.1] something like that 
[0.8] there's been a very considerable fall in population growth rates [0.3] 
since 
nineteen-seventy [1.2] world population growth rates of nineteen-seventy were 
what over two per cent maybe as much as two-and-a-half per cent per year [0.5] 
world population growth rates are below two per cent per day [0.4] er t-, er 
two per cent a year two per cent a day strewth [0.5] two per cent a year [0.4] 
they're somewhere i'll be about one-point-seven per cent one-point-eight per 
cent [0.3] i'm guessing [0.3] somewhere between one-and-a-half and two per cent 
[0.3] they've come down [0.7] and so we're looking at this [0.4] and people can 
now reasonably say that by the time we get to the year what twenty-thirty 
twenty-forty [0.4] world population growth will be very slow indeed we'll be [0.
3] getting pretty close [0.4] to what we think may be the maximum population [0.
4] in this stage of human history [0.8] we also know that the world wheat price 
which spiked in seventy-three [0.4] within a year or two it was back down to 
its normal levels [0.7] now for those of you who don't know this story [0.4] if 
we plotted the world wheat price from round about here [0.4] if this is 
the world wheat price in nineteen-fifty or so [0.4] what we're going to see [0.
4] is a story that looks something like this [5.8] that's the world wheat price 
over the last fifty years more or less [0.3] there's the spike [1.0] in the 
early nineteen-seventies [0.3] that's the nineteen-ninety-six spike by the way 
[0.5] which lasted all of what six months twelve months at most [0.5] but the 
general picture of the real world wheat price is [0.3] down down down [1.0] er 
[1.8] so the world food crisis was a short-lived event [0.3] in the early 
seventies but it contributed [0.3] to the big change in development thinking [0.
6] and what we find in the early nineteen-seventies [0.3] is we find 
developmental specialists [0.4] coming up with the following signpost [0.5] to 
development now [0.8] redistribution with growth [0.4] is one of those [0.4] 
let's have attention to equit-, equity [0.3] so development now [1.8] is not 
just economic growth [1.6] but it's economic growth [0.2] with equity [1.2] 
with decent distribution [0.3] of the benefits [2.2] now here's another [0.9] 
of the T-L-As that [1.7] you perhaps 
need to know or don't need to know [0.5] basic human needs [2.3] the I-L-O the 
International Labour Organization said [0.3] let's plan for development on the 
basis of meeting everybody's basic human needs [0.7] let's let's not just go 
for maximum economic growth or industrial growth or [0.4] iron and steel 
production [0.7] what we should aim to do is satisfy everybody's basic human 
needs [0.4] and those basic human needs [0.3] nutrition [0.3] shelter and 
housing [0.3] clean water [0.7] basic education [0.4] health services [1.0] 
clothing [1.1] right [0.3] satisfy those basic human needs of everybody [0.5] 
more or less [0.4] equivalent to alleviating poverty [1.9] and the same 
organization I-L-O [0.8] also came up with [0.6] a similar message in a 
different set of clothes [1.3] when it talked about [1.3] employment first 
policies [1.6] developing [0.7] development plans [0.5] producing development 
plans [0.5] where the maximum goal was to create jobs [1.3] and they sent 
missions famously to Sri Lanka Kenya and Colombia [0.5] of very eminent 
development specialists [0.4] who 
produced indicative development plans [0.3] aiming to maximize the creation of 
jobs [4.3] and here's another touchstone of this period [0.9] appropriate 
technology [1.2] lack of jobs in the south urban unemployment [0.4] 
casualization of labour [0.2] well [0.4] went the argument [0.2] that's because 
we've brought the wrong technology [0.3] it uses capital and saves labour [0.8] 
do remember of course that the technology developed in the west in the fifties 
and sixties [0.4] was technology from America [0.4] from Germany [0.3] from the 
U-K from France [0.3] all of those countries were short of labour in the 
fifties and sixties [0.8] never forget that all of those countries [0.6] 
invited large numbers of guest workers and immigrants to make up [0.2] the 
labour deficiency [0.5] hard to believe in these days of s-, tightening 
immigration controls and concerns about international migration [0.4] but in 
the fifties and sixties all of those countries [0.2] wanted people to come in 
they were short of labour [0.3] so all of their technology was labour saving [0.
4] well the appropriate 
technology [0.2] movement said look what we want [0.3] is technology that can 
be maintained locally uses local materials [0.3] and above all [0.6] saves on 
capital [0.3] and uses labour [0.4] responds to the factor proportions 
available [0.5] in the developing world [1.8] now [0.2] armed with these ideas 
one by one [0.2] all of the major development agencies the World Bank [0.6] 
Britain's O-D-A [0.2] America's U-S-AID [0.9] er the I-L-O you name it [0.4] 
they all signed up for variants [0.5] on development with equity [1.0] and the 
most famous moment in this [0.4] was a speech in nineteen-seventy-three in 
Nairobi Kenya [0.5] by the then President of the World Bank Robert McNamara [0.
3] in which he committed the World Bank to shifting its resources [0.5] to 
development projects which stressed redistribution with growth [0.8] now what 
did that mean in terms of concrete development policy [0.7] well what it did 
mean [1.1] was it meant that you [0.2] went for targeting the poorest [2.3] you 
looked actively [0.5] for the poor [0.3] for the small scale [0.7] for the meek 
and the humble and you tried to 
target those as the focus of your development efforts [0.8] and where this went 
sectorially [0.4] was all of a sudden [1.8] agriculture was king [1.3] 
agriculture was king and it was king because [0.3] that's where most of the 
poor were [0.4] it was king because that was where so [0.5] so many [0.2] small 
scale entrepreneurs were smallholders [0.5] and it was king because of the 
perceived [0.3] world food crisis [1.3] so agriculture was the win win win bet 
small scale agriculture you'd help the poor [0.3] you'd drive forward economic 
growth [0.3] and you'd solve the world food crisis [0.6] so agriculture got 
prime attention in this [2.1] now here's another idea out of the seventies [1.
0] I-R-D [1.1] integrated rural development [1.4] and this was the idea that 
when you worked in rural areas with the poor with the small scale and so on [0.
6] what you tried to do is to deliver [0.4] a package of assistance across 
sectors [0.3] on the grounds this would give you synergy [1.5] now [0.7] just 
to give you a fairly [0.4] exaggerated example [0.5] but if you're trying to 
get people to 
plant new varieties of rice and use fertilizer to increase their rice yields [0.
9] which you hope is a scale neutral technology that can be used by 
smallholders [0.6] then why not at the same time [0.9] er [0.5] combat malaria 
[0.4] inoculate people against diseases [0.4] and clean up the water supply [0.
4] because all of those will give you better health [0.5] which is a good thing 
in itself [0.5] but of course healthier farmers can work harder in the fields 
[0.4] and so that complements the agricultural measures [0.8] and while we're 
at it we're going to build some access roads because that will improve [0.6] 
price relatives at the farm gate [0.3] reduce isolation [0.4] and while we're 
at it we'll run a an adult literacy campaign because literate farmers [0.3] can 
read the labels on the fertilizer packet and so on and so forth [0.5] so [0.2] 
there was the idea that you should try and do things [0.3] in development in an 
integrated fashion across all sectors [0.4] because you get synergy [0.4] and 
you get more than the sum of the parts going on [2.2] now [0.2] integrated 
rural development was [0.7] 
very very exciting to work in [0.5] er [0.9] very exciting to work in [0.8] you 
got all kinds of things to have a go at [0.4] er and you've got quite a lot of 
resources [0.6] to play with [0.9] but these resources were limited compared to 
needs so what happened with integrated rural development [0.7] was within any 
country [0.5] what you did is you took a country [1.8] and a country [0.3] 
might just look like that [0.6] and might have its capital there [0.5] and you 
take [0.5] a country that looks like that and you do integrated rural 
development [0.4] and you do it [0.7] there [1.2] there [1.0] there [1.1] there 
[1.1] there [0.8] oh and there [1.0] right [0.6] and yes that is to scale [0.8] 
yes that is to scale [0.5] in other words you get these little e-, enclaves [0.
5] of very small areas where donors are putting in resources [0.3] and 
everything is done [1.4] now that country there some of you will have [0.4] 
have [0.2] have sussed [0.6] er despite its [0.4] wobbly outline [0.5] is Kenya 
[0.8] and in the early nineteen-seventies Kenya had six [0.2] small integrated 
rural development programmes [0.5] which were [0.2] very well documented [0.5] 
and some contemporary very influential 
thinkers about development [0.4] worked on those projects in the early nineteen-
seventies [0.4] but look how tiny they are [0.5] compared to the mass of Kenya 
[0.5] that really is to scale these things were in very small areas indeed [0.
5] why because [0.4] although you could target resources for a small area you 
couldn't have the whole country [0.3] running the kinds of programmes that were 
run there [1.1] so because you did everything in a integrated rural development 
[0.4] you could only do it on a small scale concentrated in particular areas [0.
6] and because you were trying to do everything [0.6] donors very often ran 
very special administrative structures quite different [0.4] to normal 
government operations [0.3] to c-, make these things work [0.7] now those six 
small experiences i think were all successes [0.5] they were all successes [0.
5] but [0.6] i think with the benefit of hindsight we have to say [0.4] they 
were unrepeatable [0.7] and institutionally [0.3] unsustainable [0.5] when the 
donors got bored and the funds ran out [0.4] and the foreign experts' contracts 
ended [0.8] and the Landrovers began to rust [0.4] these projects essentially 
[0.3] stopped [1.4] indeed i arrived in this part of Kenya in nineteen-seventy-
nine [1.3] which had been the administrative headquarters including that area 
there [0.7] and there were two or three filing cabinets chock-a with files [0.
4] in my room and i i left them there for a while [0.5] and then one day i 
thought what on earth [0.8] er [0.5] and i went through these filing cabinets 
and it was all the stuff on sort of four or five years ten years earlier [0.3] 
of the implementation of this [0.4] minutes plans documents contracts [0.2] 
budgets [1.1] semi-annual reports monthly reports all kinds of stuff [0.7] and 
i looked at this and i said my goodness this is a vital bit of development 
history here [laugh] but it's clogging up my office [laugh] so it all went in a 
skip [0.3] [laugh] there's never en-, never enough historians around to 
document these experiences and [0.2] that's the sort of way and as i threw them 
in the skip i thought [0.8] there you go [0.2] good idea at the time good 
people working 
on it [0.2] quite a success but not sustainable [1.9] now one thing that you 
need to understand about these efforts of agriculture first targeting the poor 
is basic human needs integrated rural development [0.9] is [0.2] one element of 
the development equation hasn't changed in all this [0.6] and that is [0.5] 
this is a game [0.7] about the state [0.9] and the state's agencies nobody is 
seriously questioning that if you're going to do integrated rural development 
[0.2] it will be the Ministry of Agriculture and the Department of Health [0.6] 
and the Directorate of Transport and so on [0.5] 
it will be state agencies leading the charge [0.5] and if the state agencies 
lack resources they'll get money from governments in other countries so it's [0.
3] a government first approach [0.5] nobody's really challenging [0.3] the 
supreme role of the state [0.3] as an organizer [0.2] and an investor [0.3] in 
development [4.7] now look [0.3] these ideas are publicized in the early 
nineteen-seventies [0.4] one by one in the early nineteen-seventies [0.3] all 
the major aid donors sign up [0.2] to this new agenda [0.4] and it's a very 
different agenda to the one that's prevailed for the [0.3] previous twenty 
years [0.5] one by one the agencies published documents [0.2] saying this is 
what we're going to do [0.7] now Britain had a world had a a world had a White 
Paper on development [0.5] in nineteen-ninety-seven [0.5] the previous one [0.
5] was all the way back in nineteen-seventy-five so the white the last White 
Paper [0.7] er so recent was the first one in nearly a quarter of a century [1.
1] er [0.3] the nineteen-seventy-five White Paper [1.0] er was called More Aid 
to the Poorest [0.8] and it was at the height of 
enthusiasm for these ideas More Aid to the Poorest [0.7] what is the nineteen-
ninety-seven one called [1.4] forgotten what the nineteen ninety-seven one was 
called but what's it about [0.4] it's about reducing poverty by half [0.3] in 
other words every time Britain has a White Paper on development it's heavily 
focused on poverty [1.8] so Britain signed up to this in in in nineteen-seventy-
five as did just about every other aid agency [1.8] now what you have to 
understand about history is that [0.4] if people write things down on documents 
in nineteen-seventy-three seventy-four seventy-five about [0.3] we are going to 
do this [0.7] how long does it take [0.3] to make the plans for the new 
investments and the new direction of money [0.8] one [0.2] two three years at 
least [0.4] before you redirect the flows of money [0.3] create the new 
agencies [0.3] the new plans [0.2] the programmes [0.4] so these I-R-Ds [0.2] 
not many were in operation before the mid-nineteen-seventies [0.7] and how long 
before you think it's fair to say what is the experience of things [0.9] well 
when 
you're working in rural development anything less than five years [0.3] is the 
short term [1.0] er difficult to do things in agriculture and rural areas in 
less than five years [0.3] so in other words as we come to the end of the 
seventies [0.3] it's very early days with this new agenda [0.3] it's barely 
started to be implemented [0.2] in any great seriousness [0.6] and the results 
are not entirely clear [1.3] before we reach that [0.7] the whole thing [0.3] 
is flipped [2.0] the whole cooking pot is turned upside down [2.0] the pancake 
is turned [1.7] and we're into the nineteen-eighties [0.4] and by the time 
we're into the nineteen-eighties [0.4] the entire focus of development [0.6] 
has jumped [0.2] radically from where it was [0.3] in the early seventies [1.0] 
now it's quite a long story to explain [0.5] why development ideas in the 
nineteen- [0.6] eighties were so [0.3] radically different [0.6] you've got 
them spelled out in your notes in some considerable detail [0.4] let me try and 
summarize that experience [2.5] what you have to understand is that [0.8] from 
the early seventies onwards [0.4] there was this 
primary boom [0.2] and there was inflation beginning to come into the world 
economy [0.7] in nineteen-seventy-one [0.4] America left the gold standard [0.
5] the dollar which had been anchored against gold [0.5] and had been the 
bulwark of the world economy [0.5] for twenty-five years or so after the Second 
World War [0.6] was suddenly cut free from gold [0.4] it was effectively 
devalued [1.2] remember in nineteen-seventy the American economy [0.3] made up 
about one-third of the total product of the world economy today it's about 
twenty-five per cent or less [0.6] at that time America was just [0.5] mega [0.
2] on the scene [0.3] and its currency was underwritten by the strength of 
America [0.3] and it was pegged to gold and we had fixed exchange rates [0.8] 
from nineteen-seventy-one America devalued the dollar [0.3] and the exchange 
rates floated [0.4] and from that moment onwards [0.3] the major industrial 
economies which in the fifties and sixties had had inflation rates of [0.3] one 
two three per cent per year [0.4] suddenly found themselves with inflation 
rates running at [0.2] ten per cent [0.3] 
fifteen per cent [0.3] twenty per cent [0.7] none of you in this room these 
days will probably believe me [0.3] when i tell you that in nineteen-seventy-
nine Britain's rate of inflation [0.4] was twenty- [0.2] five [0.2] per cent [0.
2] yes [1.0] i can hardly believe that as the words come out of my mouth and i 
can remember the year very c-, [0.2] very distinctly [0.3] think about it 
during a year prices go up by a quarter [0.7] it's unimaginable [0.3] back then 
now [0.2] and it was unimaginable in the sixties but in the seventies [0.3] 
world inflation [0.4] inflation in every country [0.4] moved up a gear [0.5] 
and it moved to double digit or more [1.9] now the effect of the [1.1] rise in 
oil prices [0.5] was tremendous on the world economy [1.0] what happened 
basically was that every country importing oil [0.5] suddenly paid [0.4] an 
awful lot of money [0.7] to countries that exported oil [0.8] and that huge 
transfer of resources meant that some of the oil exporters [0.4] many of them 
small countries with limited investment possibilities at home [0.8] how much 
money can you spend in Kuwait [1.0] you can build a new airport a 
desalination plant [0.6] you can build all kinds of luxury items as well as new 
hospitals and so on [0.4] and you still haven't used up these hundreds of 
millions of dollars which are flowing in [0.4] as oil rents [0.7] so a lot of 
that oil money [0.7] was put back into western banks [0.4] in Zurich London 
Frankfurt New York Miami and so on [0.6] and the money was then lent back to 
people who needed money [0.4] now the people who needed money [0.4] were [0.2] 
countries that suddenly faced a higher oil import bill [0.2] and had to cover 
the cost of that [0.7] and those countries in the developing world [0.5] who'd 
seen such [0.2] incredibly fast growth in the late sixties early seventies [0.
5] that they honestly believed with very good justification [0.4] that there 
was no way [0.4] that they couldn't pay back any amount of debt that they could 
possibly get [1.8] now [0.2] the classic country for this is this country [4.5] 
Brazil [1.9] nineteen [0.3] Brazil in the early nineteen-seventies [2.2] wish 
we had a Tardis a time machine to take you to Brazil in the early nineteen-
seventies boy would 
you enjoy it [0.7] this was a country [0.5] which was so self-confident [0.5] 
i'd never seen anything like it i've never seen a country [0.4] so full of its 
own [0.2] self-confidence [0.4] about what it was up to [0.3] and what the 
future was there [0.5] in n-, in the early seventies [0.3] Brazil had been 
growing for many years at seven or eight per cent per annum [0.3] it was one of 
the world's fastest growing economies probably the world's fastest growing 
economy [0.8] it had a mega-city [0.3] which promised to be the world's biggest 
and most important city [0.3] by the end of the twentieth century [0.3] and 
that was 
São Paulo [1.3] it also had unimaginable natural resources or appeared to have 
[0.7] most of Brazil's population and economic developments concentrated in a 
small area [0.5] coastal strip and above all Southern Brazil [0.3] all the 
Amazonian forests [1.0] were out there [0.4] barely touched [0.8] and those 
seemed to be a limitless [0.2] supply of natural resources for agriculture [0.
4] and hu-, who knew [0.5] in the early seventies [0.3] what mineral resources 
there weren't somewhere in the 
Amazon [1.6] there's Brazil second or third largest country in territory [0.4] 
in the world with apparently unimaginable riches and already growing as quickly 
as possible [1.7] and of course culturally Brazil knew it was the greatest 
country in the world because the finest football team ever seen to date [0.4] 
had just won the World Cup in nineteen-seventy [1.3] er [0.2] legendary team of 
nineteen-seventy with Pele Jairzinho and so on [0.7] er Brazilians just 
believed they'd got it made [0.5] now the Brazilian government that was a 
military dictatorship run by technocrats said look [0.5] we'll borrow to build 
the world's largest hydroelectric dam on the Parana river here [0.5] we'll 
borrow money to drive roads four-thousand kilometres across the Aramazon [0.4] 
from east to west from north to south [0.5] we'll borrow money for 
hydroelectric dams on the São Francisco river [0.6] we'll borrow money for 
this we'll borrow money for that [1.0] and nobody lending the money thought 
they could ever lose lending to Brazil [0.8] Brazil was a sovereign state it 
could always pay back the money it was large it was growing quickly [0.3] 
whatever you lent Brazil [0.3] in twenty years time [0.3] that would be really 
small change that Brazil would just pay back [0.3] very very easily in-, indeed 
[0.8] and indeed the interest rates weren't that high [0.7] world interest 
rates in the nineteen-seventies [0.3] were no more nominal than about fifteen 
per cent [0.8] and yet world inflation dollar inflation was frequently getting 
up to fifteen per cent [0.7] in several years in the nineteen-seventies world 
interest rates in real terms [0.3] were negative [0.8] right [0.7] so all you 
had to do was take the money you were lent put it into real estate gold [0.3] 
or anything that kept its value [0.5] and you were getting a free gift from the 
banks [0.5] so everywhere you looked at it [0.4] borrowing borrowing borrowing 
made a lot of sense [0.9] Brazil borrowed a bundle [0.2] Argentina did so did 
Chile [0.7] so did all the Latin American countries [0.3] so did the 
Philippines [0.8] er [1.2] and so did Mexico [0.3] and Mexico borrowed a bundle 
[0.3] and Mexico was an oil 
exporter as well [0.4] at a time that the oil price was going up [0.3] nobody 
could ever lose anything lending to Mexico [1.4] there was no way that Mexico 
could overborrow [0.6] it had huge oil reserves [0.4] and oil price was going 
up [0.4] and Mexico was also growing as quickly as Brazil [1.4] er [0.3] you 
couldn't lose lending to Mexico [1.5] now that was what happened during the 
nineteen-seventies [0.6] now towards the end of the nineteen-seventies [0.3] 
the world economy [0.6] began [0.2] to hit a rocky patch [0.8] and that rocky 
patch is marked by the phenomenon [0.8] of stagflation [4.2] now the old 
Keynesian truths [0.8] were rather simple [2.2] you could boost aggregate 
demand in your economy get the economy to grow bring down unemployment but you 
were always going to risk pushing up the inflation rate [0.8] or in the 
Keynesian model [0.6] reduce aggregate demand [0.2] take away the inflationary 
force and accept slower growth [0.3] and fewer jobs [0.7] but in the late 
seventies country after country [0.4] in the industrialized world [0.3] began 
to [0.2] experience the worst 
of both worlds [1.2] rising rates of unemployment [0.3] hesitant economic 
growth [0.6] and [0.4] high rates of inflation [1.4] Mrs Thatcher went into the 
nineteen-seventy-nine election in this country [0.7] with [0.7] an election 
poster that was very famous called Britain isn't working [1.5] picking up on 
the figure that for the first time since the war Britain had got a million 
people unemployed [0.6] in the late seventies that was a shocking statistic [0.
5] 
in the sixties very very few people were unemployed few hundred-thousand [0.4] 
now we'd got a million unemployed [0.4] and inflation was high as well [0.8] 
and on the basis of this [0.7] quite trenchant critique of the facts of a er of 
the Labour administration of the late nineteen-seventies [0.3] Mrs Thatcher [0.
4] won her election victory [0.5] now unlike other Conservative regimes [0.3] 
after the Second World War [0.3] Mrs Thatcher came to power with a very 
different set of economic advisers [0.3] to those that had accompanied [0.2] 
people like Edward Heath [0.6] er in the early nineteen-seventies [0.3] her 
advisers were not Keynesian macroeconomists [0.3] they were monetarists [0.4] 
and they said the main aim of economic policy is not Keynesian demand 
management [0.5] it's a stable money supply [0.7] get inflation down [0.6] and 
you know how monetarists do this [0.5] you do it [0.6] by cranking the big 
lever [0.2] of [0.4] well [0.4] come on [0.7] sorry this is just [0.5] a 
rampant monologue [0.4] er [1.2] how do you 
how do you stop infla-, how do you stop inflation for a monetarist [3.7] 
sm0972: interest rates [1.0] 
nm0969: interest rates yeah [0.5] you control the money supply and you do it [0.
2] by [0.2] raising interest rates [1.1] er [0.8] so Britain got a monetarist 
Chancellor of the Exchequer [0.8] who will who pushed up the interest rates 
like crazy [1.1] by nineteen-eighty-three [0.6] Britain's inflation [0.5] that 
was [0.2] twenty-five per cent in nineteen-seventy-nine [0.4] was [0.4] three 
per cent [0.5] something like that [0.4] it worked [0.2] it worked 
magnificently well [0.4] as a way of getting inflation [0.4] out of the British 
economy [0.7] but Mrs Thatcher came to power in seventy-nine with a million 
people unemployed [0.3] how many people were unemployed in Britain by nineteen-
eighty-three [2.9] just about peaked in nineteen-eighty-three unemployment in 
this country [5.2] she should have lost the eighty-four election or was it 
eighty-three by a mile [0.9] given what had happened to unemployment [0.6] it 
was a million when she came to power [0.5] by eighty-three how many was it [1.
3] anybody know [2.8] four million [1.2] i think it was 
over four-million [0.5] in other words there was a huge increase in 
unemployment [0.4] the British economy which had been growing slowly [0.4] to 
nineteen-seventy-nine [1.0] grew hardly at all during those four years and in 
some years it was backwards [0.6] lots of industries closed down lots of [0.6] 
lots of companies shut their doors faced by these cripplingly high interest 
rates [0.3] and by the massive reduction of aggregate demand caused by [0.3] 
the rise in interest rates [0.5] it was a great way to stop inflation but it 
also [0.2] did [0.4] terrific er [0.4] well had a terrific impact on economic 
growth [0.4] and employment [0.7] now that's what happened in this country [0.
4] similar things happened in other countries [0.4] an abandonment of Keyensian 
demand management with mac-, with [0.2] full time er employment [0.3] full 
employment as the main objective [0.6] and [0.2] the assumption [0.4] of the 
monetarist objectives of [0.3] staple money [0.2] low inflation [0.4] and then 
let the rest of the economy take [0.2] care of itself [0.4] by market forces [0.
6] now in nineteen-eighty [0.5] the American presidential 
election was won by President Reagan [0.4] and Reagan also [0.2] had [0.3] 
monetarist [0.5] er economic advisers [1.1] now there was one significant 
difference between Reagan's administration [0.3] and the British administration 
President Reagan and Mrs Thatcher [0.4] were very much fellow soulmates 
politically they agreed on so many things [0.5] but there was one crucial 
difference in their in in their policy prescriptions [0.4] and that was [0.4] 
that whilst Thatcher and Reagan [0.3] were both [0.3] extremely hostile to the 
Soviet Union which in nineteen-seventy-nine [0.3] had sent its troops into 
Afghanistan [1.4] and believed that the West had to take a very s-, hard line 
against the Soviet Union [0.8] what happened under Reagan was America began to 
spend huge amounts of money [0.3] on new defence equipment [0.4] believing that 
the Soviet Union was a menace [1.8] er [0.7] now that money was spent [0.2] by 
an American government [0.4] which did not believe in raising taxes [0.4] 
indeed [0.4] President Reagan had told the American people i will not raise 
your taxes [1.8] now there was a bit of a 
problem there because the American government was already [0.2] spending more 
than it got on tax revenues in nineteen-eighty [0.4] and here was a guy 
spending more on defence and promising not to tax the American people [0.6] the 
fiscal deficit in America grew hugely [0.4] hugely under Reagan [0.9] and it 
was financed [0.4] not by taxes [0.3] not by the creation of money [0.5] but it 
was financed by deficit borrowing [0.7] and that's by issuing U-S Treasury 
bonds [1.2] now for people to put their money into U-S Treasury bonds [0.3] you 
had to offer an attractive rate of interest [0.7] and what this led to was the 
U-S putting onto the world market treasury bonds [0.3] at increasingly high 
rates of interest [0.7] this happened at precisely the same moment [0.4] that 
[0.5] world intr-, er world inflation rates were coming down [0.8] under the 
impact of monetary policy [1.0] and the combined effect was that real interest 
rates which had been [0.2] negative in some years in the nineteen-seventies [0.
5] and were consistently under [0.2] five per cent real during the seventies [0.
3] suddenly in 
nineteen-eighty-one [0.4] those interest rates leapt to ten per cent real or 
more [1.1] there was a huge increase [0.9] now you'll see in your notes the 
example of Mexico [0.6] which in nineteen-eighty-one had a debt of roundabout 
ninety-billion dollars an awful lot of money [0.3] owed by Mexico [0.9] before 
nineteen-eighty-one Mexico was paying what what is it in your notes about three 
per cent on [0.7] on that debt [0.6] and had therefore to pay debt servicing 
somewhere between two and three-billions dollars a year [1.0] on a trade 
balance which generated what about fifteen-billion dollars worth of exports in 
the Mexican economy [0.4] in the early eighties [0.5] now [0.4] debt servicing 
[0.6] you've you're spending less than three-billions dollars out of fifteen-
billion dollars coming in [0.4] sure [0.2] it hurts you [0.5] but [0.2] you've 
still got a large import capacity [0.3] yeah [0.3] still a lot of money left [0.
2] to buy [0.2] the other goods and services you want to import [0.8] nineteen-
eighty-one comes [0.4] and Mexico's [1.1] average interest rate goes from [0.2] 
the low rates before to 
around about ten per cent [0.6] and instead of paying under three-billion 
dollars a year [0.3] the Mexican government now has to pay nine-billion a year 
[0.4] and its total export earnings are fifteen [1.0] so you can see what's 
happened to the residual [0.2] import capacity it's gone from about twelve-
billion dollars [0.4] to about six-billion dollars [0.8] this is a massive 
shock to the Mexican economy [1.6] and [1.0] it is simply unsustainable [0.6] 
Mexico limps on [0.2] for the best part of a year [0.5] desperately trying to 
pay off [0.5] its debt according to the schedule [0.7] but in August nineteen-
eighty-two [0.6] the Mexican finance minister on a Friday evening sits down 
with his closest advisers [0.4] looks at the data and says that's it [0.5] on 
Monday morning [0.3] we have to pay another two-hundred-million dollars of debt 
[0.4] and we simply don't have two-hundred-million dollars [0.8] stop worrying 
stop everything [0.7] stop paying [0.4] we can't do anything now [0.2] there's 
only one decision [0.9] press notice [0.3] the Mexican government is now 
suspending [0.3] debt repayments [0.2] until 
further notice [0.5] faced by [0.4] current positions [0.8] that press c-, 
communiqué went out that the Mexican government was suspending debt repayments 
[0.8] and the world financial system at that moment was on the verge of 
collapse [1.2] all of the world's major [0.3] banks [0.3] were massively 
overexposed on sovereign debt to the developing world if you looked at the 
balance sheets [0.4] provisions for bad debt against this lending [0.2] zero [0.
6] bank reserves bank capital [0.2] figure X [0.2] exposure to third world debt 
[0.2] figure Y [0.3] Y is larger than X [0.3] if all governments had stopped 
repaying at that moment [0.3] the world's major banks would have gone bankrupt 
[0.8] the effect on the world's financial system would have been simply 
catastrophic [1.5] now [0.9] what happened as a result of that [0.3] well the 
cavalry was bou-, brought in and the cavalry was the I-M-F [0.9] and the I-M-F 
galloped over the hill [0.3] and said look [0.4] we'll produce a fix [0.9] and 
the I-M-F fix went like this [0.6] they took the banks [0.5] and said to the 
banks and these are all private banks largely [0.5] they 
said you must make it easier [0.4] for the third world governments to repay the 
debt [0.5] you must extend the periods of repayment [0.4] give them grace 
periods [0.4] do anything you can to make it softer and easier [0.2] for them 
to repay [1.0] well the banks of course didn't like that because it was going 
to hit their earnings and profits [0.4] but the I-M-F had got a smoking gun 
against the temples and said fine [0.4] if you don't play ball you can go 
bankrupt [0.7] er you'll be the first ones to suffer in the world financial 
crisis that will ensue [0.4] so you either play ba-, ball with us or you go 
bankrupt and the banks kicking and screaming said okay [0.3] we'll play ball [0.
7] and the wo-, and the I-M-F said look if you do that we'll stitch up the 
other side of it with the governments in the developing world [0.8] and what 
we'll do [0.3] is we'll make sure that they carry on paying [0.7] as much as 
they reasonably can [0.9] er [0.5] we'll head off the possibility of a mass 
default [0.6] and what the I-M-F then did is it went all over the developing 
world [0.4] 
and said the priority now [0.3] is to get your macroeconomy [0.3] in a state [1.
0] that you have [0.7] a better macroeconomy [0.8] better chances of growth [0.
7] and [0.2] that you can keep paying the debt servicing [1.2] and what they 
did [0.5] was they went round the world and they signed with government after 
government [0.4] structural [0.2] adjustment agreements [1.0] so as we come 
into the eighties [0.4] we're into a world [0.3] of structural adjustment [4.4] 
now structural adjustment [0.7] is a big topic [0.7] so let's take ten minutes 
for a coffee break [0.5] and then we'll have a look at what this world of the 
eighties was [0.4] and 
nm0969: 
on at slightly less blistering pace than so far [0.7] those of you who are 
actually trying to follow it in the hand-, er handout where are we up to we're 
about page nine now [2.0] page nine [0.4] or so student [3.6] 
sf0973: which one [2.6] 
nm0969: well of the many ones handed out last week this is history of history 
of ideas about development [1.2] and we've reached round about page nine [8.0] 
well look what we've got in the early nineteen-eighties onwards [0.4] is 
structural adjustment being more or less forced [0.2] upon the developing world 
[0.7] some countries took a stronger objection to the I-M-F than oth-, than 
than others [0.3] some countries consistently for many years like Tanzania [0.
4] held out against I-M-F [0.3] orthodox advice [0.3] on macroeconomic 
management [0.4] but eventually they were basically forced to signed structural 
adjustment agreements [0.4] and why was that [0.6] well from nineteen-eighty-
two onwards from the debt crisis in August eighty-two [0.5] there was no money 
anywhere in the world system [0.5] for a poor country [0.8] in the developing 
world [0.5] to finance any trade deficit so if you were Tanzania [0.4] and 
you'd got problems with your trade balance and we'll see in a moment why you 
would have had problems with your trade balance [0.9] if you were Tanzania in 
the in the early eighties with a with a with a trade [0.2] balance deficit and 
you needed to finance it [0.3] who would give you money [1.1] none of the 
commercial banks gave any money to the developing world [0.4] for the best part 
of ten years after the eighty-two debt crisis [0.7] they got such a bad fright 
by the debt crisis they more or less ceased lending [0.2] into the developing 
world [0.6] so the only people who were lending money to governments in the 
developing world from eighty-two onwards [0.5] were other governments [0.2] 
other aid agencies and other multilateral agencies like the I-M-F [0.2] and the 
World Bank [0.9] and remarkably in the early nineteen-eighties [0.7] there was 
an intellectual consensus which applied to all of the major 
aid donors [1.9] called the Washington Consensus [0.6] and the only aid donors 
who weren't [0.4] fully signed up to the Washington Consensus [0.6] were the 
Scandinavian aid donors and the Dutch [0.9] and then your only other possible 
source of money anywhere in the world [0.6] was the Soviet Union [0.8] but the 
Soviet Union was in such trouble itself with its economy [0.5] in the nineteen-
eighties that there were really only about two or three countries in the world 
[0.4] that the Soviet Union could could s-, give significant amounts of aid to 
[0.5] one of course was Cuba [0.6] the other was Nicaragua [1.8] so if you were 
Tanzania in the early eighties [0.2] you basically had to do a deal [0.3] with 
the western aid donors [0.4] and you wouldn't get money from the British the 
Germans the French or anybody else for that matter [0.4] unless you could tell 
the aid mission [0.3] yes [0.2] we are in agreement with the I-M-F [0.6] if you 
asked for money from the British for example [0.4] the British would say well 
[0.4] where do you stand on your negotiations with the I-M-F [0.4] and if the I-
M-F 
hadn't give Tanzania a clean bill of health [0.4] don't even think about it [0.
4] sort yourself out with the I-M-F [0.4] then we'll see what we can do for you 
[1.0] so the I-M-F had got tremendous power [0.4] in the nineteen-eighties 
country after country [0.2] had to go to the I-M-F [0.2] and we may say well 
why have these countries got a trade [0.2] trade deficit [0.6] well let's give 
you three reasons for severe macroeconomic problems in the developing world [0.
3] in the early eighties [0.2] but [0.6] Tanzania would be a an excellent 
example of this [1.6] problem number one [0.4] oil prices which had gone up 
nineteen-seventy-three were also hiked up in nineteen-seventy-nine [1.0] now 
that price spike on oil [0.2] prices didn't last long [0.6] by about eighty-
five oil prices were moving back down and moving back down rather quickly [0.7] 
but for a few years in the early eighties anybody who imported oil [0.2] your 
oil bill had just gone once again through the roof [0.3] and that had pushed 
you into deficit [1.4] reason number two [0.5] primary commodity prices which 
peaked in the early 
nineteen-seventies [0.6] were on their way down [0.4] throughout the nineteen-
eighties [0.6] now we've got this on a graph somewhere if we can [1.2] find it 
er [1.5] where is it [4.3] it's in your notes [4.3] at least i think it's in 
your notes [0.7] i don't seem to have [0.7] an overhead of it [0.8] er [0.5] is 
it in those notes [10.6] no it isn't [2.1] yes it is [1.3] there you go [1.2] 
real commodity prices [1.8] and if you look at those real commodity prices they 
peak in the early seventies [0.9] er by the en-, by the [0.6] nineteen-eighty 
[0.4] they've shuffled back down [1.1] and you can see that from eighty to 
eighty-eight they're on their way down down down [1.5] so you've got countries 
in the developing world which have seen the price of their main exported 
commodities [0.6] moving downwards [1.3] er [0.7] and so you've got for any 
unit volume of exports [0.3] you've got a reduced [0.2] export earnings [0.9] 
and then you've got the effects of [1.1] stagnation [0.2] depression [0.2] and 
deflation [0.7] in the industrialized countries these countries are all using 
monetarist policies [0.3] they're growing rather slowly [0.5] their import 
capacity has 
been reduced [0.4] or is not growing as it did [0.7] demand for imported 
primaries is going down and this is pushing down the primary price [0.8] and at 
the same time [0.3] there are politicians in these countries saying well we 
have to protect our domestic industries [1.3] so you take a country like 
Bangladesh which in the earl-, in the eighties is developing its cotton 
industry [0.5] and it finds its possibilities of exploiting cheap labour in 
cotton to for [0.2] textile exports to Europe or the U-S-A [0.4] is heavily 
circumscribed [0.5] by the multifibre agreement [0.5] which is a bit of trade 
protectionism [0.4] which makes it very difficult for Bangladesh to export more 
than a certain quota of cotton textiles [0.3] to the industrialized world [0.3] 
so protectionism and reduced demand or or s-, or slowly growing demand [0.4] in 
the north [0.3] is making it ever more difficult to export [0.3] from the 
developing world [0.8] so you've got the trade deficit the falling commodity 
prices and difficulties of protection on the world trade scene [0.6] hence [0.
3] 
most countries in the developing world [0.4] well [0.2] most countries many 
countries in the developing world [0.5] have got severe trade deficits [0.2] in 
the early eighties [0.6] they're also running high rates of inflation and 
they're also many of them are running [0.4] high rates of fiscal deficit [0.2] 
in other words the government is spending a lot more money [0.3] than it brings 
in [0.3] in tax revenue [1.2] and when we look at structural adjustment [0.8] 
and you'll see it's set out on page ten [0.8] we've got a package of measures 
[0.5] which can conveniently be divided [0.5] into demand side and supply side 
[0.5] measures [0.4] or perhaps more accurately divided into stabilization 
measures [2.3] and supply side measures [0.8] now your stabilization methods [0.
6] improve the balance of trade [0.7] and do that by devaluing the currency [1.
6] reduce fiscal deficits [0.3] and the main weapon to do that is just cut 
government spending [1.3] and reduce inflation [1.1] and for any monetarists 
that means controlling the money supply [0.3] and above all that means allowing 
interest rates to rise to 
market [0.2] clearing levels [2.0] so macroeconomic stabilization is one demand 
side of structural adjustment [0.9] the second side is an attempt to improve 
the conditions for growth [0.6] and that is to be done [0.2] through the 
efficient use of resources [1.4] and there you have two elements of it [0.3] 
take out price distortions [1.3] er [0.2] and you remove price distortions by 
getting rid of the distortion on the exchange rate by devaluing [0.5] get rid 
of excessive subsidies [0.7] and get rid of any [0.2] partic-, particularly 
onerous taxes [1.0] now many developing countries for various social and 
political reasons have [0.3] subsidies on things like food [0.3] electricity [0.
3] urban transport [0.8] sometimes the price of fuel [0.3] in the agricultural 
sector fertilizers pesticides [0.3] irrigation water [0.9] the message from the 
I-M-F was all of those subsidies distort prices [0.3] and lead to inefficient 
allocation of resources in the economy [0.3] as well as costing the government 
a lot of money [0.3] get rid of them [0.3] get efficiency into the system [0.7] 
cut 
onerous taxes [1.2] where would you have found onerous taxes [1.1] does anyone 
know this [0.6] it isn't is it [0.8] where would you have found peculiarly [0.
2] high rates of taxation [0.6] in a country like Tanzania [0.4] or in any 
other developing country in the early eighties [1.6] there were people paying 
tax rates of forty fifty per cent [0.2] who [1.2] any idea [5.8] counts as 
interesting [1.0] 
sm0974: would it be multinationals [1.1] 
nm0969: some multinationals might have got a banging off the tax systems on 
corporate taxes there [0.4] certainly in the nineteen-seventies some countries 
had [2.2] tax regimes and investment controls that [0.3] that that that tried 
to restrict the activities of multinationals [0.4] they might have but there's 
another significant group [0.2] who were getting banged by the taxes [2.5] the 
answer is small farmers [0.5] small farmers [0.6] you might say well small 
farmers paid no taxes [0.7] well if you check out effective tax rates [0.7] er 
[0.3] on anybody exporting cocoa coffee [0.2] palm oil cotton and so on [0.6] 
there were various things going on in many developing countries that meant that 
export taxes on cash crops [0.3] the main exports they got [0.3] at the margin 
were very high indeed [0.8] and the [0.4] I-M-F and the World Bank looked at 
those and said well get those taxes down because they're a [0.3] major 
disincentive [0.4] to exporting [3.6] of course there were countries in which 
the macroeconomic malaise was phenomenal [0.8] where [0.7] exchange rates were 
so overvalued [0.7] that the domestic price of an exported good was barely 
worth [0.4] sticking it in a handcart [1.5] classic example is Ghana [0.2] in 
the early nineteen-eighties when the cedi [0.5] was overvalued by more than ten 
times [0.4] hugely overvalued cedi [0.6] what that meant was that if you were 
growing cocoa in southern Ghana [0.6] which at that time was one of the world's 
biggest cocoa exporters [1.2] when the cocoa was sold and it was sold at a 
dollar price and the dollar price was translated back into cedis because the 
cedi was so strong against the dollar [0.3] you got very very few cedis in your 
hand [0.7] and cocoa growers looked at it and said is that all i'm getting for 
a ton of cocoa [0.8] 
hardly worth me growing the stuff hardly worth cutting it off the trees [0.9] 
except of course for those Ghanaian farmers [0.3] who did cut the cocoa off 
their trees [0.5] but most certainly did not export it through Ghana [0.5] 
suddenly in the early eighties there were very large increases [0.3] in cocoa 
exports from the Cote d'Ivoire [0.4] to the [0.7] to the west [0.4] and from er 
[0.3] Togo [0.4] to the east of Ghana [0.5] and that was nothing to do with the 
farmers in those two other countries [0.3] there was an awful lot of Ghanaian 
cocoa [0.3] that [0.2] walked across the border [1.2] er [0.7] so those kinds 
of distortions on the exchange rate and pricing systems [0.3] get rid of those 
go for [0.4] efficient prices for best resource allocation [0.7] and [0.2] big 
message here [0.3] allow the markets to function [0.8] during the nineteen-
sixties and s-, nineteen-seventies many developing countries had governments [0.
3] that were very distrustful of market forces [0.8] and you can understand 
that distrust in market forces [0.3] remember in nineteen-se in the early 
seventies people were very worried about the unequalizing effects [0.4] of 
rapid economic growth [0.7] and people feared that free markets would lead to 
inequities [0.3] and sought to control the markets in various ways [0.4] 
by the early nineteen-eighties [0.5] the Washington Consensus argued that the 
cost of controlling markets was very high [0.9] er that markets might not be 
perfect but they were [0.3] much preferable to government control [0.7] and so 
the argument there was liberalize your markets allow people to trade to move 
government to move [0.6] er goods and services around the economy to [0.7] er 
access foreign exchange to access credit to set up business to reduce 
regulations [0.3] and so on [0.3] so as to allow maximum market enterprise [0.
4] within the economy [2.3] and the final element of structural adjustment is 
institutional reform [0.4] reform your economic institutions [1.6] er two 
elements in here [0.3] privatization [1.0] many developing governments [0.5] 
world governments had large parts of their [0.6] eco-, economy [0.3] in state 
hands [0.5] operated by state corporations [0.5] that often had many remits 
besides [0.3] making a profit [1.5] Tanzania was in dreadful trouble in the 
early nineteen-eighties one reason that Tanzania was in dreadful trouble in the 
nineteen-eighties [0.4] was that all [0.3] formal sector cereals marketing 
processing distribution [0.4] was in the hands of a very large parastatal 
called the National Milling Corporation [0.6] now the National Milling 
Corporation was told by the Tanzanian government [0.5] collect [0.5] maize [0.
3] down in the bottom left hand corner right hand corner anywhere in Tanzania 
at the same price [0.4] as you collect that maize [0.7] in places much closer 
to Dar es Salaam [1.0] everywhere they had to buy up [0.2] the maize at the 
same price [0.6] everywhere i think they also were [0.4] were forced to 
distribute fertilizer to maize growers [0.4] at the same price [1.1] what that 
meant was that places close to Dar es Salaam [0.9] found that the prices they 
got were not that great for maize [0.5] so they didn't deliver to the National 
Milling Corporation [0.5] places at the far end of the country [0.8] which 
previously [0.4] had got [0.5] a very 
poor price for maize because of their isolation and transport costs [0.3] 
suddenly were offered a price for maize [0.7] that more or less ignored the 
transport costs [0.4] so they grew a lot more delivered it to the N-M-C [0.3] 
and then the N-M-C had got eight-hundred kilometres of trucking this maize [0.
3] to the main consumption points [0.6] not surprisingly [0.3] the N-M-C began 
to run big deficits [0.9] now as a public sector c-, [0.2] er corporation [0.3] 
entrusted with a key element in Tanzanian food security [0.5] it could not go 
bust [0.3] it had to continue operating [1.3] the N-M-C had an account at the 
Central Bank in Tanzania [0.5] and the account was in the red [0.6] and they 
just ran [0.2] bigger and bigger overdrafts [1.0] now if you have a huge 
parastatal in your economy [0.3] running up a very large overdraft [0.3] on the 
Central Bank account [0.4] what happens to your money supply [3.0] public 
sector overdrafts at the Central Bank [0.2] what's happening to your money 
supply [1.4] what does it do to your money supply [2.3] any idea [2.9] well it 
expands it yeah [0.2] this is money for free [0.8] all that the 
Central Bank is saying is carry on writing cheques [1.1] so the N-M-C is 
writing cheques creating shilingis in the Tanzanian economy [0.6] the money 
supply is way out of control [1.5] money supply's out of control so inflation 
is being pushed up [0.6] nominal rate of the Tanzanian shilingi is pegged [1.5] 
and if your inflation is faster than world inflation and your nominal exchange 
rate is pegged [0.4] what happens to your real exchange rate [3.3] goes up [0.
8] your real exchange rate is going up shilingi is getting stronger against the 
dollar [0.3] year in [0.2] year out the degree of overvaluation gets greater [0.
4] so what does that then mean for a Tanzanian grower of cotton or a Tanzanian 
grower of coffee [0.4] what it means is in an inflated economy [0.4] you're 
getting the same number of shilingis for your cocoa [0.3] for your for your 
coffee and your cotton [0.3] this year [0.3] as you did [0.2] two three years 
ago [0.6] inflation has eroded the value of those shilingis the real price to 
you [0.3] in shilingis [0.5] of your coffee [0.4] and your cotton [0.7] is 
going down [0.4] 
right [0.6] same things are happening in Ghana in the early nineteen-eighties 
[0.7] so [0.7] the operation of your large [0.2] parastatal [0.5] is snookering 
the whole economy [0.9] there's a whole series of vicious effects here [0.5] 
which push you into a bigger and bigger mess [0.7] not surprisingly [0.6] the I-
M-F and the World Bank looked at this kind of thing and said [0.3] for heaven's 
sake privatize these state enterprises [0.6] er [0.2] they're doing you no good 
at all [0.7] er [0.2] they're probably inefficient [0.5] er [0.3] well it's not 
obvious that they were all inefficient but the general feeling was that 
government was inefficient [0.4] and they're messing up your economy in all 
kinds of ways [0.9] they also wanted key economic institutions reforming [0.6] 
and those included the tax system [1.0] where the basic message was [0.9] 
broaden your tax base [0.6] and lower the tax rates [1.1] er if you have a 
wider [0.2] tax capture you can bring down the rates [0.4] which was regarded 
as a stimulus to in-, in-, investment [1.0] and also reform your financial 
sectors [0.7] get yourself an efficient competitive 
financial sector [0.4] very ve-, often meant privatizing banks [0.2] and 
reducing state control of the banking system [0.4] yeah [2.1] which was the 
first Third World country [0.4] to go for a fully liberalized banking system [0.
8] anybody know [1.7] there was one country which ten years before this [0.7] 
went for a big experiment in all of these policies and liberalized its bank 
system [0.5] before almost any other country in the developing world did [3.9] 
any idea [2.3] Chile [1.6] Pinochet's coup of nineteen-seventy-three [0.8] 
brought to power in [0.2] in Chile not just a dictatorship [0.6] but a supply 
side monetarist set of [0.2] economic advisers [0.4] known as the Chicago Boys 
[0.7] all [0.2] ex-pupils from the University of Chicago where they'd been 
taught monetarism [0.4] and free market economics [0.3] implemented in Chile 
from seventy-three onwards ten years before it was done in the rest [0.3] of 
the developing world [0.3] fully liberalized financial sector [0.9] in Chile 
from the mid-seventies onwards [1.0] has anybody ever heard of what happened to 
the Chilean financial system in [0.2] about nineteen-eighty-one [1.6] collapsed 
[0.9] massive bank failures huge bailout problems [0.5] er [0.4] totally 
liberalized bank sectors 
are a disaster [1.8] nobody in this room will [0.2] probably have any knowledge 
of what happened in the Midwest of the U-S-A in n-, in in [0.5] during the 
first Reagan administration [1.7] where the savings and loans trusts [0.2] 
things a bit like the British bo-, building societies [0.5] were deregulated by 
the Federal Reserve Bank [0.7] and [0.3] just told to do finance any way they 
like [0.7] with the result [0.2] that the losses in the savings and loans 
institutions [0.5] were colossal [0.6] i think we're talking trillions of 
dollars on losses in the savings and loans scandals of the nineteen-eighties [0.
7] fully liberalized financial systems are very very dangerous [0.6] er [2.0] 
so there are one or two experiences that pushed that too far but the general 
idea was to dereguli-, [0.4] regulate [0.3] and get more efficient financial 
institutions [1.8] now those are the elements of structural adjustment [1.0] 
what you'll find on the next couple of pages of your handout [1.7] 'cause 
you'll find some of the problems [0.2] involved in structural adjustment [3.8] 
we're not going to go through 
all of the problems involved in structural adjustment it's a very big topic [0.
5] but let me give you three elements of structural adjustment which are [0.2] 
really big problems [1.6] the first is that [0.2] when you look at the 
macroeconomic stabilization measures [0.4] such as raising interest rates [0.3] 
and cutting government spending [0.6] these are severely [0.2] deflationary 
measures [0.4] they will reduce aggregate demand in the economy [0.7] they will 
lead to business failures they will lead to unemployment they will lead to less 
business activity [1.9] and those deflationary elements [0.4] the creation of 
unemployment [0.6] loss of demand in the economy and reduced economic [0.6] er 
activity [0.3] are major elements there which led people to criticize [0.4] er 
structural adjustment as a set of measures [0.4] that would increase poverty in 
the developing world [1.7] now the I-M-F said okay there are deflationary sides 
side to it [0.4] but there are supply side measures in there [0.2] which will 
get your economy growing [0.3] and any pain that there is in 
structural adjustment [0.2] will be strictly temporary [0.7] now that leads us 
to the second problem [1.2] big problem of structural adjustment [0.7] and that 
is [0.4] that structural adjustment is usually not sequenced ideally [2.3] now 
in a variant on how many economists does it take to change a light bulb [0.5] 
er how many [0.3] people does it t-, take to devalue the currency [0.3] of a 
country [1.3] apologies to those of you who've heard this at least twice before 
[0.8] er [0.5] how many people does it take to devalue you've got nominal 
exchange rates [0.3] have i done this even with the undergrads [1.0] now you're 
smiling as though yo-, i did it last week i m-, might have done it last week [0.
8] okay [0.9] look if you have nominal exchange rates i mean these days most 
countries have now got free exchange rates but in the days that you announced 
the exchange rate [0.4] how many people does it take [0.6] and how long does it 
take [0.4] to devalue [0.2] a country's 
currency [7.4] any idea [5.3] no no idea [1.7] who would have to make the 
decision [2.6] you're in Ghana in the early nineteen-eighties and you've 
decided the cedi is w-, w-, way overvalued it's ten cedis to the dollar and it 
should be [0.3] a hundred cedis to the dollar fine [0.3] who's going to take 
that decision [1.6] who do you need to take a decision like that [4.6] no [5.0] 
okay [0.4] the answer is [0.8] you [0.2] you probably need your Minister of 
Finance your Chancellor of the Exchequer [0.3] you probably need the Governor 
of the Central Bank [1.0] and you'll probably have to consult senior cabinet 
colleagues or the President of the country [1.3] so that's what two or three [0.
3] high ranking decision makers [0.5] and a typist [1.0] right [1.4] how long 
does it take to devalue about five minutes yes [0.9] as long as you've reached 
agreement that you're going to do takes five minutes [0.5] that's all the time 
it takes to to to write out the press announcement that says as from today [0.
2] the government of Ghana redefines the cedi from ten [0.5] cedis to the 
dollar to a hundred cedis to 
the dollar or whatever it is yeah [0.9] takes five minutes and takes about 
three people to make the decision [0.4] similarly if you want to cut the 
government budget [0.9] you know how quickly can you do that how many people 
are involved [0.6] well it's maybe a couple of dozen technicians in the 
Ministry of Finance go through the government budget with a red pencil [0.3] 
reduce the budgets [0.4] takes one week at most [0.3] yeah [1.1] how long on 
the other hand does it take [0.2] to privatize [0.3] a big state enterprise [0.
5] yeah [1.9] er [0.6] those of you who lived through the British 
privatizations of the nineteen-eighties [0.7] privatizations of British Gas 
British Telecom and so on [0.3] even in this country took an army of people to 
do [1.1] advertizing tendering [0.2] recruiting shareholders producing 
documents [0.3] deciding the form of privatization [0.3] deciding what price 
you should try and sell things off [0.3] it's a huge business [0.3] you need an 
army of civil servants for this [0.6] Nicaragua in nineteen-eighty [1.2] 
decided to privatize [0.3] the major state enterprises [0.3] 
Nicaragua's a very small country [0.6] when it [0.3] drew up a list of state 
enterprises there were three-hundred-and-fifty to be privatized yes [1.1] now 
think of all the legal documentation and all of the technical work in 
privatizing [0.3] those three-hundred-and-fifty [0.2] enterprises [0.3] it's 
years and years of work [0.5] it took Mrs Thatcher a decade to privatize what 
[0.5] the dozen or so biggest [0.9] public sector utilities in this country [0.
8] and that took [0.8] huge resources [1.3] so for a developing country to 
privatize [0.2] it's i-, it's a mountain of work [0.4] similarly if you're 
trying to liberalize parts of your market economy [0.3] where you previously 
had lots of regulations [0.5] and where you don't want to just rip away 
everything overnight [0.7] er there's a lot of technical work there [0.3] now 
the point i'm making is that the stabilization measures [0.3] you can do them 
very quickly you can cut governments ra-, [0.3] you can cut government 
spending rather quickly [0.3] you can raise interest rates rather quickly [0.4] 
the supply side liberalization measures [0.3] the reforms of banking tax 
systems privatizations [0.4] these take years to do [0.8] so you've got a lag 
between those things that tend to deflate your economy [0.6] and those things 
that give a stimulus to your economy [0.6] and that lag can be quite a long lag 
it can be five years or more [0.8] so it's no surprise to see that [0.4] 
devaluation what the I-M-F claimed would be very short term pain [0.6] has 
proved to be at least medium term [0.3] if not long term pain [0.7] and indeed 
for many countries you'd say [0.3] where is the e-, where is the light at the 
end of the tunnel [1.7] and here's a third problem with with structural 
adjustment 
nm0969: 
now you go to Tanzania and you say that [0.3] and you go to Uganda and say that 
[0.7] and then you say the same thing in the Cote d'Ivoire [0.7] and you say 
the same thing in Colombia [0.6] and in Costa Rica [0.4] and El Salvador [0.3] 
and Guatemala [0.4] and Indonesia [1.9] and so on [0.3] yeah [0.9] now it makes 
an awful lot of sense [0.5] for [0.4] an El Salvador or a Kenya [0.5] to export 
more coffee [0.5] earn more foreign exchange [1.1] er [0.5] and balance its 
trade [0.6] but what happens if all countries producing coffee [0.3] all 
produce [0.2] more coffee [0.3] at the same time [1.1] well [0.2] against a 
demand schedule which is not that elastic [0.6] the price will go down [1.0] 
now that [0.3] diagram that was in the notes of falling [0.2] primary commodity 
prices [0.5] one of the elements behind that fall in commodity prices [0.4] 
were the efforts of countries under structural adjustment [0.3] to increase the 
volumes [0.3] of primary exports [0.6] so [0.5] an argument that makes perfect 
sense for one country [1.1] isn't necessarily a good argument for all countries 
at the same time [0.6] now that argum-, that that problem with the argument is 
known as the 
fallacy of composition [1.1] composition agg-, added all together in aggregate 
[0.3] it isn't good advice [0.2] for any given country at any one moment it is 
good advice [0.4] but then all countries were given the same [0.4] advice at 
the same time [6.6] now look on [0.2] page nine [0.2] you've got a little box 
called the Washington Consensus [2.7] and this was an intellectual consensus 
built up in the early nineteen-eighties about what development policy should be 
[1.7] and it's called the Washington Consensus because Washington is where 
you'll find the World Bank [0.5] the International Monetary Fund [0.8] er and 
you'll also find the Inter-American Development Bank and you'll also s-, find 
the U-S government [0.8] now all of the [1.7] well not all but [0.2] many of 
the [0.6] people defining policy in Washington in the early eighties very 
powerful people [0.5] came to the same conclusions about what good policy would 
be [0.3] in the developing world [0.3] and there it is listed point by point [0.
6] let's have a look what we've got there [0.7] a balanced fiscal budget 
government 
spends only as much as it takes in [0.5] tight government spending controls [0.
3] broad based tax with low marginal tax rates [0.9] reform your prices to 
market based prices [0.4] make real interest rates positive [0.6] get yourself 
a stable exchange rate [1.5] er [0.7] trade liberalization and encouragement of 
[0.2] foreign [1.1] direct foreign investment foreign direct investment [1.7] 
there's terrific change in fashions from the early seventies to the early 
eighties [0.3] regarding multinational companies [0.5] and [0.3] foreign direct 
investment [1.1] in the early nineteen-seventies people were very wary of the 
big [0.3] multinational corporations believing that they were exploitative [0.
6] and through transfer pricing mechanisms [0.4] were taking out bigger profits 
from the developing world than they should have been [0.8] transfer pricing is 
where you have [0.4] a local subsidiary of a major multinational [0.8] and what 
you do with this [0.3] is you [0.3] the transfer prices as you [0.8] transfer 
goods [0.3] between elements of the same corporation [0.5] you set the prices 
internally to your company [0.4] so that you 
only make profits [0.3] in countries [0.9] which have low tax regimes yes [1.4] 
now if you set this up well [0.5] you can have a global corporation that makes 
very little profit [0.4] in countries like Germany and Japan [0.9] or Sweden [0.
7] and suddenly makes a fortune in the Cayman Islands yeah [0.7] tiny part of 
the company makes a fortune in the Cayman Islands [0.3] well it was never that 
naked [0.6] but [1.1] what you got your tax lawyers to do it was alleged was to 
make sure that you [0.3] rack up your profits [0.4] where the tax rates are 
specially low [0.4] yeah [0.8] so you pay very little tax in Sweden [0.3] and 
then on your big profits in the places where you've got a lot of profit then [0.
6] you pay very little tax on that [1.0] and we know how there i mean that game 
with taxes [0.2] exploiting the possibilities of [0.3] realizing your profits 
in low tax havens [0.4] is why everybody today knows that some of the richest 
people in the world [0.5] pay no tax [0.8] now is that true [0.5] that it's 
commonly alleged that the richest people in the world [0.3] pay next to no tax 
yes [0.5] they live in 
strange places [0.5] they can't spend too much time in any one [0.5] one of the 
major cities of the world [0.6] er [0.2] they have [0.2] unusual nationalities 
[0.3] unusual residences [0.4] and pay next to no tax on phenomenally high 
earnings [0.2] this is what we're told [0.4] well in back in nineteen-seventy 
th-, this was a big fear [0.4] and many governments put a lot of control on 
multinational organizations [4.3] er [2.5] by the time you get to the nineteen-
eighties [0.4] those ideas have been blown away [1.7] because what people are 
saying by the nineteen-eighties is they're saying hey [1.2] if you want [0.2] 
to have something happen in a country [0.4] maybe you can do it by a government 
parastatal [0.5] but maybe that government parastatal will be inefficient [0.4] 
and if it makes losses [0.3] it'll borrow from the Central Bank [1.0] expand 
the money supply [0.3] and create problems for you [1.0] on the other hand [0.
6] if you will give it this out as a franchise [0.4] to some multinational 
company [0.5] they can only [1.3] er they can only operate if they make profits 
they have to be efficient [0.8] and if they make 
profits this isn't going to cost your country anything [1.1] and instead of 
getting debt from overseas [0.5] to put into state investments that might go 
bad [0.4] how about foreign direct investment [0.7] because when one of the big 
corporations comes to invest in your country [0.6] you don't have debt [0.9] 
there's no reason to pay back the investment capital [0.3] sure you'll have 
repatriated profits [0.3] but that's only if the investment's successful [0.5] 
if something goes wrong [0.4] well the corporation loses not the country [0.7] 
so by the early eighties you got a f-, you got a set of arguments saying [0.4] 
foreign investment is a very good thing [0.5] encouraging [0.5] get rid of [0.
2] get rid of debt [0.5] bring in foreign investment [5.7] what else have we 
got in there in the [0.2] Washington Consensus [1.3] er [0.8] a consensus in 
favour of privatizing state enterprise [0.8] er [0.9] get the state out of it 
[0.2] on the grounds that states are likely to be inefficient [0.7] and on the 
grounds that state enterprises are likely to be managed for as many political 
objectives as economic objectives [1.1] 
deregulate your markets including the labour market [0.4] er [0.2] this is back 
to the nineteen-thirties [0.4] if there's a problem of unemployment [0.8] let 
the wages go down to a market clearing level [1.7] er [0.6] sound macroeconomic 
policy in command [0.7] and some rudimentary social safety nets if there are 
problems of poverty [0.4] during adjustment [0.5] throw a bit of money at the 
problem [1.8] the World Bank also argued at the same time for investments in 
human capital [0.5] for reasons that we will see [0.3] in a few moments [1.9] 
er and in timing stabilize before you create [0.4] the conditions for growth [1.
8] now that's the Washington Consensus it's about macroeconomic stability and 
it's about trying to get a supply side [0.3] market based miracle [0.3] for 
economic growth [4.2] now what do we need to say for the nineteen-eighties [0.
3] about agriculture [1.6] this is really a story in the nineteen-eighties the 
big stories [0.4] are about macroeconomic phenomena [1.5] it's extraordinary 
how quickly the ideas of the early nineteen-seventies stressing equity 
stressing 
reaching the poorest [0.4] had put agriculture [0.3] top of the bill [1.3] in 
less than ten years [0.3] agriculture has been wiped out [0.3] from the policy 
agenda [0.3] in favour of macroeconomic concerns [0.4] of the early nineteen-
eighties [0.5] and agriculture is now seen as nothing special to any other 
sector [0.6] if anything's going to happen in agriculture [0.3] base it on the 
market [0.4] base it on efficiency [1.9] but when people looked at agriculture 
[0.6] they saw [0.2] one major problem that was going on [0.7] and that was 
this [3.7] the problem of [3.1] okay [0.5] the problem of negative protection 
[5.5] 
and this is a very very simple argument [1.3] what was argued [0.5] was that [0.
9] you there's your agricultural supply curve [1.0] quantity and price [1.2] 
then [0.2] in far too many developing countries [0.8] what you got [0.6] was 
negative protection [1.1] and whereas [0.2] that would be [0.6] a market price 
[1.2] delivering [0.4] an output of [0.6] O-A [1.7] what you got in many 
countries [0.4] was prices [0.4] artificially depressed [0.2] by government 
policy [1.8] to a point here [3.6] with a corresponding reduction [0.2] in 
output [2.6] now you look at that and you say well what government in their 
right mind [0.6] would reduce [0.3] agricultural prices [0.4] and thereby 
suppress production [0.4] that can't be a good thing [1.2] but think about it 
[0.3] any country that was worried for example [0.3] about the price of urban 
food [0.7] you might try and control the froo-, the food price [0.5] on behalf 
of urban workers [0.5] in the desire to keep down wages [0.4] for your 
industrialization process [1.2] you might be taxing your export [0.2] crops 
very heavily [0.4] because that's 
the only government revenue you've got in the country [0.5] is is is to tax the 
[0.3] the agricultural export [0.4] taxing your exports effectively brings down 
the price [2.4] now those things were fairly obvious to most governments [0.2] 
what was less obvious to most governments [0.4] was the impact of an overvalued 
exchange rate [0.8] and if you overvalue your exchange rate [0.4] you hurt your 
agriculture in two directions [0.5] first any export crops you've got [1.4] 
earn less [0.6] than they would [0.2] if you've got [0.2] a free market 
exchange rate [0.4] you end up with less local currency per dollar earned in 
your hand [0.4] than you otherwise would [0.4] and you put downward pressure [0.
5] on the prices of any export crops [0.9] but you also put downward pressure 
[0.3] on any food crops any domestic crops [0.9] why [1.2] because imports get 
cheap [0.3] under an overvalued exchange rate [1.2] a lot er a little of the 
local currency will buy plenty of dollars [0.3] and it makes imported food 
cheap [0.3] and brings down your [0.2] overall price level [1.3] so indirectly 
through things like the exchange rate [0.4] you're bringing 
down [0.2] the price [0.8] and because you're bringing down the price [0.2] 
you're taking away the incentive from agriculture [1.6] faced by this analysis 
[0.4] the World Bank spent most of the nineteen-eighties [0.4] telling people 
looking at agriculture policy [0.4] get the negative protection [0.2] out of 
agriculture [0.8] and you will deliver a major incentive [0.7] to producers [0.
6] which will [0.6] largely correct problems you've got of insufficient food 
production [0.3] insufficient export crop production [0.3] whatever [1.2] so 
that was the particular message above all else that was given [0.3] for the 
agriculture sector [0.5] get negative protection out there it's a market based 
measure [0.4] about [0.2] the peculiarly [cough] [0.3] effects [0.3] or price 
discrimination [0.8] upon agriculture [11.2] okay [3.1] nineteen-eighties [1.1] 
er [2.5] what have we got [0.2] during the [0.3] nineteen-nineties [2.0] well 
ideas haven't changed a lot [0.5] between the eighties and the nineties and [0.
4] current day [0.8] er [0.2] the Washington Consensus [0.7] is still largely 
intact [2.1] during the nineteen-nineties [0.6] 
changing ideas about development [0.6] were much influenced by [2.2] an 
examination of the historical record [0.5] for one part for the world [1.7] and 
that is during the nineties people looked to what had happened in the 
developing world over the previous decade [0.6] and said [0.4] structural 
adjustment in the nineteen-eighties were a lot of misery in Africa [1.1] 
Africa's per caput [0.5] G-D-P earnings [0.4] went down [0.3] for most 
countries during the nineteen- [0.4] eighties [0.4] quite badly down for some 
some groups of people [0.5] Latin America stood still [0.3] or went backwards 
[0.9] but one part of the world saw [0.3] incredibly fast growth rates [0.3] 
and as we mentioned last week [1.3] that was East Asia [1.5] er south China [0.
2] Hong Kong Singapore Korea [0.2] but increasingly Indonesia Thailand Malaysia 
[0.3] all of these countries [0.2] grew very quickly indeed [1.4] and they grew 
they were the fastest growing part of the world economy [0.7] the British 
economy the American economy the German economy [0.4] didn't do that well in 
the nineteen-eighties [0.3] it was hesitate hesitant growth [0.6] East Asia on 
the other hand [0.3] was growing very quickly indeed [1.0] and that led people 
in the in the nineteen-nineties to sort of say well [0.3] what did these guys 
get so very right [0.8] what was what was the wonder element [0.4] that allowed 
these countries to grow very quickly [0.4] when other parts weren't [1.3] and a 
lot of time was spent in the nineteen-nineties trying to interpret the so-
called East Asian miracle [1.8] there are big disputes about the extent to 
which the East Asian miracle [0.3] shows that market liberaliza-, liberalism 
works [0.8] particularly when you realize that one of these countries is China 
[0.5] with a highly controlled economy indeed [0.7] the Japanese have never run 
[0.3] a purely free market economy [0.5] neither have the Koreans [0.7] on the 
other hand [0.5] Singapore [0.3] Hong Kong [0.6] were swashbuckling free market 
capitalism [0.9] so there were debates about the extent to which state 
intervention in the free market [0.4] pushed forward the East Asian miracle [1.
2] but nobody disagreed about one element of the East Asian miracle [0.5] and 
that was investment in 
people [1.2] country after country in East Asia it was argued [0.4] had 
undertaken [0.3] reasonably equitable investments in health care [0.5] 
education [0.3] and training [0.5] of people in those countries [0.9] and it 
was argued that this was a major stimulus to industrialization in this area [0.
4] that you could always hire [0.5] a lot of people at low labour rates [0.3] 
but who were in reasonably good health [0.6] who were literate and had 
reasonable skills [0.6] and that that was a difference between East Asia for 
example [0.3] and Africa and Latin America [0.9] or a difference for that 
matter between East Asia [0.2] and South Asia [1.9] India for example has 
concentrated its educational spending [0.3] on elite facilities [0.6] with the 
result that India has more PhDs than any country on Earth [0.4] far more than 
the Chinese [0.9] er [0.9] it was argued in China on the other hand [0.4] the 
distribution of education had been much broader with the result that this large 
[0.7] set of people who'd been in the Chinese countryside with relatively low 
marginal products [0.8] as i said last week 
this is the Lewis argument [0.4] had moved into [0.8] export processing zones 
and con-, and and [0.6] and er [1.8] manufacturing industry in Shanghai Canton 
Fujian the coastal area of South China [0.9] and were highly employable [1.0] 
er in ways that you couldn't do quite the same [0.4] out of rural India [1.5] 
so there was a lot of interest there in in in human capital [0.4] and the 
advantages of investing in people [9.2] now there's plenty more we can say 
about the [0.3] ni-, the nineties [0.7] and there are parts of this story which 
we still need to revisit [0.7] and then there's all of the rest of the stuff 
that i hoped we might have had a a go at today [0.9] er [0.5] what we're going 
to have to do is er put the whole sequence of these talks backwards once [0.8] 
next week we'll be continuing with this because we'll need at least another 
session to get through it [0.7] er before we get to the [0.5] land talks [2.0] 
so next week we'll carry on with this one