Dead Policy Walking

Development Policy21 Jun 2010David Sogge

David Sogge responds to the background article “Getting the basics right” in the context of the online debate about Dutch development cooperation triggered by the report Less Pretension, More Ambition by the Dutch Scientific Council for Government Policy (WRR).

David Sogge is the Board Secretary of the Transnational Institute in Amsterdam

Getting basics right, no doubt about it, is a good thing to do. But how? One way, surely, is to abandon precepts and formulas that are damaging. The economic orthodoxies of the Washington Consensus, the Big Ideas that the West has used to manage the Rest for the past three decades, are clearly damaging. (Damaging that is, for the Rest. For some in the West, it has paid high dividends, literally.) The WRR endorses the view that, in terms of promoting pro-poor growth, those economic orthodoxies are bad ideas. Yet it wishes us to believe they are “dead” and “buried”. Is that the case? The evidence suggests otherwise, as Geske Dijkstra points out, and underscores with a reference to important recent research, in her comment on the WRR report. Today, from the Bretton Woods Project, a seasoned IFI-watchdog, we have yet more contrary research findings. It seems many hundreds of millions of people continue to face Dead Policy Walking:

UNICEF in April posted a desk review of the latest IMF country reports from 86 low- and middle-income members, which found that “in two thirds of the countries reviewed, the IMF has advised to contract total public expenditure in 2010 and further fiscal adjustment in 2011 for all but a few countries.” The UNICEF review argued against the withdrawal from fiscal stimulus when “social impacts of the economic slowdown are still felt in terms of rising poverty levels, unemployment, mortality rates and hunger.” Although the IMF has advised governments to prioritise poverty reduction and social policies when cutting public spending, the review questioned how “this much needed spending [can] be adequately addressed in parallel to fiscal adjustment.” After complaints by the IMF, the UNICEF paper has since been retracted.

But evidence that the dead have risen is now apparent not only in low- and middle-income countries. Consider the austerity policies now being imposed on Greece. And on Spain, Portugal and soon on the UK, Ireland and … The Netherlands. In a somber opinion article entitled ‘That 30s Feeling’ the Nobel laureate economist Paul Krugman wrote last week in the New York Times that these pro-cyclical austerity measures are likely to damage Western economies, thereby posing risks for their political systems too. Indeed in the current advance of market fundamentalism in the US and Europe he sees “parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.”

Bad policies dead and buried? To suggest such a thing, and to imply that they no longer block the high road to policy coherence, is badly misleading. Perhaps the resurgence of orthodoxies here on home ground may liberate us from such dangerous illusions.