The New Development Economics: After the Washington Consensus (review)

This book is the final part of a trilogy that looks at the emergence and evolution of development economics — a discipline taken by many to constitute a separate branch of economics due to its focus on issues specific to industrializing countries. While the previous volumes look at the forerunners of the discipline on one hand and its pioneers on the other, this book looks at the recovery and current status of development economics following two decades of sustained criticism from mainstream economists.

Following its consolidation in the post-World War II years, during the late 1970s and throughout the 1980s, development economics was strongly attacked by orthodox economists advocating an adherence to market forces — as opposed to state initiative — as the most effective way to foster economic growth. International financial institutions such as the World Bank and International Monetary Fund (IMF) were important players in shaping the debate, seeking to promote market-based solutions for a wide array of development issues — the so-called "Washington Consensus".

However, over the course of the subsequent decade, mainstream economics became more receptive to heterodox arguments. The unexpectedly negative effects of liberalization and privatization in Russia, the high social cost of market reforms in Latin America, and the East Asian financial crisis highlighted the importance of non-market factors such as the quality of public institutions and historical and cultural factors in shaping market outcomes.

Now for many orthodox economists, the market has lost its unassailable superiority vis-à-vis the state — paving the way for a more nuanced treatment of both the market and the state. Leading mainstream economists have begun to incorporate a range of unorthodox elements such as geography, culture, and distance in their modelling in an attempt to understand, and compensate for, a variety of market failures — marking the beginning of a new period for development economics.

The book, then, brings together a wide collection of essays on many of the discipline's key debates. While not for the faint-hearted, as it is densely written and quite technical, the book contains several excellent essays.

The first two chapters are useful as they place debates within their historic context, namely where development economics is perceived to be and how this relates to positions and policies advocated by the IMF, World Bank, and leading U.S.-based universities. The essays by Rose, Harriss, Byres, and Khan are succinct and powerful, and Goodacre's chapter is a much-needed treatment of the relationship between mainstream economics and its more academic and theoretical sibling, economic geography.

In collating these pieces, the book provides a very good snapshot of where the discipline of development economics is at the moment and tries to pinpoint the main controversies it faces. However, while its historical overviews and essays are valuable, as a whole greater than its parts The New Development Economics suffers from several shortcomings.

First, the book reads a bit unevenly, ranging from very technical discussions on specific debates in mainstream economics, such as New Growth Theory, to a policy issue such as financial programming, to overviews of entire disciplines, such as Economic Geography. In the process, several vital issues are left out. For example, while readers receive an excellent review of the debates surrounding agricultural development, industrial policy receives a short-shrift in the Developmental State chapter, and the "knowledge economy" is left untreated. Similarly, the issues surrounding state "eclipse" in the face of globalization or environmental degradation are conspicuous by their absence. Thus, while the book promises to be avant-garde, its choice of topics is a little outdated.

On another level, the book is unclear about its purpose. Specifically, it is not evident whether it limits itself to analysing some of the main challenges facing development economics and, in particular, its newest manifestation, or whether it attempts to propose a new paradigm altogether.

This dilemma is made manifest in the book's selection of authors. While all are committed...