Foreword

One should be suspect of the moniker “new” when considering issues in international affairs. Few phenomena actually prove to be “new,” and fewer still survive long enough to warrant serious analysis. It was with a degree of concern, therefore, that the editors of SAIS Review chose to focus this issue on what we have termed The New Institutionalism. As to whether the current global focus on institutions is truly new, we happily leave that to the intellectual historians. SAIS Review is content to stake its claim only on the importance of this focus and its significance in international affairs.

The lessons of nearly a decade of change in the transition economies of Central and Eastern Europe and the former Soviet Union, the short-comings of the ongoing process of Latin American political and economic development, the economic and financial crisis that has swept through Asia - all underscore why, despite the best efforts of central bankers and politicians, there remains at least one missing piece of the development puzzle. The much heralded “Washington Consensus” of the early 1990s looked at sustainable growth in starkly economic terms: macroeconomic adjustment, open-market discipline for interest and exchange rates, and firm control of monetary policy. While these elements have certainly proved important, recent events appear to highlight a key missing ingredient: sound institutions. Economic, political, legal, and financial institutions allow economies and societies to function and adjust not only to economic crises, but to political crises as well. Although short-term success may be achieved without - or even at the expense of - these institutions, long-term stability and sustainable growth depends vitally on them.

Three articles in this issue focus specifically on The New Institutionalism. David Williams places The New Institutionalism in the broader historical context of economic development, noting both the potential rewards of the approach and the significant challenges it poses for policy-makers and development agencies. The latter, in particular the International Monetary Fund, have been heavily involved in the process of reforming financial institutions in Asia. Gillian Garcia and Carl-Johan Lindgren, both banking specialists with the IMF, expose a particularly unsettling result of poorly developed banking and financial institutions - cross-border financial contagion. Just as important as institutional reform, however, is the actual creation and establishment of institutions. Mitchell Orenstein argues that the economic “shock therapy” that has been prescribed and implemented from Latin America to Russia is a strategy of economic development that, by its nature, undermines institutional development. Taken as a whole, these articles capture both the impact and complexity of The New Institutionalism.

The second section of this issue addresses a nation that, for the United States, has proved to be one of the great enigmas of the post-Cold War political landscape - India. Now that the confetti has settled on its fiftieth anniversary, a more tempered analysis is in order and SAIS Review is proud to present three articles by four experts on South Asia. Stephen Cohen examines the peculiar relationship between the United States and India, arguing that an important opportunity now exists for “the world’s oldest democracy” to reexamine and strengthen its relations with “the world’s largest democracy.” In recent years economic ties have drawn the United States and India closer together. Thomas Timberg pinpoints the foundation of these ties and analyzes the impact of India’s economic liberalization since 1990 on its relations with the United States. The United States is not the only target of India’s changing focus. Ambassadors Howard and Teresita Schaffer discuss the development of India’s regional role in South Asia, and the direction that India’s policy toward its South Asian “neighbors” may take in the future.

The Letter from Brazil follows on the heels of President Clinton’s recent visit to South America’s perennial “country of the future.” Ambassador Melvyn Levitsky, considering the radical changes that have altered not only the domestic affairs of Brazil, but also the politics of regional Latin American economic integration, concludes that there exists a unique window of opportunity for the United States to develop a strong yet pragmatic partnership with Brazil.

Reflecting the complexities of the...