Developing Countries

For the vast majority of human existence, international trade was fuelled by renewable energy. Trade winds were used to cruelly bring enslaved labour from Africa to grow cane, limes, bananas, and cocoa in the Caribbean and powered the windmills that turned the cane into molasses and sugar.

Ruling Capital: Emerging Markets and the Reregulation of Cross-Border Finance by Kevin P Gallagher; Cornell University, 2015; pp xi +233, $29.95.

Developing-country defaults on their external debt repayments are a function of both their 'willingness to pay' as well as their 'ability to pay'. While the ability to repay can be captured by economic factors like the growth rate of the economy and external shocks, willingness to repay is more difficult to measure. In this paper, it is emphasised that political factors are important determinants of the willingness to repay and should be treated as an explanatory variable explicitly. A multivariate probit model is estimated that tests the hypothesis that the probability of default is inversely related to the level of democracy in the debtor country. It is shown that the evidence doesn't support the hypothesis.

Will the IMF's new guidelines on conditionality, the outcome of a review initiated some two years back in response to criticism of the Fund's handling of the adjustment problems of crisis-hit countries in Asia, make a difference to countries' adjustment efforts in the future? How far are the new guidelines different from the 1979 ones?

Privatisation is very much the flavour of the day. Many enthusiasts of privatisation seem to believe that a shift from public to private ownership will automatically make for improved performance. Yet there is little in economic theory or the empirical evidence on privatisation that lends support to such a simplistic belief. The evidence on the impact of privatisation is by no means unmixed. In particular, in less developed countries, where law enforcement and corporate governance tend to be weak, private ownership does not necessarily make for better performance. It is possible, based on the research on privatisation, to draw some tentative conclusions for privatisation policy in a context such as ours.