The Economics Book

328

EVEN BENEFICIAL

ECONOMIC REFORMS

CAN FAIL

RESISTING ECONOMIC CHANGE

R

eform is designed to kick-

start an economy and

benefit a whole population

through the transformation of

institutions. One might think that

reforms that benefit the economy

would be welcomed and carried

through. However, sometimes there

is substantial resistance to reform,

even from those who might

eventually benefit. In order to

“fix” an economy and return it to

growth, it is necessary to remove

the inefficiencies within the

economic system. This can be

difficult if the country is run by an

unaccountable political class for its

own benefit, as is often the case in

the developing world.

Reform and influence

Turkish economists Dani Rodrik

and Daron Acemog ̆ lu have pointed

out that when powerful groups

Reforms are proposed that would

benefit the economy.

... because they wish

to preserve their

control of resources.

Powerful elites may resist

these changes...

They distort the reforms,

which become ineffective or

achieve the opposite of

their intended aims.

Even beneficial

economic reforms

can fail.

IN CONTEXT

FOCUS

Economic policy

KEY THINKERS

Dani Rodrik (1957– )

Daron Acemog ̆lu (1967– )

BEFORE

1989 British economist

John Williamson uses the

term “Washington Consensus”

for the first time (see

box, opposite).

2000 South African economist

Nicolas van de Walle

documents the failure of

IMF-backed “structural

adjustment” reforms in Africa.

AFTER

2009 US economists Douglass

North, John Wallis, and Barry

Weingast propose a new

approach to reform based on

societies’ responses to the

problem of violence.

2011 Reform packages

in Europe following the

2008 financial crisis run

into opposition.