Economies in Development and Transition 379The sources of this success remain controversial. Some analysts, especially
neoclassical economists, point to the market-oriented policies of the NICs.
This view is represented in the article by Joseph E.Stiglitz and Lyn Squire,
two prominent officials of the World Bank (Reading 25). Others argue,
however, that unique domestic political factors were important prerequisites
for successful policies of export-led growth—in particular, weak labor
movements and leftist parties; strong, developmentally oriented bureaucracies;
and, to varying degrees, authoritarian political regimes. These conditions, it
is averred, facilitated market-oriented policies that are not feasible politically
in other circumstances. Relatedly, critics of export-led growth have suggested
that the success enjoyed by the NICs cannot be repeated. The number of
countries that can, at any moment in time, specialize profitably in labor-
intensive manufacturing is limited, and the industrial states have consistently
protected their domestic markets when threatened with “too much” competition
from the NICs, thus creating a barrier to further upward movements in the
international division of labor. As a result, they argue, the path blazed by
the NICs is no longer open to other developing countries. This critical
perspective is developed in the essay by Robin Broad, John Cavanagh, and
Walden Bello (Reading 26).
Macroeconomic policy in developing countries is central to both perspectives
on development. For proponents of export-led growth, successful stabilization
policies are a cornerstone of economic advancement; high inflation and rapidly
changing fiscal and monetary policies undermine incentives for private investment.
For skeptics, such policies are merely an artifact of underlying political factors;
the same conditions that allow export-led growth also facilitate stable
macroeconomic policies. The problems and politics of inflation and stabilization
are addressed by Stephan Haggard (Reading 28).
The former centrally planned economies—most notably the former Soviet
Union and its allies in Eastern and Central Europe, and China—are something
of a special case in the political economy of development. With the collapse of
communist rule in Eastern Europe and the former Soviet Union and with rapid
economic reforms in China and Vietnam, the former “socialist bloc” has ceased
to represent a recognizable and distinct economic order. Almost all its members
have abandoned central planning, state ownership of productive assets, and
economic insularity and have sought to join the liberal international economy;
most have moved to join the IMF and the WTO. However, these attempts have
had varying success.
Most of the former centrally planned economies have gone in one of two
directions. Some of the more advanced nations, especially in Central Europe and
the Baltic, have been very successful at turning toward the market. They are on-
track for membership in the European Union at some point in the next twenty
years and, more generally, appear to be converging on existing European economic
and political patterns. The Czech Republic and Slovenia, for example, are probably
most usefully compared to Portugal or Greece for the purposes of political economy.
They have largely eliminated the vestiges of central planning, and the problems
they face today are similar to those faced by other relatively poor industrial nations—