The Global Financial Crisis and Development Thinking
The global financial crisis has not only dealt a major blow to the global economy, but also shaken confidence in economic management in the developed world and the economic models that guide it. The crisis has revealed major market failures, especi...
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| Language: | English |
| Published: |
2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100629111506 http://hdl.handle.net/10986/3838 |
| Summary: | The global financial crisis has not only
dealt a major blow to the global economy, but also shaken
confidence in economic management in the developed world and
the economic models that guide it. The crisis has revealed
major market failures, especially in the housing bubble and
its transmission to the financial system, but also glaring
state failures that propagated and exacerbated the crisis.
Will the events of the past two years lead to major shifts
in thinking about development economics, and should they?
This paper assesses that question for several key domains of
development thinking, including the market-state balance,
macroeconomic management, globalization, development
financing, and public spending. On the one hand, changed
global circumstances and new awareness of vulnerability
should lead to some policy changes, as developing countries
take steps to reduce and buffer risks, including risks
generated in developed countries. At the same time, the
crisis should largely reinforce the Post-Washington
Consensus on development that has emerged over the past
decade -- a world view that aims to achieve private
sector-driven growth but sees a facilitating role for the
state, promotes engaging with the global economy in ways
that advance development, and values pragmatism,
experimentation, and evidence-based policymaking over ideology. |
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