ISAS Working Papers

It is undeniable that in the last three decades, cataclysmic changes have been underway in the functioning and organization of the world economy. Following Went (2002-03), three changes may be singled out for special attention: (i) A phenomenal increase in the number of global markets for products and services (especially financial services). (ii) A growing role for "footloose"multinationals (a term owing to Reich (1992)) in the global economy. (iii) An enhanced role for supranational organizations (G8, IMF, BIS, WTO, OECD etc.) and regional associations (EU, NAFTA, ASEAN, etc.), with a commensurate emasculation of the role of nation states. While these developments are well recognized, a related phenomenon seems to have attracted relatively little attention viz. the unchallenged sway that the doctrines of new-classical economics1 and monetarism have acquired over the policy advice emanating from academic institutions, international "think tanks" and multilateral bodies. This mould of thinking translates into policy recipes such as export-oriented growth, privatization, deregulation etc. and are religiously followed by many emerging market economies (EMEs) and least developed counties (LDCs), (under "persuasion" from international organizations) with no attention to local conditions. The actual results of such policies are often mixed, and though the success stories are inevitably highlighted, failures tend to get under-reported and attributed to faulty implementation rather than the flawed advice in the first place.