A5.- Hidrología superficial y subterránea

The discussion on the promotion of PSD is to be seen in the context of a wider debate on the respective roles of market and state in achieving growth and development and is also related to the debate on industrial development and policy.

If markets worked perfectly, they would allocate resources optimally and there would be no need for government to intervene in economic activities. However, market failures can emerge through imperfect competition and market power, in the supply of public goods and through externalities.

In theory, these market failures can be corrected through government intervention. However, government interventions are the result of a political process, which means that government failures are also possible. Both the market and the state are needed for allocating resources and the costs of market failures must be weighed against the costs of government failures when choosing an economic system.

2.2.1. The linear-growth model and the catch-up goal

Theorists of the 1950s and 60s viewed the process of development as a series of successive stages of economic growth which all countries must pass through: (1) traditional society; (2) pre-conditions to take-off; (3) the take-off; (4) the drive to maturity; (5) the age of high mass consumption (see Todaro 2002: 112-6, for a description of the linear-stages-of-growth model).

Under this theory, economic growth was stimulated by the right mixture of saving, investment and foreign aid. Large-scale industrialisation was considered to be the means for achieving economic growth, the take-off to a mature economy. This was inspired by the Marshall Plan for economic reconstruction and the massive injection of capital investment coupled with state intervention designed to accelerate the pace of economic development, which had proven to be successful in post-war Europe.

2.2.2. Structural-change models

theories focus on the mechanisms by which underdeveloped economies transform their domestic economic structures from a traditional subsistence agriculture to a modern, more urbanised and more industrially diverse manufacturing and service economy (see Todaro 2002: 116-23, for a description of theories and patterns of structural change).

In the 1960s and 70s, the state was regarded as the prime mover of economic development. Many developing countries adopted inward-looking strategies aimed at the development of a modern industrial sector through government-led central planning, protectionism and other direct incentives, influenced by the export pessimism of the 1950s and 60s, as well as import-substitution industrialisation inspired around the argument of infant industry protection. State-owned enterprises were another important component: the structuralists believed that, given the underdeveloped capital markets in developing countries, only the state could generate and

16 manage the sizeable investments needed to industrialise. In sum, under this theory, governments of developing countries had to actively promote industrialisation through government regulation of the economy.

From the 1960s to the mid-1980s, a second strategy, which could be considered as opposed to the import-substitution industrialisation, was utilised mainly by Asian countries, the so-called export-oriented industrialisation. However, in terms of relation between the market and the state, there is no intrinsic difference between the two models (see see Hayami/Godo 2005: 268-80, for a description and an assessment of the industrialisation process in the “tiger economies”). Under the export-oriented model, industrial production is oriented towards the world market, but exports are heavily promoted by the state and target industries protected by means of tariffs, import quotas, foreign exchange controls and directed credit.

2.2.3. International-dependence models

During the 1960s, dependence models came up, being more political in orientation and criticising the linear stages and structural-change models. Underdevelopment was explained through international and domestic power relationships (of dependence and dominance), institutional and structural rigidities and the resulting dual economies and societies both within and among countries throughout the world (see Wallerstein 1974, as well as Senghaas 1974 and 1979 as key works within this line of thought). Under these theories, emphasis was placed on poverty eradication, provision of more diversified employment opportunities and reduction of income inequalities, all to be achieved within the context of a growing economy, but without giving economic growth such a central status as in the linear stages and structural-change models (see Todaro 2002: 123-7, for a contextualisation of international-dependence theories). Also under these theories, the developmental state played a key role, mainly in the areas of agricultural reform, diversification of the production structure, industrialisation and increase of the level of employment. Representatives of dependency approaches criticised that countries were either dependent on exports (as in the case of Asian countries under the export-oriented industrialisation model) or on foreign investments, mainly through TNCs (as in the case of many Latin American countries); ideas were put forward for models of autonomous industrialisation, based on an industrial production mainly oriented towards the domestic market, led by local investment and based on the utilisation of an independent technological capacity (see Kiely 1998: 64-7, for a summary of the debate on dependent and independent industrialisation strategies).

2.2.4. Structural Adjustment Programmes – The Washington Consensus

The 1980s and early 90s became a decade of neoclassical (or also referred to as neoliberal), free-market resurgence, where government interference was seen as unnecessary and even detrimental to development. Since the mid-1980s, the widespread adoption of an economic

17 development paradigm¹⁰ based on policies to strengthen market forces, increase competition and refocus the role of the state has heightened the beneficial role of free markets (see Hayami/Godo 2005: 280-95, for an assessment of structural adjustment policies). Many developing countries have undertaken structural reforms focusing on:

o fiscal discipline and concentration of public expenditure on public goods such as education, health and infrastructure;

o promotion of deregulation and competition (including trade liberalisation, openness to foreign direct investment and privatisation of state-owned enterprises); and

o improvement of the legal, judiciary and regulatory environment.

The public choice theory, or new political economy approach, also played a key role during the neoclassical resurgence, putting emphasis on the self-interested perspectives from which politicians, bureaucrats, citizens and states act, with detrimental effects on development, providing further arguments in favour of minimal state intervention.

2.2.5. Post-Washington Consensus

In the 1990s, the established neoclassical paradigm in international development assistance began to be seriously questioned and the role of the state in development was being reconsidered (failures of the structural adjustment programmes were illustrated by Easterly 2001 and Stiglitz 2002, among many others).¹¹ Apart from the recurrent crises in Latin America and East Asia, one of the main criticism stemmed from the fact that structural adjustment carried considerable social costs with it and had failed to achieve economic growth and poverty reduction in low-income countries, especially in Africa (see Hayami/Godo 2005: 282-98, for a summary of the criticism to the Washington Consensus). The general perception that the free market system is broadly and universally efficient in enhancing economic growth had waned, mainly because of the critical importance of institutions in the development process. These institutions may differ across countries and economies on different development paths (see North 1981, 1990 and Williamson, O.E. 1985, key representatives of New Institutional Economics). The role institutions play in the development process, but also in (re)distribution processes, is blanked out in the perception of the Washington Consensus (BMZ 2004: 5).

The influence of New Institutional Economics showed itself in the rejection of an inherent conflict between state and market (see Estrup 2009: 9). The new view still holds that development has to be market-based, but sees the state as the provider of an enabling environment and fundamental public goods. This new paradigm brought the mixed-economy model into the donor focus, with assigned roles for and partnership between public and private sectors, and can be considered a

“neo-structuralist” approach (see Estrup 2009: 10). A key part of the state’s role is to provide and

10The so-called “Washington Consensus“ reflected the free-market approach to development followed by multilateral organisations such as the IMF and the World Bank. The term “Washington Consensus” was coined by J. Williamson to refer to “the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries” (Williamson, J. 2000: 251).

11 The so-called “New Consensus“ or “Post-Washington Consensus” came forward at the 1998 Summit of the Americas in Santiago de Chile (Todaro 2002: 704).

18 secure the foundations for economic development by ensuring that the requirements for an effective market-based economy are met (Todaro/Smith 2002: 705). Building the state’s capacity and responsiveness through appropriate reforms, responding to and limiting government failure, and encouraging the participation and strengthening of civil society in general, strengthening the voice and power of the poor (empowerment) and maximising the initiative of aid-recipient countries (ownership) are key areas of intervention.

Another major pillar of the post-Washington Consensus is the assumption of poverty reduction as the immediate objective of (government and donor) interventions, rather than a consequence of the (trickle-down effect from) economic growth the interventions are designed to stimulate (see Hayami/Godo 2005: 295-306, for a description of the post-Washington Consensus). Two major changes in international development co-operation summarise the shift in the orientations: the PRSP¹² processes and the introduction of the Millennium Development Goals (MDGs)¹³. Nevertheless, just as the Washington Consensus could be summarised in 10 points (see, for example, Williamson, J. 2000: 252) which did not contain any direct reference to reduction of poverty or inequality as central ends in themselves related to economic development, all 8 MDGs are related to quality of life in a broad sense and do strikingly not include any target directly related to economic growth, reflecting the respective current modes in development assistance.

However, it is a broad consensus among donors and policy-makers that sustained economic growth is a necessary condition for sustained poverty reduction.