Hirschman’s view of development, or the art of trespassing and self-subversion

This article analyses the work of Albert Hirschman from the standpoint of two basic concepts: trespassing and self-subversion. Hirschman turned these exercises into an art, pleading his case in a manner which combines curiosity and intellectual humility. In a world accustomed to think and think of itself through totalizing models, in a continent where so many ideological models which sought to open up (or rather, force open) the realities of countries were put together and taken apart, Hirschman’s works and intellectual attitude represent a healthy and beneficial invitation to take a different view. This is not his only merit, however. From Chile to Brazil, from Mexico to Argentina, he passed on his passion for the possible to more than a few admirers. In the last few years, a great many ministers, academics and leading members of international organizations have repeatedly praised his contributions. Likewise, many of the concepts developed by Hirschman –his “exit, voice and loyalty” triptych, the notion of the “tunnel effect”– and above all his propensity to think in terms of the possible and his efforts to trespass over and subvert theories (including his own), paradigms and models, and all the cubist and minimalist mental exercises that are constantly created and recreated, are healthy sources of inspiration and interpretation for rethinking the never-ending quest for development. Lastly, notions like community participation or social capital, which are now major subjects of discussion, can also be better appreciated, subverted and self-subverted in the light of Hirschman’s work.Trespassing;self-subversion;Chile;Mexico;Brazil;Argentina

Banking on Democracy: The Political Economy of International Private Bank Lending in Emerging Markets

Clearly, a new agenda is emerging for private international banks. Political issues such as human rights seem to be a current concern. But what about democracy? What about political regimes? Are they taken into account by private banks when they decide whether to invest in a country? Put another way, do private banks have democratic political preferences? In this article, we focus on cross-border lending from international bank(er)s. The questions asked are as follows. Do bank(er)s react positively (that is by increasing their lending) when an emerging democracy appears? Do we witness increased bank lending after democratic transitions? Lastly, is there any relation between democratic consolidation and bank lending?Banks;Capital flows;Democracy;Emerging markets

Crushed Aid: Fragmentation in Sectoral Aid

This paper measures and compares fragmentation in aid sectors. Past studies focused on aggregate country data but a sector analysis provides a better picture of fragmentation. We start by counting the number of aid projects in the developing world and find that, in 2007, more than 90 000 projects were running simultaneously. Project proliferation is on a steep upward trend and will certainly be reinforced by the emergence of new donors. Developing countries with the largest numbers of aid projects have more than 2 000 in a single year. In parallel to this boom of aid projects, there has been a major shift towards social sectors and, as a consequence, these are the most fragmented. We quantify fragmentation in each aid sector for donors and recipients and identify which exhibit the highest fragmentation. While fragmentation is usually seen as an issue when it is excessive, we also show that some countries suffer from too little fragmentation. An original contribution of this paper is to develop a monopoly index that identifies countries where a donor enjoys monopoly power. Finally, we characterise countries with high fragmentation levels. Countries that are poor, democratic and have a large population get more fragmented aid. However, this is only because poor and democratic countries attract more donors. Once we control for the number of donors in a country-sector, democratic countries do not appear different from non-democratic ones in any sector and poor countries actually have a slightly less fragmented aid allocation.Aid; Fragmentation

Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies

This article focuses on the interactions between politics and financial markets in emerging economies. More precisely, it examines how Wall Street reacts to major Latin American political events. The case study focuses on the 2002 Brazilian presidential elections. The first section of the article provides a critical review of the available literature. The second section presents an empirical study of Wall Street analysts’ perceptions of the 2002 presidential elections in Brazil, based on reports produced by leading Wall Street investment firms. The final section uses polling and financial data from previous Brazilian elections to place the events of 2002 in comparative historical perspective.Emerging economies;Financial markets;International political economy;Latin America

Herding in Aid Allocation

Although there exists a vast literature on aid efficiency (the effect of aid on GDP), and that aid allocation determinants have been estimated, little is known about the minute details of aid allocation. This article investigates empirically a claim repeatedly made in the past that aid donors herd. Building upon a methodology applied to financial markets, this article finds that aid donors herd similarly to portfolio funds on financial markets. It also estimates the causes of herding and finds that political transitions towards more autocratic regimes repel donors, but that transitions towards democracy have no effect. Finally, identified causes of herding explain little of its overall level, suggesting strategic motives play an important role.aid; herding; volatility; fragmentation

La emergencia de las multilatinas

Incluye BibliografíaEl mundo empresarial cambió notablemente en los últimosdiez años. Han surgido nuevas empresas multinacionales en países demercados emergentes como Brasil, India, China, Sudáfrica y México,los que no solo son grandes receptores de capital extranjero sino queahora también invierten fuertemente en el exterior. En la notable historiade las nuevas multinacionales destaca la aparición de empresas quellamaremos multinacionales latinas (o multilatinas);, en particular deMéxico y Brasil, que tuvieron como precedente aquellas de España enlos años 1990. Las multilatinas surgieron merced a los clásicos factoresde expulsión y atracción (push and pull);. Pero en la última décadafueron impulsadas por la baja del costo del capital, que está activandoel salto desde las ventas en el exterior a las adquisiciones en el exterior,fenómeno que es materia del presente artículo

Benefiting the resource rich: how can international development policy help tame the resource curse?

While natural resource revenues ought to enable development, past experiences with the ‘Paradox of Plenty’ have shown that mineral and oil wealth often represents a curse rather than a blessing, inducing slower growth and higher levels of poverty. Many resource rich countries have high poverty rates and are among recipients of international aid. This paper looks at how lessons from successful resource rich countries can provide lessons for resource management. It also considers how international donors can act to facilitate such processes. Norway and Chile are small open economies with high concentration in petroleum and copper, respectively. Yet the interaction between good institutions and fiscal policy, facilitated by the use of resource funds, has allowed both countries to largely escape the resource curse. Both countries have prioritised institutional development before engaging in heavy resource extraction. Maintaining a broad tax base, developing linkages to the rest of the economy, investing in human capital, and engaging in political consensus-building have helped retain incentives that limit rent-seeking. Many countries facing high inflows of natural resource rents also have weak institutions. For these countries, strengthening institutions through developing the skill and efficiency of civil servants and committing to transparency and accountability can help change the pay-offs from engaging in corrupt practices or rent-seeking. Yet in many cases, large-scale institution building might be beyond these countries’ immediate capacity, leaving an important opportunity for international donors. Aid, in the traditional sense, is not the solution to the resource curse. Once the natural resource revenues have started flowing, resource rich countries are not primarily in need of further financial inflows. Fostering long-term development here is rather a question of technical support and capacity building, support for international anti-corruption mechanisms and imposing transparency and legal requirements on national companies operating in these countries

The usual suspects: Investment Banks’ Recommendations and Emerging Markets

The paper addresses two core questions: do recommendations have an impact on the allocation of flows in the asset class? Above all, are we facing in this asset class major problems of asymmetries of information? In order to answer these questions, we used untapped and rich datasets. We constructed a unique database covering the period 1997-2006 for all the bond recommendations by the major Wall Street and City investment banks that dominate the emerging bond markets. The most important and relevant results are as follows. First, 90% of the underwriters recommend, at the announcement date of the issue, to buy or to maintain in their portfolio the bonds issued by the countries where they are acting as lead managers. Second, there is an additional bias, investment banks’ recommendations depend also on the relative size of the secondary bond market. In fact, there is a phenomenon that we call “too big to underwrite” meaning that investment banks do not send negative signals to investors of countries that, given their size, are considered important for their business. Finally, by using a simple cross-section analysis, we found that the impact of investment banks’ recommendations on capital flows is more significant and more predictable than some macroeconomic variables such as interest rates, economic growth and inflation

Vive la France ! French multinationals and human rights

This paper focuses on the analysis of corporate responsibility and also examines the question of international diffusion of norms in the context of globalization. It measures the influence of nonstate actors on foreign societies and states. It also draws on firsthand economic and financial empirical data, and then analyzes the reasons why French firms haveadopted this discourse and integrated many practices prevalent in the US private sector. It shows that the globalization of production and capital has created in France a favorable context for the reinterpretation of corporate social responsibility, despite France's political and historical specificity with respect to human rights. As French companies have become increasingly transnational in their operations and reliant on nonresident capital, they have been more willing to take norms of corporate social responsibility into account. This economic context has had three major effects. First, it has influenced the construction of a domestic public space and new social networks—a market of virtue—based on cooperation among nongovernmental organizations, norms activists and businesses. Second, it has influenced some firms in the definition of their international strategy. Finally, it has compelled the French state to react in economic regulatory terms. Nonstate actors are thus constructing new norms, shaping the economic public debate, compelling states to react, and setting new public policies