An economist’s perspective is provided on the political economy of policy reform. First, the origins and analytical content of the new orthodoxy in development policy are examined. A distinction is made between macroeconomic policies aimed at economic stability, such as fiscal, monetary, and exchange rate policies, and liberalization policies aimed at structural reform and growth, such as the removal of relative-price distortions and the reduction of state intervention. The appropriate lessons to be drawn from the experience of East Asian success stories are discussed. Next, the reforms of the 1980s and 1990s are examined. The confluence of economic crisis with reform has led to the natural supposition that crisis is the instigator of reform, a hypothesis that keeps reappearing in the literature and yet is inadequately analyzed. This issue and some normative aspects related to the politics of policy reform are also discussed.
