John Calverley and Richard O’Brien (editors)
Finance and International Economy
The AM EX Bank Review Prize Essays
Oxford University Press, New York, NY, USA, 1987, xiv + 189 pp, $14.95.
This volume contains the winning essays of a competition held by the AMEX Bank Review to honor the memory of the distinguished French economist and architect of international cooperation, Robert Marjolin. The essays are of high quality, policy oriented, and on a broad range of topical subjects in international economics. Several of them bear directly on the concerns of the Fund and the Bank. That by Alexis Rieffel, which won first prize, analyzes the inefficiencies associated with the use of exchange controls in semi-industrial countries and the valid political reasons why their authorities maintain these controls. He notes, “The challenge to the IMF and other ‘outsiders’ is to distinguish between countries that can survive liberalization and those that cannot—and for those that cannot, to find forms of exchange controls that maximize the political benefits while minimizing the economic costs.” On the subject of exchange rate stability, Michel Maila argues cogently that ad hoc agreements (a la Plaza or Louvre) are no substitute for the sustained discipline of international fiscal and monetary policy coordination among the major developed countries. Three of the essays are on the international debt crisis. Daniel Cohen cautions that in countries where the bulk of the debt is public, stabilization programs must safeguard the government’s ability to raise the resources needed to finance the debt. Oscar Echevarria proposes a new Debt Management Agency, and J. Adam Schwarz outlines some regulatory changes that would facilitate the greater use of debt swaps and debt-equity conversions. Hamish McRae makes a welcome contribution on the consequences of the internationalization of equity markets, and Terrence Keely’s is an elegant essay defending financial innovation on the basis of its social benefits.
Income Distribution and the Macro-economy
Cambridge University Press, New York, NY, USA, 1988, xii + 208 pp., $39.50.
Using both a time series and a simulation-type approach based on family expenditure survey data, the author analyzes the complex process through which cyclical fluctuations in factor shares and in unemployment influence the distribution of income. He also studies the impact of changes in the social welfare system on income distribution. Between 1978-79 and 1981-82, the period during which unemployment climbed steeply, he shows that the marked worsening of inequality in income distribution tended to vary inversely with the economic cycle; a finding consistent with his studies of earlier post-war periods. This conforms with the conclusion of the path-breaking 1953 study by Kuznets for the United States. An implication of the findings is that employment assistance measures need to be focused on the long-term unemployed who bear a relatively heavier burden in times of high unemployment.
Robert E. Hudec
Developing Countries in the GATT Legal System
Gower, Brookfield, VT, USA, 1988. xix + 259 pp., £12.95.
In this timely essay, Professor Hudec first traces developments through the four decades of GATT, using highlights to show the drift from a legal relationship based essentially on “parity of obligation” toward a “one-sided welfare relationship demanded by the developing countries.” The basic question for evaluation then emerges: Where do the interests of developing countries really lie? After a sprightly survey of viewpoints, Professor Hudec concludes that “developing countries should redirect their long-term objectives to the strengthening of the GATT’s MFN obligation in all respects.” Not only would that orientation nurture the interests of developing countries externally, but it would benefit their internal trade-policy decisions.
Donald L. Plucknett, Nigel J.H. Smith, J.T. Williams, and N. Murthi Anishetty
Gene Banks and the World’s Food
Princeton University Press, Lawrenceville, NJ, 1987, xv t 247 pp., $35.
Anyone who spends any time thinking about food security will find this book an interesting and valuable addition to his library. Besides the obvious interested citizen, readers would include policymakers, researchers in the agricultural and environmental sciences, as well as social scientists concerned with farming and rural development. Moreover, the authors’ at times anecdotal, but always clear, writing make this book easy, even entertaining, to read. In addition to reviewing the scientific issues and policy implications of crop germplasm work the book discusses the role of germplasm collections in upgrading the disease and pest resistance of crops and in tailoring varieties to adverse soils and climates. Besides containing a history of germplasm preservation and exchange, the book offers numerous tables cataloging the “genes already banked,” where, and the kind of storage in which they are held. Future issues that the book points to include increased training opportunities for germplasm specialists and more duplication of collections to prevent irreparable losses.
Ibrahim F.I. Shihata
MIGA and Foreign Investment
Martinus Nijhoff Publishers, Boston, MA, USA, 1987, xvi + 540 pp., $152.
This is truly a magnum opus, a hefty, detailed, and extremely valuable insight into the formation of the Multilateral Investment Guarantee Agency, the new World Bank affiliate designed to help promote and protect foreign investments in the developing world. The author, Vice President and General Counsel of the Bank, has written extensively on MIGA and related subjects, including some articles for this journal. He was deeply involved in the process of developing the idea of MIGA, and subsequently in shepherding it through the maze of multilateral discussions and international negotiations. The volume assesses the flow of foreign investment in LDCs, explains the origins of MIGA and its guarantee and non-guarantee functions, and finally, examines the policy issues that emerge out of its creation. An important and timely addition to the relatively sparse literature on multilateral cooperation.
Joseph A. Pechman,(editor)
World Tax Reform
A Progress Report
The Brookings Institution, Washington, DC, USA, 1988, x + 249 pp., $11.95 (paper)
The tax systems of the industrial countries are changing rapidly; some are undergoing major reform. Messere, in his “Overview” reflects the popular sentiments of the eighties that tax systems are “unfair, inefficient, and unnecessarily complicated; governments have been persuaded that tax reform may be a vote winner rather than a vote loser.” By the end of the 1980s the developed countries will have lower individual and corporate income tax rates. Since their budgets leave little or no room for reducing revenues, most countries have simultaneously broadened the tax base, by eliminating or reducing deductions and extending the taxation of fringe benefits. This book reports on the proceedings of a conference held in November 1987 to evaluate tax developments in the developed world. Papers by government experts in charge of tax policy in individual countries give concise accounts of developments and of their fiscal and broader economic and social implications; the book concludes with short general chapters by Sijbren Cnossen, Richard Goode, and Kenneth Messere.
Barend A. de Vries
Remaking the World Bank
Seven Locks Press, Cabin John, MD, USA, 1987, xvi + 184 pp., $12.
In a book with such a title, one would expect a delineation of those aspects which call for “remaking.” This is hardly the case. The opening chapter even argues that all criticism of the Bank, from whatever quarter, is largely unfounded. Nevertheless, the book is comprehensive and highly readable. It covers the Bank’s record of the last four decades, including its changing emphases. The author argues that the challenges ahead will be quite different and that the Bank will be uniquely positioned to take a leadership role in dealing with the problem of external debt. The book covers many other issues of particular interest including cofinancing, conditionality, and the case for augmenting the Bank’s capital resources and lending capacity. Fund-Bank cooperation is taken up as well, with the author expressing the hope that intensification of staff contacts will move from avoiding conflict to what may be called “creative complementarity.”
Ann Davison, Chris Hurst, Robert Mabro
Governments and Oil Companies in the Third World
Oxford Institute for Energy Studies, Oxford, England, 1988, xvii + 272 pp., $54.95.
The oil price collapse of 1986 radically changed the economics of gas development in developing countries. Low oil prices intensify the competition between oil and gas, making expensive gas fields uneconomic to exploit. But a study by the World Bank, whose results are incorporated in this book, shows that even with low oil prices, costs are not an obstacle to gas development. For many internal markets in developing countries, gas will remain an economic source of fuel with considerable advantages—not least the foreign exchange savings that result when gas substitutes for oil consumption. More often, obstacles arise from failure to understand the peculiar requirements of gas developments, and from difficulties in the relationships between host governments and oil companies. These relationships are a particular focus of this practical and well organized book. Given the objectives of companies and of the various agencies within government, the procedures they follow, and the political and institutional constraints under which they operate, the book’s central chapters examine practical ways in which differences can be reconciled to mutual advantage. Guidelines are offered for planning and evaluating projects, framing contracts and legal agreements, and designing policies toward pricing and profit sharing. The book includes eight illuminating case studies.