Ahmed Moustafa: Limited Access Orders in the Developing World: A New Approach to the Problems of Development

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شكرا مرة أخرى د عمرو الديب على النشر لتلخيصي وتحليلي لهذا التقرير المهم الصادر عن البنك الدولي.

 
Ahmed Moustafa: Limited Access Orders in the Developing World: A New Approach to the Problems of Development
Authored by:
Douglass North, John Joseph Wallis
Steven Webb and Barry Weingast
The World Bank Independent Evaluation Group
Country Relations Division
September 2007 – “Whereas WB policies unfortunately have not been changed to date.”
 
Really it was a pleasure to present and criticize the report of the subject matter here-above, which issued by World Bank on 2007, last Tuesday before Dr. Yakovlev Alexandrovich, our Russia Business course professor and the head of Institute for Industrial and Market Studies at Higher School of Economics.
Report’s Intro Brief:
 
Development policies in developing states relying on developed world, however social dynamics are different in those developed from the developing states. As the development practitioners face a mismatch amid the problems addressed and available tools as it is inappropriate as well for MDGs in developing countries concerning issues, for example, the transparency. This dilemma requires full understanding of how such societies actually behave and the difference between developing and developed countries. Such important issue which highlighted by World Bank necessitated having a broader dialogue with both academics and political institutions in order to restructure developing societies economics and politics in order to settle violence and disorder globally.
Whereas alliance of strong individuals and elites (interest groups) with the authorities in any country, avoid them losing (rents and privileges) obtained from their society, because if they conflict together, all of them will lose it. The direct correlation between rents and (Order Stability) enables to integrate a new economic and political theory.
 
Whereas humanity created (practically) two world social ranks: 1- Limited Access Order (LAO) 2- Open Access Order (OAO).
 
Difference between LAO & OAO:
In brief LAO is related to developing societies where elites monopoly exists, as there is no fair competition, one man show or one single actor countries, whereas elites and interest groups are benefited from the political regime, so they keep its economic support (rentals) for it, in order to achieve two goals: avoiding violence and conflict in society that may harm regime and elites altogether, as well as keep the social stability in such societies.
However OAO is related to the developed states whereas the fair play exists, the full competition available in all society fields (Political, Economic and Social). Whereas states can progress as well as regress and others can stagnate for decades. Bolivia, Venezuela and Russia regressed as long as LAOs nationalize, control and institutions out of law, Rwanda, Somalia and Yugoslavia regressed because of violence. Germany regressed during the Nazi period from a matured OAO to LAO.
Here the doorstep conditions and transitions movement from a LAO to OAO occurs via the transition process in such societies, which necessitates three elements:
1- The rule of law for elites (Property Rights and Contract Enforcement)
2- Support for perpetually living elites organizations.
3- Centralized & consolidated control of violence only via (Military & Police) according and adhered to their role provided in internal laws and constitutions.
 
Why the behavior of the institutions relies on the social order which they are embedded?
 
Here the authors deal with and compare the matter of customary and traditions of both LAOs and OAOs. Whereas the two social orders maintain themselves in different way. LAOs try to keep rents creation, selective and suppress competitions in all social fields as mentioned here-above, however OAOs support competitions, strong and independent institutions. As per institutions they are in different nature in both of LAOs and OAOs regimes, even if LAOs institutions are desirous to carry out reforms. As the transition from personal to impersonal exchange is the main difference between the two regimes.
 
Examples: Officials and Judges incentives/corruption (in LAOs because of the direct personal exchange), as well as the problem of subsidies magnetic cards “Egypt & India”, in addition to institutional mutual respect between each other to keep the steering of the order lest losing incentives, the failure of dependent central banks to stop the matter of inflation and vice versa for OAOs countries.
 
Why forces operating in OAOs may not produces transitions in LAOs?
Here the authors also focused on four global dimensions:
1- The availability of institutional reforms in OAOs.
2- World Political Order (reshaping the world powers especially after great wars and conflicts)
3- Technology (in terms of production and information).
4- Multinational Firms.
 
Why approaches to development often fail and considered as an alternative approach?
1- All the proposed mechanisms failed, because it was mainly based on market economy, as well as such reforms contradicts with the interests of society elites, oligarchs and corrupt governments, of course it fails, also proposed reforms disregarded the redistribution of problem of the potential violence. Therefore societies may prefer economic exploitations more than chaos, anarchy and violence. Further, if reforms adopted and it is contradicted with elites’ interests, they may made it in a good match with the customary and the traditions of LAOs in some countries, because they are powerful and professional in that respect.
2- Two problems face the developing states:
A- Movement alongside the spectrum of LAOs (fragile, basic and mature phases) as well as the creation of doorstep conditions.
Here we talk about control violence, establishing a legal framework of NGOs and keeping the persistence of private organizations (here we talk about moving from fragile phase to a basic one), however LAOs mature status is supposed to prepare itself to Doorstep phase.
Here we are not addressing poverty in LAOs mature phase country, in this country elite should have a greater chance as it helps in reducing poverty and as it makes the country more resilient in facing crises.
B- How to move from LAOs to OAOs.
Here the authors focus on the establishing of proper legal systems to protect property rights and contract enforcement and regulating certain types of externalities like (Tort), as well as establishing courts and appointing justices to guarantee its necessary independence to establish impartial delivery of justice.
 
Important notes on this report:-
• One of the most important observations taken on this report – any change, transformation or reform in any country of “LAO” must always happen domestically, and in all political, economic and social aspects, between the stakeholders in one country of the ruling regime, its institutions, the elite and of course the people – as for the idea of #Chock_Therapy, unfortunately, it brought great negatives to the countries that tried it both #Russia itself, as well as on some respects in #Egypt, because the poor classes are often harmed, and a large part of the middle class, whose income barely enough to meet their basic needs and kindly be reminded that people stood by their regimes to avoid for chaos, this is perhaps what was mentioned in the above report.
 
• Unfortunately, the report forgets that the #United_States and the #West in general support many countries from LAOs, which are accused of backwardness and repression, not for anything but the interests of #America and the West with these countries, or the interests of their Offshore companies, which may help corruption or the suppress of the regime, so that it remains at the extreme profitability, and we do not forget that the #World_Bank itself gave credit quality certificates to some of these countries of LAOs despite the poor economic performance in those countries and the spread of poverty in them.
 
• It is necessary to review the World Bank, if it is already effective and plays a real role, regarding the #tyranny of some countries and the spread of a scenario (either the current regime or #chaos) and trying to reach compromises between peoples and their regimes and this is very unlikely – because the majority of the countries of the entire world, including the West itself currently suffers from tyranny, as well as the world public opinion suffers from the chaos of the absence of wise opinion, the absence of values and ethics, as well as the absence of applying the rules of international law and international legitimacy – as if “the carpenter’s door itself is disassembled.”
 
• One of the most dangerous observations is the World Bank’s outlook on exit from LAO, and then its failure to anticipate the #Great_Depression that occurred in 2008 for two reasons: first, the unjustified #wars on #terrorism in the world starting from the war on #Iraq and #Afghanistan in 2001 – second, the manipulation of interest rates (#LIBOR) through British and American banking system, which created collapses in the system of banks linked to the #Federal_Reserve in Europe, Asia and Russia and the most egregious example of this dire financial situation was #Iceland. And here I contradicted with the report in one of the points mentioned here-above that one of the most important foundations of state sovereignty is the subordination of their central banks to the ruling regime, not only the control of a state of inflation, as the report noted especially in the countries of the West, led by America. This is exactly what #China has done, so that the Chinese economy has become the largest economic power in the world for the dependence of the central bank on the regime and the strict monetary policy thereof, as well as not being linked to the Federal Reserve.
 
• The American and British systems also failed to interrogate any of British or American banking groups involved in the issue of fraud or bankruptcy and we have certain cases (Lehman Brothers – Citigroup – Barclays Bank) – so where is the #transparency they are assuming in the western banking system, and which OAO countries demanded LAO countries.
 
Ahmed Moustafa
Director of Asia Center for Studies and Translation
Postgraduate Student at Russian Studies Department, HSE Moscow
Member of Council for Developing Social Science Research in Africa and Group Strategic Vision Russia and Islamic World

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