Practitioners in Economic Policy

Profile of Maria Ramos;

Maria Ramos and her Finance Department colleagues were charged with putting in front of South Africa’s ministers and cabinet viable options for reaching economic targets without jeopardizing financial stability. Ramos says nothing was sugar coated.

“In 1996 we had to put a fiscal policy in place that had to say to the nation that if we wanted to achieve a sustainable economic growth path of 6 percent, this was how we would get there. That was our starting point. People often think that the program of growth, employment, and redistribution was about cutting the deficit. That’s not the question we asked. We asked: ‘If we want 6 percent growth, what do we need to have in place to achieve it?’

“Very quickly, we came to the conclusion that you can’t get to 6 percent growth when you have a position of fiscal instability, because you can’t borrow your way out of a crisis. We didn’t want to go to the IMF—we didn’t think that was going to be a sustainable solution—and we were very close to that. South Africa had no reserves—in fact we had a negative reserve position because we had a net open forward position at that point of about $26 billion. We had debt-to-GDP ratios of around 50 percent, we had debt-servicing costs reaching the point where they were unsustainably high. So the fiscal position was pretty precarious: the metrics didn’t add up.

“So if you want to get growth there, you have to fix the base. And fiscal sustainability is hard to achieve and it’s easy to lose. That’s what we placed before policymakers, before the cabinet. And I have to say that, as hard as it was, when faced with that, I never came across a politician from the president down who said: ‘No, we can’t do this because it’s going to be unpopular for me.’ What’s been remarkable for me as a civil servant to see was that politicians from the top down were able to say ‘What is in the best interests of our country? It’s going to be painful, it’s going to be hard.’ Those investments continue to pay off today.”

Another Practitioner- Rakesh Mohan's Eichengreen challenge

Monetary Policy in a Globalized Economy- A Practitioner's View

Rakesh Mohan

Ashok Mody review;

In a recent comment, Barry Eichengreen (2009) says that economists are subject to fads and trends because the penalties for departing from social norms are large. Hence, even though the tools and perspectives to question the prevailing normative view are available, the incentives to adopt them are minimal...

Rakesh Mohan sees such pragmatism as the key role of a practising economist. It is in the practice of economics that the rubber, so to speak, hits the road, the theories are tested, the validity of parameters is assessed, and the cold reality of politics is faced. He speaks of the recurring conflicts in objectives faced by policymakers. In resolving these conflicts, he questions and prods, often pushing back on views widely held by academic and other practising economists. In his practice, Mohan reports, the Eichengreen challenge was always present. But because the risk of being marginalised is high, bucking the orthodoxy requires clarity of perspective and determined persistence. Both of these are amply in view in this book, which brings the speeches Mohan delivered as deputy governor of the Reserve Bank of India (RBI) from the early years of this decade, along with an extensive introduction and an “after word” that reports on the ongoing global financial and economic crisis...

For students of the Indian economy who also seek a special understanding of India’s monetary and financial policies, this book will be an invaluable guide. It presents a careful and current account of developments with an analytical eye, placed in the context and language of ongoing international policy debates. For readers seeking to assess the pulse and rhythm of India’s ginger steps from the safety of domestic finance to the choppier waters of international finance, the book offers a calibrated prognosis.

A good decision

Sanjay Pradhan to head World Bank Institute;

“Today policymakers around the world want to know what has worked elsewhere, and they want to connect with practitioners in other parts of the world. They want just-in-time global knowledge that can be customized for local conditions. The World Bank Institute can serve as a premier global platform that connects practitioners with cutting-edge development knowledge.” Mr. Pradhan said. “By supporting dynamic capacity development that inspires, informs and catalyzes innovative reforms across countries, the World Bank Institute can play a very helpful role in improving development outcomes.”