18.104.22.168 Public Administration
• Honesty and competence. Corruption in government undermines economic progress (Sachs, 1997). Like sin, corruption cannot be eliminated but it can be diminished.
• Security, stability, order. The rule of law and order needs a judicial system to administer justice and interpret laws. Rules of the "game" are established by government so as to create an environment where business contracts can be made and efficiently carried out.
• Property rights. To encourage investment and improvements in property, investors must be able to "reap what is sown." Property rights allow property to be used as collateral for loans. A favorable investment climate avoids capital flight and attracts foreign direct investment.
• Competition. Governments need to avoid giving protection to firms exercising monopoly power. Open trade is often the most effective option to countervail the economic power of domestic firms. Parastatals (state-owned enterprises) need to be avoided where possible.
• Fiscal responsibility. Countries need to avoid operating account deficits. A deficit is justified in the capital account only for investments with the strong chance of a return that will more than cover the principal and interest.
• Monetary restraint. A rough rule of thumb is to increase money supply slightly in excess of the real gross domestic product (GDP) growth rate, with appropriate adjustments for foreign exchange and direct investment flows. A central bank at "arm's length" from political pressure, and with the sole objective of price stability is useful. However, because wages are inflexible, inflation of up to 3% annually can be tolerated and may even be helpful.
• Appropriate taxation. One of the most difficult challenges in any developing country is to collect taxes to pay for even minimal public services. Successful governments tax "bads" (consumption, tobacco, alcohol, emissions), not "goods" (investment, exports). They charge user fees to cover costs for electricity, irrigation water, and the like provided by the public sector. Sales, value-added, and property taxes distort the economy less than taxes on industry profits and exports.
22.214.171.124 Liberal Trade Policy
• Properly valued, preferably a market determined, foreign exchange rate.
• Open economy to trade and investment.
126.96.36.199 Infrastructure Investment
• All-weather roads for food security and for commercial activity consistent with comparative advantage.
• Bridges, seaports, airports, electricity, and the like.
188.8.131.52 Public Services
• Agricultural research offers unusually high returns on public and private investment. More will be said of this later.
• Human resource investments are essential for broad-based development for women and men, including minorities. Because rates of return on elementary schooling investment are especially high, universal elementary schooling is a priority for food security and development.
• Sanitation for food security requires attention to water and waste. Parasites and bacteria interfere with digestion of food and sap vitality.
• Health clinics staffed by volunteers and paraprofessionals can provide cost-effective services such as immunization, vitamin supplements, and can educate for HIV/AIDS prevention, family planning, and pre- and post-natal care education.
• For development to be sustainable, attention must be given to the environment. This is especially urgent where poverty attends high population growth and density. Agriculture can benefit from integrated crop management (forage legume rotations, alley cropping, etc.), conservation tillage (no tillage, ridge till, mulch till), integrated pest management (economic threshold intervention, biological pest controls, pest-resistant crops and livestock, best management practices), integrated crop-livestock systems including forage legumes, and integrated forest management (plantation forests, ecotourism, etc.).
• The public safety net is for those unable to depend on themselves, the market, family, or other private sources. Landless peasants, smallholders, and the urban poor are especially vulnerable. Options include targeted food assistance and food for work. A country following the standard model will have the economic means to leave no person hungry. Transfers to serve humanitarian needs are as critical as investment in elementary education serving both economic equity and efficiency. Beyond that, the height and breadth of the safety net is a political decision that is not dictated by the standard model. Countries choosing high social safety nets ("welfare states") tend to have slow economic growth, and lack "creative economic destruction" that prunes economic deadweight.
• A free press, independent judiciary, and democracy can be very helpful. The free press and independent judiciary along with other checks and balances in government help to curb corruption. Democracy contributes to stability by diminishing problems of succession in government.
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