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ABCDE Conference Convenes Economic Heavyweights

Esoteric discussion on everything from economic geography to ethnic conflict were center stage at this year's tenth anniversary of the Annual World Bank Conference on Development Economics.

Leading a venerable gathering of speakers, Nobel Laureate James Tobin, Yale University, World Bank Chief Economist Joseph Stiglitz, and IMF Deputy Managing Director Stanley Fischer kicked off two days of provocative talks.

Paul Krugman, Massachusetts Institute of Technology, and John Luke Gallup and Jeffrey Sachs, Harvard Institute for International Development, tackled the question of geography and destiny. Krugman discussed the division of the world into industrial and non-industrial countries, the emergence of regional inequality within developing countries, and the emergence of giant urban centers. He argued that while geography may have been destiny in the past, it need not be so in the future.

Gallup and Sachs argued that geographic variables should be reincorporated into the research agenda. In particular, policymakers need to consider a wider rage of problems informed by geography, including the special problems of landlocked countries, geographic aspects of population growth, the challenges of low agricultural productivity and endemic disease in the tropics, and pressures for mass migration.

Paul Joskow, Massachusetts Institute of Technology, and Jean Jacques Laffont, Universite des Sciences Sociales, looked at different aspects of competition and regulation in developing countries. Joskow paid special attention to the problems faced by developing countries in implementing effective regulatory reform. Meanwhile, Laffont asked whether competition was indeed what countries needed most. Stimulating competition is essential, he argued, but so are strong democratic institutions that promote the welfare of consumers.

Bruce Greenwald, Columbia University, Asli Demirgüç-Kunt, World Bank, and Enrica Detragiache, IMF, gave their perspectives on financial market liberalization.Greenwald examined the implications of financial market imperfections and showed how some of these are accountable for many characteristics of the recent crises in Asia and Mexico. He argued that aggressively restrictive monetary policies were likely to do more harm than good.

Demirgüç-Kunt and Detragiache raised the question of whether liberalization contributed to the increasing frequency of banking problems. In their study of 53 industrial and developing countries, they found that financial systems are more resilient when institutions are strong. In particular, respect for the rule of law, a low level of corruption, and good contract enforcement can curb the adverse effects of liberalization on a financial system.

Ethnic diversity and conflict were themes discussed by Donald Horowitz, Duke University, and Paul Collier, University of Oxford/World Bank.

Horowitz examined 10 competing explanations of ethnic conflict, ranging from theories of primordial affiliation to evolutionary concepts of kin selection and genetic imprint. He argued for a view of ethnicity grounded in a deep sense of sociality, buttressed by the sense of similarity to others and difference from others. Horowitz analyzed ethnic political behavior in the democratic state, where he argued that maximal inclusiveness had strongly unfavorable outcomes.

Collier looked at ethnic diversity and its effect on a country's economy and risk of violent conflict. He reasoned that highly diverse societies are actually safer than homogenous ones. Income levels and political rights were also important influences on the risk of violence. In societies where ethnic composition persistently fuels conflict, the best hope for peace is creating extreme ethnic divisions.

The ABCDE conference series is a forum for discourse on policies and approaches in economic development. For more information, visit www.worldbank.org/abcde or call Maria Ionata, 202-458-0492, fax 522-2654, or e-mail mionata@worldbank.org.


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