Is discourse relevant for economic development?

• Author: Beaulier, Scott A.

"As much as it might like, the IMF, in its public rhetoric at least, could not be completely oblivious to the widespread demands for greater participation by the poor countries in the formulation of development strategies and for greater attention to be paid to poverty.... The idea that citizens in a borrowing country might also participate was simply too much! Stories of this kind would be amusing were they not so deeply worrying. Even if, however, the participatory poverty assessments are not perfectly implemented, they are a step in the right direction. Even if there remains a gap between the rhetoric and the reality, the recognition that those in the developing country ought to have a major voice in their programs is important. But if the gap persists for too long or remains too great, there will be a sense of disillusionment. Already, in some quarters, doubts are being raised, and increasingly loudly. While the participatory poverty assessments have engendered far more public discussion, more participation, than had previously been the case, in many countries expectations of participation and openness have not been fully realized, and there is growing discontent." Joseph Stiglitz, Globalization and Its Discontents (2002a) Economists are discovering the limits of their knowledge regarding the institutional and cultural preconditions of economic development. Those working for the World Bank and International Monetary Fund (IMF) must have been humbled by William Easterly's (2001) depressing account of the failed attempts to reform Third World economies. Tracing through a fifty-year history of development failure, Easterly concludes: "the search for a magic formula to turn poverty into prosperity failed. Neither aid nor investment nor education nor population control nor adjustment lending nor debt forgiveness proved to be the panacea for growth" (2001, 143).

In a much different spirit, Joseph Stiglitz has offered his interpretation of the development problem. According to him, the IMF is to blame for the Third World's growth tragedy by taking a "one-size-fits-all" approach to development problems (2002a, 34). Assuming there is only one true model of how a country can develop, the IMF has failed to appreciate the complexity involved in economic development. Its role has expanded beyond its mandate, which is to assure global economic stability. The IMF managers do not belong in the business of promoting economic development, especially if their approach is going to be a "neocolonial" one in nature (2002a, 41). (1)

Frustrated with these neocolonial tendencies, Stiglitz has been one of the most ardent proponents of a new approach to development economics. He recommends a shift away from traditional economic impositions by major lending institutions toward a more "participatory approach" to economic development (2002a, 50). (2) The "traditional, narrowly economic approach" to development has failed because reformers have attempted to impose private-property rights, the rule of law, and free-market prices on populations unfamiliar with them (2002b, 164). Successful reform requires more than a change in the institutions:

If a change in mindset is at the center of development, then it is clear that attention needs to be shifted to how to affect [sic] such changes in mindset. Such changes cannot be "ordered" or forced from the outside, however well-intentioned the outsiders may be. Change has to come from within. The kinds of open and extensive discussions that are central to participatory processes are, I suspect, the most effective way of ensuring that the change in mindset occurs not only within a small elite, but reaches deep down in society. (2002b, 165) According to Stiglitz, the Washington consensus rush to "get the prices right" and to "get the institutions right," without any genuine concern for culture, ruined the reform process.

Economists clearly underestimated the importance of culture in economic development, as Stiglitz correctly points out, but what are we to make of Stiglitz's call for a decidedly participatory process in economic development? Outside of political philosophy, the value of participatory processes has not received much attention. Literally hundreds of papers have been written on the determinants of economic growth, yet the issue of what kind of relationship should exist between developing countries and lending institutions is seldom taken up. (3) Stiglitz is one of the first contemporary development economists to consider the relationship between discourse and development. (4) In this article, I explore the link between participation (in Stiglitz's sense) and development. Can Stiglitz's participatory process accommodate a developing country's culture and history? Can those participatory process lead to more rapid reform? Or will "reform with a more human face" prove to be nothing more than cheap talk?

The Concept of Participatory Processes in General

Arguments for more participation in collective decision making have a long and rich history. John Stuart Mill was one of the earliest defenders of a discursive society. To assure the proliferation of the best ideas, he argued, a society must be open and tolerant of dissent:

If all mankind minus one were of one opinion, mankind would be no more justified in silencing that person than he, if he had the power, would be justified in silencing mankind.... [T]he peculiar evil of silencing the expression of an opinion is that it is robbing the human race, posterity as well as the existing generation--those who dissent from the opinion, still more than those who hold it. If the opinion is right, they are deprived of the opportunity of exchanging error for truth; if wrong, they lose, what is almost as great a benefit, given the clearer perception and livelier impression of truth produced by its collision with error. ([1859] 1974, 76) F. A. Hayek also offered an epistemic defense of the open society:

If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty. And, in turn, liberty of the individual would, of course, make complete foresight impossible. Liberty is essential in order to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. (1960, 29) Mill and Hayek make pragmatic arguments for open discourse and the toleration of dissent. An open society is one that grants individuals the freedom to experiment with ideas, inventions, and new ways of living. No individual knows in advance where the next major breakthrough is going to come from, nor does any individual enjoy an infallible corner on truth. Given the limits of reason, a society must be open to prevent absolutist problems and to weed out bad ideas. Moreover, societies tolerant of experimentation will tend to enjoy more rapid progress. (5)

Jurgen Habermas, a leading contemporary philosopher, offers a more complicated defense of an open society. He argues (1984, vii) for a discourse ethic, which he believes should serve as one of the foundational principles of a free society. For Habermas, the discourse ethic does more than serve the utilitarian values of diversity and discovery; the ethic is defensible on higher moral grounds because it is right to guarantee open discourse to individuals in a society. Open dialogue grants individuals the opportunity to debate deeply held values about the good life. By allowing individuals with unique interests to express their concerns and desires, the discourse ethic has the potential to produce a moral consensus. If moral consensus can somehow be attained, the likelihood of value impositions by economically or politically powerful groups is lessened.

A participatory process ideally is one in which all the interests of all parties affected by a decision are satisfied--unanimous consent is reached. Not everyone gets exactly what he wanted ex ante, but the dialogue allows individuals to continue trading off values until each person walks away from the discourse feeling satisfied. Since the publication of Buchanan and Tullock's Calculus of Consent (1962), political economists have regarded the unanimity rule as a useful construct in judging the outcomes of collective-action disputes. Any policy change that enjoys unanimous support is necessarily Pareto improving. The policy is not making any one person in the collective decision-making body worse off. If an individual is being made worse off, he will not consent to the policy and no Pareto improvement occurs.

In practice, political economists are hard-pressed to find rules capable of meeting the unanimity standard. Buchanan ([1968] 1999b, 18) attempts to operationalize the unanimity rule by arguing for a "workable unanimity" standard. Under that criterion, the closer collective-action resolutions come to unanimity, the more defensible they are.

Buchanan's unanimity criterion and Habermas's discourse ethic are closely related. Both represent a search for a standard capable of legitimizing universals. Habermas asks whether we can come to agree on any universal moral values, Buchanan whether we can come to accept any universal rules. Unanimity is the ideal outcome of Habermas's discourse ethic, which maintains that "[o]nly those norms can claim to be valid that meet (or could meet) with the approval of all affected in their capacity as participants in a practical discourse" (1991, 66, 93).

Buchanan and Habermas do not want every possible issue in a society discussed and debated in a discursive manner. Buchanan argues for unanimity at the...