Self-made countries: why poor nations aren't prisoners of their history.

• Author: Kenny, Charles
• Position: Turnaround: Third World Lessons for First World Growth - Book review

Turnaround: Third World Lessons for First World Growth

by Peter Blair Henry

Basic Books, 240 pp.

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In his new book Turnaround: Third World Lessons for First World Growth, Peter Blair Henry, dean of the Stern School of Business at New York University, wants to persuade you of three big ideas about economic success in countries rich and poor. First, economies aren't destined to wealth or poverty by constitutions or by bureaucratic structures; leaders have a choice to follow policies that lead to economic growth. Second, those policies involve both discipline and a sustained commitment to the future demonstrated by fiscal and monetary probity, open trade and financial regimes, and market-friendly policies. Third, says Henry, the stock market is a good guide as to which policies are "disciplined." He is perhaps most persuasive on the first point, and least convincing on the third.

Turnaround is a book heavily focused on macroeconomic policy issues covering fiscal and monetary austerity along with the "Washington Consensus"--an oft-derided ten-point set of policy prescriptions for economies in crisis, so described by economist John Williamson because the criteria were recommended by D.C.-based organizations such as the International Monetary Fund, the Treasury Department, and the World Bank. As such, Turnaround is a welcome addition to a global development literature that has recently spent much of its time either discussing microeconomic issues at the one end--like the multi-award-winning Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty--and millennia-spanning work on the historical determinants of wealth like Why Nations Fail: The Origins of Power, Prosperity, and Poverty at the other. Besides providing a happy middle ground, Henry has produced one of a dwindling number of papers in the American Economic Review and can also be understood by readers who haven't passed advanced classes in statistics and algebra.

Henry takes on institutional determinists' view that economic policymaking and performance is largely preordained by a country's past. He reprises his argument in the American Economic Review, noting that while Barbados and Jamaica shared very similar colonial histories, between 1960 and 2000 Barbados had per capita GDP growth of 2.2 percent compared to Jamaica's 0.8 percent. Populist Jamaican politicians drove their economy into the ground while disciplined Bajan leaders kept their country on...