Diploma Zip 2012-2024 Form

You do not need to fill out a customs form for a regular letter sent from the US to any other country. Postage for an international letter under 1 ounce is currently $1.15. You may apply any stamp - or combination of stamps - which equals that amount.

The development experiences of Third World countries since the fifties  have been staggeringly diverse—and hence very informative. Forty years  ago the developing countries looked a lot more like each other than they  do today. Take India and South Korea. By any standards, both countries  were extremely poor: India's income per capita was about $150 (in 1980  dollars) and South Korea's was about $350. Life expectancy was about  forty years and fifty years respectively. In both countries roughly 70  percent of the people worked on the land, and farming accounted for 40  percent of national income. The two countries were so far behind the  industrial world that it seemed nearly inconceivable that either could  ever attain reasonable standards of living, let alone catch up.If anything, India had the edge. Its savings rate was 12 percent of GNP  while Korea's was only 8 percent. India had natural resources. Its size  gave its industries a huge domestic market as a platform for growth. Its  former colonial masters, the British, left behind railways and other  infrastructure that were good by Third World standards. The country had a  competent judiciary and civil service, manned by a highly educated  elite. Korea lacked all that. In the fifties the U.S. government thought  it so unlikely that Korea would achieve any increase in living  standards at all that its policy was to provide "sustaining aid" to stop  them falling even further.Less than forty years later—a short time in economic history—South  Korea's extraordinary success is taken for granted. By the end of the  eighties, its per capita income (in the same 1980 dollars) had risen to  $2,900, an increase of nearly 6 percent a year sustained over more than  three decades. None of today's rich countries, not even Japan, saw such a  rapid transformation in the deep structure of their economies. In  contrast, India's income per capita grew from $150 to $230, a rise of  about 1.5 percent a year, between 1950 and 1980. India is widely  regarded as a development failure. Yet over the past few decades even  India has achieved more progress than today's rich countries did over  similar periods and at comparable stages in their development.This shows, first, that the setbacks the developing countries  encountered in the eighties—high interest rates, debt-servicing  difficulties, falling export prices—were an aberration, and that the  currently fashionable pessimism about their future is greatly overdone.  The superachievers of East Asia (South Korea and its fellow "dragons,"  Singapore, Taiwan, and Hong Kong) are by no means the only developing  countries that are actually developing. Many others have also grown at  historically unprecedented rates over the past few decades. As a group,  the developing countries—134 of them, as conventionally defined,  accounting for roughly three-quarters of the world's population—have  indeed been catching up with the developed countries.The comparison between India and South Korea shows something else. It no  longer makes sense to talk of the developing countries as a homogeneous  group. The East Asian dragons now have more in common with the  industrial economies than with the poorest economies in South Asia and  sub-Saharan Africa. Indeed, these subgroups of developing countries have  become so distinct that one might think they have nothing to teach each  other, that because South Korea is so different from India, its  experience can hardly be relevant. That is a mistake. The diversity of  experience among today's poor and not-so-poor countries does not defeat  the task of analyzing what works and what doesn't. In fact, it is what  makes the task possible.Lessons of ExperienceThe hallmark of economic policy in most of the Third World since the  fifties has been the rejection of orthodox free-market economics. The  countries that failed most spectacularly (India, nearly all of  sub-Saharan Africa, much of Latin America, the Soviet Union and its  satellites) were the ones that rejected the orthodoxy most fervently.  Their governments claimed that for one reason or another, free-market  economics would not work for them. In contrast, the four dragons and,  more recently, countries such as Chile, Colombia, Costa Rica, Ivory  Coast, Malaysia, and Thailand have achieved growth ranging from good to  remarkable by following policies based largely on market economics.Among the most important ideas in orthodox economics is that countries  prosper through trade. In the sixties and seventies the dragons  participated in a boom in world trade. Because the dragons succeeded as  exporters, they had abundant foreign exchange with which to buy  investment goods from abroad. Unlike most other developing countries,  the dragons had price systems that worked fairly well. So they invested  in the right things, in ways that reflected their comparative advantage  in cheap, unskilled labor.Some economists still dismiss the dragons as special cases, but for  reasons I find specious. They argue that Hong Kong and Singapore are  small (hitherto smallness had been regarded as a disadvantage in  development); that they are former colonies with traditions of  excellence in public administration (like India and many others); that  they have been generously provided with foreign capital (like Latin  America). These economists also argue that Taiwan and South Korea  received generous foreign aid (like many other developing countries),  and have even argued that their lack of natural resources was an  advantage. What was most unusual about these countries, in fact, was a  relatively market-friendly approach to economic policy.The countries that failed, often guided by "experts" in the  industrialized world, are the ones that gave only a small role, if any,  to private enterprise and to prices that are unregulated by government.  Government planners concentrated on broad aggregates such as investment,  consumption, and savings. Their priority was investment—the more, the  better, regardless of its quality.Most governments also thought that their economies were inflexible and  could not adjust to changing conditions. The export earnings of  developing countries were regarded as fixed, for instance, and so was  the import requirement for any given level of domestic production. The  possibilities for substituting one good for another in response to a  change in price were denied or ignored. The idea that workers respond to  changes in incentives was likewise dismissed. This assumed lack of  responsiveness led the planners to believe that prices, rather than  providing signals for the allocation of resources, could serve other  purposes instead. For instance, with direct controls they could be kept  low to reduce inflation, or raised here and there to gather revenue for  the government.Taken to the limit, this "fixed-price" approach leads to regulation by  input-output analysis. The idea is to tabulate the flow of primary,  intermediate, and finished goods throughout the economy, on the  assumption that each good requires inputs of other specific goods in  fixed proportions. When all the cells in the table have been filled in, a  government needs only to decide what it wants the economy to produce in  order to know exactly what the country needs to import, good by good.India went in for this sort of planning in a big way. More than a few of  today's leading free-market economists have worked within India's  planning system or have studied it in detail, and intimate contact with  it leads them to one inescapable conclusion: government planning of the  economy does not work. Professor Deepak Lal of London University, a  leading proponent of market economics for the Third World, mentions his  experience with India's planning commission in his book The Poverty of Development Economics. He calls the antimarket approach favored in so many countries the "dirigiste dogma."From Peru to GhanaIn the noncommunist world, the most striking recent example of this  dogma at work is Peru. When Alan Garcia's government came to power in  the summer of 1985, Peru was already in a bad way, thanks largely to  high tariffs and other import barriers, restrictive labor-protection  laws, extensive credit rationing, high taxes, powerful trade unions, and  an extraordinarily elaborate system of regulations to control the  private sector. One result was Peru's justly celebrated black market, or  "informal economy," described by Hernando de Soto in his modern  classic, The Other Path. The other result was great vulnerability  to adverse economic events. The early eighties delivered several,  including a world recession, high interest rates, a drying up of  external finance, and declining commodity prices.Garcia's policy was based, he said, on two words: control and spend.  After imposing price controls, he sharply increased public spending. The  program succeeded at first. Gross domestic product (GDP) grew 9.5  percent in 1986 and 7 percent in 1987. But by the spring of 1988  inflation was running at 1,000 percent a year; by the end of the year it  was 6,000 percent. After that, output and living standards collapsed.  In 1990, the economy a wreck, Garcia was voted out of office.The dirigiste dogma has proved equally damaging in Africa. Take Ghana.  When it became independent in 1957, it was the richest country in the  region, with the best-educated population. It was the world's leading  exporter of cocoa; it produced 10 percent of the world's gold; it had  diamonds, bauxite, and manganese, and a flourishing trade in mahogany.  Its income per capita was almost exactly equal to South Korea's at $490  (in 1980 dollars). By the early eighties, however, Korea's income per  capita had risen fourfold, while Ghana's had actually fallen nearly 20  percent to $400 per head. Investment slumped from 20 percent of GDP in  the fifties to 2 percent by 1982, and exports dropped from more than 30  percent of GDP to 4 percent.The country's leader at independence, Kwame Nkrumah, was a spokesman for  the newly independent Africa. He said the region needed to develop its  own style of government, suited to its special circumstances. He spent  vast sums on megaprojects. As economic troubles mounted, he nationalized  companies and followed with capital repression. Under his regime  capital flew abroad, and people with skills and money did the same. The  kleptocrats (government officials who steal large amounts) ran the  country into the ground. In the early eighties a new government came to  power and at last began to steer the economy along orthodox lines. Until  then, Ghana had been to Africa what Peru is to Latin America: a  distillation of everything that has gone wrong with the continent's  economies.In the Third World, where so many people live off the land, agricultural  development is crucial. Ghana provides a startling case study in how to  wreck the farm sector. The means was the agricultural marketing board—a  statutory monopoly that bought farmers' crops at controlled prices and  resold them either at home or abroad. The prices paid to farmers were  kept artificially low, on the assumption that farmers ignored price  signals.Between 1963 and 1979 the price of consumer goods went up by a factor of  twenty-two in Ghana. The price of cocoa in neighboring countries went  up by a factor of thirty-six. But the price paid by the cocoa marketing  board to Ghana's farmers went up just sixfold. In real terms, therefore,  the returns to cocoa farmers vanished. The country's supposedly  price-insensitive farmers responded by switching to production of other  crops for subsistence, and exports of cocoa collapsed. Peru and Ghana  are extreme cases, but they show in the starkest way that prices do  matter in the the Third World and that rejecting market economics  carries extremely high costs.The essential elements of a development strategy based on orthodox  economics are macroeconomic stability, foreign trade, and strictly  limited intervention in the economy. With policies under these three  headings, governments can foster enterprise and entrepreneurship, the  irreplaceable engines of capitalist growth.The Macroeconomic FoundationExperience shows that high and unstable inflation can harm growth. A  noninflationary macroeconomic policy is, therefore, a prerequisite for  rapid development. Control of government borrowing is the crucial  element in such a policy. When public borrowing is excessive,  governments are soon obliged to finance it by printing money, and rising  inflation then follows. That is why the conventional approach to  stabilization (a term that covers steps to reduce an unsustainable trade  deficit as well as anti-inflation policies) usually advocates lower  public spending and/or higher taxes. The International Monetary Fund has  long made programs of this sort a precondition for financial assistance  to countries in distress.These so-called austerity programs have aroused two sorts of  controversy. First, some economists question whether big changes in  fiscal policy are really needed. In Latin America, for example, some  governments sought "heterodox" policies to reduce inflation without the  recession that the orthodox approach almost always brings on. The  heterodox approach argues that in high-inflation countries, the budget  deficit is caused mainly by inflation, not the other way round. The  argument is twofold. First, because there is a lag between when people  earn income and when they must pay taxes on it, high inflation reduces  real tax revenues. Second, inflation increases the nominal interest rate  (and hence the budgetary cost of servicing past government debt).Hence the heterodox logic: reduce inflation with direct controls on  prices and incomes and a currency reform, and the budget deficit will  shrink of its own accord. This method has been tried repeatedly in  Brazil and Argentina, where brief success has generally given way to a  worse mess than at the outset, and in Israel, where the results were  more encouraging. Israel shows that the heterodox can work—that falling  inflation does cut public borrowing. What matters is whether the deficit  that remains after the heterodox measures are in place is low enough to  be noninflationary. In practice, the remaining deficit is almost always  too high, and the program fails. Countering inflation almost always  requires a dose of austerity.The second controversy over austerity concerns the costs of this remedy.  Many economists argue that orthodox programs put too much of the burden  on the poorest parts of society. To cut their budget deficits,  governments can either raise taxes or cut spending. Raising more  revenue—even if that could be done without harming incentives—is hard  because of weak tax administration. So stabilization nearly always  involves cuts in public spending. If the cuts fall on food subsidies and  welfare spending, goes this argument, they hurt the most vulnerable.This argument sounds plausible, but in many countries it is wrong. A  study by Guy Pfeffermann of the World Bank shows that the beneficiaries  of social spending in the developing countries are not the poor. First,  more public spending of any sort means more public employment.  Bureaucracies in developing countries do not give many jobs to the  landless rural poor, to small street traders, to unskilled manual  workers, or to the urban unemployed. They recruit from the middle  classes, who are, therefore, the first to benefit from public spending.They often are the second and third to benefit as well. In some  countries subsidies have amounted to more than 10 percent of GDP. These  mainly go toward making electricity, gasoline, housing, and credit  artificially cheaper for consumers. Quite apart from the massive  microeconomic damage that these price distortions cause, such subsidies  do not signNow the poor. Many of the poor do not live in houses, which  greatly reduces their need for electricity, and most do not own cars.  (Gasoline subsidies alone in Ecuador and Venezuela have been equivalent  to several percentage points of GDP.) Although some of the poor would  benefit from credit, subsidized credit is not aimed at them and makes  the unsubsidized kind harder to get and a lot more expensive. Spending  on education is also, as a rule, heavily biased toward the middle  classes. In some developing countries, spending per capita on university  education exceeds spending per capita on primary education by a factor  of thirty. Many of the poor lack access to even the most basic primary  education, while the universities remain the publicly funded preserve of  the middle class. And in most developing countries the coverage of  heavily subsidized social security systems is strongly skewed against  the poor. In Brazil in 1984, only 8 percent of workers in the poorest  broad sector of the economy (farming) were covered by a social security  system. Nearly 80 percent of workers in the most prosperous sector  (transport and communications) were covered.By and large, the scope for cutting public spending in developing  countries without hurting the poor is more than enough for stabilization  to succeed. In some cases (subsidized credit, for example) a reduction  in public spending would actually help the poor directly, even before  the broader benefits of macroeconomic stability began to flow back.  Admittedly, this is not much help in political terms. It is easy to  neglect the poor. That is precisely why this vast system of subsidies  does not help them. But the middle classes can shout loudly when the  economic distortions that help them are taken away. So the political  barriers to getting economic policy right are formidable.The Gains from TradeFor its World Development Report in 1987, the World Bank  classified forty-one developing countries according to their openness to  trade since the sixties. It classed economies as either inward looking  (exports were discouraged) or outward looking (exports were not  discouraged), with a further division according to the strength of any  trade bias. The World Bank then plotted these groups against a variety  of economic indicators.Growth in income per capita was highest in the strongly outward-looking  economies and lowest in the strongly inward-looking ones. The same was  true for growth in total GDP and in value added in manufacturing, and  for the standard measure of the efficiency of investment. On all these  criteria the moderately outward-looking countries also outperformed  inward-looking economies, although by a smaller margin. The failure of a  strong inward orientation to promote domestic manufacturing—not just  exports of manufactures—is particularly striking. The whole point of  looking inward had been to industrialize faster.The three strongly outward-oriented countries in the World Bank's report  were Hong Kong, Singapore, and South Korea. Taiwan would have been the  fourth if it had been included in the sample, and would have reinforced  the message. The four dragons, however, have been more diverse in their  policies than is usually assumed. Hong Kong's outward orientation is due  to unalloyed free trade. The other three have been interventionist to  varying degrees, using export incentives to offset the  export-discouraging effects of domestic protection.South Korea, by some measures the most interventionist dragon, is often  cited as proof that intelligent dirigiste, rather than a broadly  outward-looking trade policy, is the key to rapid development. This  judgment is often based on the false premise that Korea has protected  its domestic producers as much as if not more than the inward lookers  have protected theirs, with the difference that it has then piled on a  lot of incentives for exporters. This is incorrect. In reality, South  Korea has had a moderate and declining degree of domestic protection  with just enough export promotion to achieve broad neutrality in trade  incentives.Korea's growth surge began in the mid-sixties. Policy began to change in  the late fifties. At that time Korea's government placed quantitative  restrictions on almost all imports, but the restrictions were looser  than in many other developing countries. The government began to provide  export incentives to offset its protection for producers of import  substitutes. At first this failed to work, perhaps because the currency  was overvalued, leaving too great a bias against exports. In the early  sixties the government dismantled its multiple exchange-rate system,  devalued the currency, and (because devaluation helped exporters)  reduced its export subsidies. These liberalizing reforms were the  turning point. Exports began to grow rapidly.In 1967 the government reformed its import control system, greatly  reducing the number of imports subject to quotas and began to reduce its  tariffs. So as the miracle proceeded in the late sixties and seventies,  the background was not just outward orientation (domestic protection  offset by export promotion), but a low average level of domestic  protection, with relatively little variation in the rates of protection  from one sector to another. Toward the end of the seventies, when Korea  did increase its support for heavy industry, the economy began to run  into trouble. Policymakers acknowledged their mistake and moved back  toward liberalization.The clear consensus among mainstream economists is that outward-looking  trade policies are one of the keys to development. But why? The answer  from orthodox economics is that trade allows countries to exploit their  comparative advantage. Trade enables a country to consume a mix of goods  that is different from the mix it produces—with prices in world markets  acting as the mediator between the two. Conventional theory proves that  trade, as a result, makes both partners unambiguously better off. So  long as import barriers and other policies do not drive domestic prices  too far away from world prices, market forces are enough to push  production and consumption in the right direction. But trade does more  than bring about the right mix of products. It also eliminates the  inefficiencies in production caused by protection.Protection may make some domestic producers monopolists or near  monopolists, thus introducing an inefficiency directly (because  monopolists exploit their market strength by producing less and charging  more) and indirectly (because, lacking competition, they have no  incentive to keep costs low).Two of the world's top trade specialists, Professors Jagdish Bhagwati of  Columbia University and Anne Krueger of Duke University, have  emphasized yet another source of inefficiency pervasive in developing  and industrial countries alike: "rent-seeking," or more generally,  "directly unproductive profit-seeking." These spring from the efforts of  business to exploit or evade the distortions caused by protection. For  instance, import licensing may drive a wedge between the official price  of an intermediate good and the price that a domestic producer is  willing to pay.This "rent" is a potential source of profit for somebody. Resources will  be spent in trying to corner the market in licenses, or in bribing the  bureaucrats who decide which firms will get them, or in lobbying  governments to alter the pattern of protection in ways that favor the  lobbyists. Worst of all, resources will be spent in trying to win an  increase in the overall level of protection. A study of Turkey (see  Grais et al.) found that the costs of rent-seeking in the late seventies  were between 5 percent and 10 percent of GDP. Because the study made no  allowance for the effect of protection on domestic monopoly power, this  is an under-estimate of the cost. A study by Joel Bergsman, which did  take monopoly effects into account, found that the annual costs of  protection were 7 percent of GDP in Brazil, 3 percent in Mexico, 6  percent in Pakistan, and 4 percent in the Philippines. Such results  speak for themselves. The evidence shows that trade works; orthodox  theory shows why.Where to InterveneIt is often argued that all the dragons (except Hong Kong) have had  highly interventionist governments. Even on the assumption that these  interventions, by luck or judgment, left the economies with  outward-looking trade regimes, this poses a question. Might their  success be due to nothing more profound than the fact that good  intervention is better than bad? It is not the extent of intervention  that matters, the argument goes, but the skill with which it is done.It is true that these countries, especially South Korea, have had  interventionist governments. This they have in common with almost all  developing countries. The difference is not only that they pursued an  outward-looking approach to trade (broad lesson number one), but also  that this approach molded the forms of intervention they undertook in  the domestic economy (broad lesson number two). The net effect (broad  lesson number three) was to leave the price system largely intact as a  signaling device for the private sector.More generally, an outward-looking approach to trade does not require  laissez-faire (though laissez-faire does require an outward-looking  approach to trade). The state has a vital role in development.  Paradoxically, however, most of the Third World's highly interventionist  governments neglect this role because they are too busy doing things  they should not.Government has several vital jobs to do and no spare resources to waste  on other things. The cost of an effective legal system, for instance, is  public money well spent. This means countries need rules that define  property rights, contracts, liability, bankruptcy, and so on (which most  developing countries already have). It also means enforcing those rules  effectively (which fewer manage to do). Spending on physical and social  infrastructure is essential, for there are good (orthodox) reasons to  think that the private sector will provide too little. Numerous studies  have shown that the economic returns to spending on primary education,  especially for girls, are extremely high. Governments need to do more in  such areas, not less, though none of these tasks requires the  government to be a monopolist.Governments have done too little in the areas where they can do some  good because they have spread themselves too thin and been far too  ambitious in areas where intervention is, at best, unnecessary. Instead  of building roads, schools, and village health centers, Third World  governments have built prestigious airports, universities, and big-city  hospitals. Instead of letting businesses compete, they have created  state-run industries and sheltered their extraordinary inefficiencies  from foreign and domestic competition.Advocates of state intervention often claim to be realists. Markets are  not perfect, they say, so governments have to step in, especially in  developing countries. They are right up to a point. The price system  never works perfectly, least of all in developing countries. But it is  important to be realistic about governments, too. The past forty years  of development experience have shown that no resource is in scarcer  supply than good government, and that nothing market forces could devise  has done as much harm in the Third World as bad government.Two MythsA common argument is that many developing countries will be condemned to  economic stagnation, regardless of the economic policies their  governments pursue, by two factors beyond their control: their  insupportable debts and their lack of home-grown entrepreneurs. Both  ideas are wrong.First, consider debt. The costs of the debt crisis of the eighties have  indeed been great. At the margin, foreign capital matters a lot—not just  in quantitative terms, but because of the foreign expertise that often  comes with it. But the problem of debt, serious though it is, is by no  means an insuperable obstacle to growth in the Third World. Even in good  times, foreign capital has financed only a small part of the investment  undertaken in developing countries. Debt needs to be kept in  perspective.In its World Development Report 1989, the World Bank compiled  data on financial balances for a sample of fourteen developing countries  (some now "highly indebted," others not) for which sufficiently  detailed data were available. The figures suggest that the biggest  source of capital, by far, in these economies during the seventies and  eighties was household saving. This was equivalent, on average, to 13  percent of GDP in the countries in the sample. Businesses saved 9  percent of GDP. The domestic supply of capital—the sum of household  saving and business saving—was 22 percent of GDP, while the inflow of  foreign capital was only 2 percent of GDP.After the debt myth comes the myth of the missing (especially African)  entrepreneur. The idea that the Third World lacks the spirit of  enterprise is laughable. Peasant farmers who switch to another crop in  response to a change in their government's marketing arrangements are  entrepreneurs. So are the unregistered taxi and minibus operators who  keep most Third World cities moving. So are street vendors,  perambulating water vendors, money changers, and informal credit  brokers. So are the growers of illegal crops such as coca, who in many  countries are denied the opportunity of making a decent living by legal  means. So are the smugglers of just about anything that do such a  roaring trade across Africa's borders, profiting from the massive price  distortions that government policies create.Entrepreneurship admittedly is partly a matter of skills—in choice of  technique, in management, in finance, in the ability to read the label  on a bag of fertilizer. Skills have to be learned, and in many  developing countries they are in short supply. But this supply is not  fixed. The success of the green revolution in India and elsewhere shows  that farmers are willing to learn new skills when they can see an  advantage in doing so. (The green revolution involved the introduction  of high-yielding crop varieties that required different methods and more  sophisticated inputs such as fertilizer and an assured water supply.)To see what entrepreneurship in the Third World can achieve, consider  the flowering of the garment export business in Bangladesh, one of the  poorest countries in the world. This started with a collaboration  between Noorul Quader, a bureaucrat-turned-entrepreneur, and the Daewoo  Company of South Korea. Quader's new company, Desh, agreed to buy sewing  machines from Daewoo and send workers to be trained in South Korea.  Once Desh's factory started up, Daewoo would advise on production and  handle the marketing in return for royalties of 8 percent of sales.  Daewoo did not lend to Desh or take any stake in the business. But it  showed Desh how to design a bonded warehouse system, which the  government agreed to authorize. This was crucial. In effect, it made  garment exporting a special economic zone—an island of free trade within  a highly protected economy.At the end of 1979, Desh's 130 trainees returned from South Korea with  three Daewoo engineers to install the machines. Garment production began  in April 1980 with 450 machines and 500 workers. In 1980 the company  produced 43,000 shirts with a value of $56,000. By 1987 sales had risen  to 2.3 million shirts and a value of $5.3 million—a growth rate of 92  percent a year.Desh did so well that it canceled its collaboration agreement with  Daewoo in June 1981, just eighteen months after the startup. It began to  do its own marketing and bought its raw materials from other suppliers.  It achieved most of its success on its own. Also, the company has  suffered heavy defections of its Daewoo-trained staff. Of the initial  batch of 130 who visited South Korea in 1980, 115 had left the company  by 1987—to start their own garment-exporting businesses. From nothing in  1979, Bangladesh had seven hundred garment-export factories by 1985.  They belonged to Desh, to Desh's graduates, or to others following their