Social Scientist. v 20, no. 224-25 (Jan-Feb 1992) p. 63.

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Distributional Dimensions and Macro-economic Policy Implications of External Liberalisation Under Structural Adjustment^

This paper examines the relation between liberalisation and income distribution within the context of the structural adjustment operations implemented in semi-industrial economies and the consequent policy implications. The analysis is influenced by the Turkish experience with orthodox structural adjustment of the 1980s. Some of the conclusions may, however, be relevant for the debates on policy options in post-apartheid South Africa.

The paper is organized around three sections: The initial discussion is related to the impact of overall liberalisation on the so-called 'rent-seeking* activities. This is followed by an investigation of changes in the structure of relative prices corresponding to and following trade liberalisation and the distributional consequences thereof. The impact of internal and external financial liberalisation on internal income distribution and on surplus transfers to or from the external world (i.e. international income distribution) is the third sub-theme. Macro-economic policy implications and recommendations following from the analysis are covered under each theme.

The orthodox expectation that overall liberalisation, external and internal, would improve income distribution in a developing economy is based on two pillars: (i) The so-called theory of rent-seeking and (ii) an awkward adaptation of the Stolper-Samuelson theorem to the actual conditions of labour-abundant developing economies with heavy state involvement. Some paradoxes with respect to the latter issue will be discussed in the following section. I will now briefly investigate how far the neoclassical Utopia of a fully liberalised economic regime in which 'rents* of protection and of intervention have beeneliminated altogether is likely to be realized under the actual conditions of semi-industrialized capitalist economies.

University of Istanbul

This paper was originally presented at the ANC Conference on Macroeconomic Strategy in Johannesburg, South Africa, in January 1992.

Social Scientist, Vol. 20, Nos. 1-2, January-February 1992

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