Michel Petit

Privatization and Deregulation of Support Services

Defining the relative role of government and the private sector in achieving a healthy economic growth is perhaps the greatest challenge facing the development community today. This question is clearly essential to any interpretation of the current issues raised by deregulation and privatization policies. The fact that the debate is timely does not, however, mean that it is new. On the contrary, this debate may be seen as the oldest debate in economics. Adam Smith’s introduction of the invisible hand was in reaction to the prevailing convictions among the mercantilists that governments had a very important role to play in determining the wealth of nations. This conviction was widespread in France, where it has historically been a strong component of the national culture, from Colbert, who promoted the development of manufacturing in the 17th century, to Pompidou, who was instrumental in bringing about the modernization of industry in the 1970s.

Trade and development

Interest in the relationship between trade and development has existed since the birth of economics as a discipline. Adam Smiths theory of the division of labor and specialization emerged at the founding of the discipline, and we can easily interpret international trade, and the increase in efficiency which could result from it, as the division of labor on an international scale. If the wealth of nations is based on an increased degree of specialization and ever-increasing division of labor, so then does international trade act as both a main engine, and also a consequence, of overall economic development. Such an interpretation seems to be supported by data from the last forty years indicating that international trade has in fact increased more rapidly tQ.an economic growth, and that the variations in the rate of GNP growth across countries have been positively correlated with the rate of growth of international trade. There is no reason to believe that this correlation does not also exist with agricultural growth, certainly in countries for which agriculture is one of the most important productive sectors in the economy. Until the current Uruguay Round of negotiations, agriculture had been, in essence, exempted from the general discipline imposed collectively on all nations by the GATT. One of the main objectives of the current Round was to bring agriculture under the GATT discipline. From the start of the Uruguay Round, agriculture played a central role in the negotiations, and it was widely assumed that the Round would conclude successfully and significantly change the rules regarding international agricultural trade.