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Inflation was a major concern during the three years that the book covers in extra detail. But the economics of inflation and the science of monetary and fiscal policy, especially in an emerging economy, are inadequately understood. The chapter provides a dissection of monetary policy including some conundrums of how to control inflation while keeping growth up.

Israel's high inflation calamity amounted to a crisis of political and economic institutions. Failing economic governance made it essential for the government to raise revenue through money expansion. At the time when the newly elected government was catering to populistic demands, the printing press was used to finance the fast-expanding government spending and transfers. The central lesson from the Friedman (1971) is that steady-state seigniorage from revenue maximizing central bank is small. However, Israel, as well as previous historical episodes, offer a counter example. Inflation spikes can be a significant source for government revenue. Following almost 8 years of the hyperinflation economic chaos, the Israeli voters brought about some major political rebalancing towards the political center. Sargent (2009) argues that high inflation can be stopped quickly, and at a low cost. His argument is that inflationary expectations are quick to adjust when the economic regime shifts considerably. The temptation not to stop inflation in its tracks may be irresistible. Similarly, if the government surprise market participants by abrupt stopping of hyperinflation in the presence of entrenched inflation expectations, the fiscal burden of public sector wage bill and subsidies to basic food must rise. Therefore, the government may hesitate to do so. To overcome this difficulty there must be a full-fledged social agreement between the government, savers (who hold government bonds), public sector wage earners, and recipients of food subsidies. To fix the inflated outlays on debt service, wage bill, and subsidies, some major redistribution of income must accompany the inflation-halting step. This is in essence the lesson from Israel’s inflation stabilization policy.

Despite the fact that Italy has recently celebrated the 150th anniversary of its political unification, geographical disparities stand out as a prominent characteristic of the Italian economy. In this chapter we present new estimates of the gap in the average level of prices between the north and the south of the country. The positions of the two macro-areas of the country have not changed over the century and a half after unification: the north has always had a higher per-capita income than the south and a higher overall price level. The north–south divide has steadily increased, from 10 percent in 1951 to almost 20 percent in recent years. The observed divergence in price levels highlights the delay, possibly the failure, in Italy’s economic integration. Its cost, in terms of both foregone economic growth and distributive equity, is borne by Italian society as a whole.

These are years of uncertainty and crisis for many in rural and urban parts of Zimbabwe, as land reform is expanded and political violence is deployed against opponents. While this period is often seen as a "rupture" in Zimbabwe’s political trajectory, the chapter argues that there are in fact strong continuities which reveal the reproduction of practices and norms from earlier years. The chapter charts efforts by the regime to rebuild and remobilize the nationalist coalition, after the loss of the constitutional referendum and the emergence of the Movement for Democratic Change (MDC), which shapes the new opposition’s experience of fighting elections. It then demonstrates the ways in which state institutions and resources were used in this process, despite the economic crisis precipitated by hyperinflation. We see that despite attempts by the nascent and fragmented opposition to generate alternative discourses, the regime’s control of coercion and state institutions, and a powerfully resonant rhetoric gave it the power to resist demands for change.

This chapter undertakes a cross-regional comparison of the developmental paths of China and the Latin American countries of Argentina, Brazil, Chile, Mexico, and Peru (LAC 5). It traces the economic histories and policies implemented within the LAC-5 from the 1950s until the 1980s before turning to China to do the same from the 1980s onward. The author argues that the contrasting underlying logic between the Washington Consensus and the Beijing Consensus can explain the widely divergent outcomes in the development of Latin America and China.