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The question of what kind of institutional set-up would be appropriate for promoting economic development is approached in terms of combination between market and state. The traditional debates on the choice of development strategy between free trade and infant industry protection is examined with reference to the historical experiences of developed economies as well as recent confrontations between import substitution industrialization and the IMF-World Bank structural adjustment policies. The nature and significance of market failures versus government failures are illustrated in terms of comparisons between the Latin American Debt Crisis in the 1880s and the Asian Financial Crisis in the 1990s. The choice of the market versus the state, as well as growth versus equity, is discussed in reference to the changing paradigms in the IMF-World Bank.

Chapter 4 focuses upon the institutional framework that Gordon Brown and his chief economic advisor, Ed Balls, put in place to make the Treasury the pilot agency of New Labour’s political economy. Insofar as the newly established Department for International Development (DFID) was concerned, this would ensure that it was the Chancellor, rather than the Secretary of State for International Development who would design New Labour’s international development policy. Yet the role that the Treasury played in ‘internationalising’ New Labour’s domestic political economy went beyond the conquest of other Whitehall departments. Brown took the macroeconomic blueprint – the ‘new economic architecture’ – that he had mapped out at home, to a number of key international financial actors abroad. This blueprint would create, in Brown’s mind, ‘a new Jerusalem’, a biblical phrase that the Chancellor used to describe the vision that he had of a world free from poverty, debt and disease. Embedding this vision into the orthodoxy of the ‘post-Washington Consensus’, Brown wanted to maintain not only a clear transmission of policy but also a distinct institutional ‘lock-in’, and a set of global governance arrangements that would provide the framework for the policies explored in the following three case study chapters.

The first of these case study chapters in chapter 5 draws parallels between the economic framework designed by Treasury officials at home and ‘the new international economic architecture’ that Gordon Brown was keen to pursue abroad. This would provide the basis for a new approach to debt relief to reform the Heavily Indebted Poor Countries initiative. The new Multilateral Debt Relief Initiative would be conditional upon recipient countries meeting their obligations towards this new economic architecture, designed by Brown and based upon the principles of the ‘post-Washington Consensus’. This approach however, ran counter to many within civil society who viewed the issue of debt relief in ‘moral’ rather than simply ‘economic’ terms. In meeting with these different faith groups, NGOs and other debt activists, Brown certainly appeared sympathetic to such claims but the biblical language of forgiveness, justice and redemption that he used in speaking to these audiences differed from when he spoke in altogether more punitive terms to the international financial institutions. Here Brown spoke of the need for greater stability, demanded that indebted countries recognise their financial obligations, and urged greater surveillance by the International Monetary Fund of these countries national accounts.

The priority which is now given to economic development policies that attempt to address inequality and poverty is furthered by the search for what Joseph Stiglitz referred to as the ‘post-Washington Consensus’. Aside from how there are ongoing developments in both macro- and microeconomic theories that concern economic costs of inequality which allocate more focus on inequality and poverty, it is important to note that the renewed attention received by these issues reflects the post-liberalization growth exhibited by Latin America which, unfortunately, has had minimal effects in relinquishing economic inequalities, specifically in the rural sector. Today, land policy in Latin American countries consist mainly of the use of instruments such as land titling and market-assisted or negotiated land reform. This chapter aims to assess the performance of liberalized land markets through first considering the theory of smallholder land market competitiveness and through looking into experiences in three Latin American economies.