Box: Birthday Celebrations of the New Economic School

The two-day international conference entitled The State of Economics and of Transition held in December 2002 was hosted by the New Economic School in cooperation with CEFIR, SITE, and the William Davidson Institute. The NES received a congratulatory letter from President Putin acknowledging its accomplishments since its inception in 1992. More than 500 people attended the conference, one of the largest in the history of the new Russia, and 42 research papers were presented.

Stanley Fischer gave the keynote speech: "Globalization and Its Challenges." In his keynote speech he enumerated some of the challenges facing economic globalization. Primarily, he said, it has to make the global system deliver economic growth more consistently and more equitably to further reduce global poverty and inequality. According to Fisher, the policy challenges include the following:

• Implementing the right policies. The outward-oriented policies described in the 1990 Washington Consensus remain an important component of the right approach to economic policy. That policy approach needs to be enhanced by

• Greater emphasis on social justice, to be implemented through health and education spending, social safety nets adapted to the country’s economic structure, and infrastructure spending

• Increased attention to developing the institutions of effective economic governance, including efficient judicial systems, civil service, tax system, and other elements of an enabling environment for private sector activity

• More attention to crisis proofing the economy, especially by strengthening the financial system and macroeconomic policies

• Increased attention to labor market reform to allow a greater proportion of the workforce to enter the formal labor market.

• Delivering on trade and aid. The industrial countries should liberalize their agricultural trade and end the massive subsidies to agriculture that impair the exports of so many developing countries. The Doha development round also needs to succeed. At the same time, the developing countries could achieve major gains by opening up their trade to each other. However, the problems of the poorest countries are unlikely to be solved without significant increases in aid.

• Making the international financial system less prone to crises. The system is still disturbingly crisis-prone for the emerging market countries. Despite the shift to exchange rate flexibility, crises can erupt for other reasons, particularly market fears of unstable debt dynamics. The strengthening of domestic policies and institutions is essential.

• Dealing with migration. Labor migration and temporary labor flows are a potentially powerful force in the global economy. If the unskilled migrate, they can be an advantage by helping produce a convergence of income levels among countries; however, they can be a disadvantage because of possible brain drain effects. This is an area where national economic, social, and cultural preferences are bound to take a front seat.

• Improving governance. Ordinary people everywhere want to improve their lives, but corrupt governments do not necessarily respond to their desires. This is why the trend toward democracy is so important. While countries are primarily responsible for their own fates, outsiders from both the public and private sectors can help influence the outcome by promoting democracy, investing in the economy, and supporting projects in the social sectors.