Market, Redistributive and Proto-Reform: Can Liberalization Help the Poor?

In early modernization, reforms can remove arbitrary privilege—both freeing markets and helping the poor. Later, there is tension between redistributive and market reforms. The paper explores reform options by contrasting recent Asian experience with earlier experiences of Europe, especially Britain. The two great accelerations in world poverty reduction—Europe’s in 1750-1950, Asia’s since 1950—saw sharply increasing salience of redistributive reform. In 1950-75, such reform often proved disappointing for want of market reform; gains leaked to the rich and to bureaucrats via rent-seeking. Yet the reaction toward purely market reforms since 1980 has also disappointed many developing countries, because the decline in redistributive reforms has left many poor people without access to markets, land, or education. Market reforms often require land reform and / or “children’s reform†in order to succeed. Recent evidence confirms robust, positive relationships between reduced inequality and subsequent faster growth. In some policy areas (e.g., bequests taxation), incentives may benefit from redistributive reform.