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Cambridge Journal of Economics 24:1-19 (2000)
Copyright © 2000 Cambridge Political Economy Society

Article

The political economy of 'policy credibility': the new-classical macroeconomics and the remaking of emerging economies

I Grabel

Graduate School of International Studies, University of Denver, Denver, CO 80208, USA
E-mail: igrabel@du.edu

Abstract

The criterion of 'policy credibility' is invoked with increasing frequency today by new-classical development economists in debates over economic and institutional reform in developing and transitional countries. The paper argues that the credibility criterion is used to privilege neoliberal economic policies and associated institutions. The paper demonstrates that the credibility criterion is theoretically anti-pluralist and politically anti-democratic. In this connection, the paper argues that a policy's credibility is always secured endogenously through political and economic power rather than exogenously by virtue of the epistemiological status of the theory that promotes it. The paper concludes by suggesting two alternative criteria by which policy regimes and the governance structure of monetary institutions could be adjudicated. These alternative criteria are termed the 'principle of democratic credibility' and the 'principle of fallibility'.

Key Words: Policy credibility • Central banking • Currency boards • Development policy • New-classical economics


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