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Finance & Development
A quarterly magazine of the IMF
September 2001, Volume 38, Number 3

From the Editor

The problems created by steadily aging populations and the need to create adequate social safety nets challenge policymakers in many countries. Far-reaching social sector reform is particularly crucial in the former centrally planned economies, where both employment and income have fallen sharply. In the first article in this issue, Christian Keller and Peter S. Heller point out that, although most transition countries had well-developed social sectors under central planning, these were designed for a very different economic system. The authors discuss the steps these countries have already taken and outline what more they need to do to develop effective social safety nets. In the next article, Nicholas Barr takes a hard look at issues of pension reform in industrial countries and considers the choices policymakers face in designing a good plan.

The IMF's Heavily Indebted Poor Countries (HIPC) Initiative is the first comprehensive international effort to reduce the debt of the poorest countries. Our third article reviews how the resources being freed through this debt relief will enable governments to spend more on such public services as health care and primary education.

Jagdish Bhagwati, in his Point of View, condemns the persistence of protectionism on the part of rich countries against the labor-intensive products made in poor countries. But he also reminds developing countries that their own trade policies are often the cause of their poor export performance. David Dollar and Aart Kraay consider the effects of increased participation by developing countries in international trade. They conclude that, contrary to popular belief, increased trade has strongly encouraged growth and poverty reduction in developing countries.

The Suez crisis of 1956 proved to be the first major international crisis to require a substantial financial involvement from the IMF. Taking a historical perspective almost forty-five years later, James Boughton asks if it was not also in some respects the first financial crisis of the twenty-first century.

Other articles in this issue discuss the lessons for developing countries from California's electric power crisis, "state capture" in transition economies, intergovernmental relations in Russia, a World Bank-supported initiative in the city of Odessa that can serve as a model for reform in other Eastern European cities, public-private partnerships, and the tricky issues of water management in the Middle East and other regions. Our Bulletin section carries excerpts from a recent speech by Horst Köhler, Managing Director of the IMF, in which he gives his strong support to a new initiative by African leaders to address the challenges their countries face.

Ian S. McDonald