Economic Reform in Developing Countries
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Economic Reform in Developing Countries

Reach, Range, Reason

Edited by José María Fanelli and Lyn Squire

This book offers insights into the process of economic reform in developing countries. It is organized around three factors that are critical to the success of any reform. According to Nobel Laureate Amartya Sen, these key dimensions are Reach, Range, and Reason. ‘Reach’ refers to the ability of reform to be person-centered and evenhanded, reaching all individuals in society. ‘Range’ considers the institutional reforms and policy changes necessary to implement change and the possible ripple effects on other policies and populations. Finally, ‘Reason’ captures the importance of constantly asking why a particular reform has been selected.
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Chapter 1: Economic Transition and Income Distribution in Hungary, 1987–2001

István György Tóth


István György Tóth In his foreword to this book, Amartya Sen uses long periods of Chinese and Indian history to establish his argument that reform must be designed and evaluated on the basis of ethical foundations which emphasize people and inclusion. This chapter focuses on a much shorter period: Hungary’s transition from socialism to capitalism, roughly from 1987 to 2001. The institutional coverage, however, is at least as broad as Sen’s examples. The ‘Great Transformation of Central and Eastern Europe’, as János Kornai dubbed the era (2005), influenced all spheres of life, changed way people interact and reshaped the institutions of politics and economics. Since the particular effects of various single reform steps are difficult to isolate, it will not even be attempted here. Rather, I speak about ‘reform’ in very broad terms, meaning the complex set of transition processes leading from the state redistributive systems to a market economy. Professor Sen argues that reform should bring something to the lives of people. It should bring improvements for all people, especially those at the bottom of society. Thus, economic reach should include effects on growth, poverty and inequality; social reach should embrace the spread, availability and quality of social services like health care and political reach should include the possibility of criticizing current government practices. In this chapter I limit the argument to an analysis of economic reach, and I focus on income distribution and the poverty-alleviation effects of broad reforms in Hungary. As Sen predicted,...

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