WHAT DO WE KNOW ABOUT THE POLITICAL-ECONOMY OF ECONOMIC-POLICY REFORM

The recent wave of democratization in developing countries and in form erly communist ones has sparked renewed interest in the relation betwe en politics and economic adjustment. Adjustment programs, however well designed in a technical economic sense, are often politically difficu lt to launch and, once launched, to keep afloat. Success in implementi ng an adjustment program may depend on a government's skill in generat ing political support and holding off the opposition. This article exp lores the politics of economic reform, drawing on country studies by p olitical scientists and country specialists, the growing theoretical l iterature by economists, and the findings of a World Bank research pro ject on the political economy of adjustment in new democracies. The ar ticle examines three broad clusters of variables: institutional charac teristics of the political system, aspects of the internal and externa l economy, and the design of the reform program. It also considers the relevance of political analysis for policy-makers and for internation al financial institutions.