Corporate Governance Task Force Meeting
September 25, 2003
New York, NY
Notes taken by Tomasz Michalski.
Bolton: What is corporate governance?
This is what I picked up from the NYT on Monday. It's not very encouraging for us. (shows slide) Here's our attempt to organize a few thoughts. What are the key issues for corporate governance in developing countries? We thought we'd take a mainstream approach. This is a very widespread view in the economics profession, a very simple textbook view . Income per capita is a function of hours worked and hourly productivity and the view is, well, what explains higher per capita income in the west, which is about $100 per hour, the difference between the US and a developing country, which is about $2, is that the US has a bigger stock of capital . You make those observations and you conclude from there that the main problem of development is really a problem of transferring capital from a rich to a poor country a lack of social capital and trade barriers, and this is really the consensus .
[Neoclassical perspective on development: income per capita is a function of hours worked and hourly productivity; higher physical or human capital increases hourly productivity; the lower the trade distortions and taxes are the higher is the marginal revenue product.
According to this, the main problem of development is thus how to transfer capital from rich to poor countries. The main obstacles to development are then lack of protection of capital income, trade barriers, rule of law etc.]
Millennium Challenge Account and US policy linking corporate governance with development aid is directly inspired by this analysis.
Is protection of capital income really the panacea of economic development? How does one go about protecting capital income? What form of corporate governance, what rules should be applied? How does one solve the enforcement problem?
Protecting capital income... [continues]
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