Balanced Package of Reforms

As part of the effort of mobilizing support for reforms, a strategy can define tradeoffs and can attempt to balance gains and losses for different sub-sectors. Sometimes, it may be difficult to gain approval of a single reform proposal, since the stakeholders that stand to lose from it, even if they are a small minority, may be able to apply sufficient political pressure to derail it. However, if it is packaged with other reforms, those who stand to lose from one of the reforms may perceive enough benefits in the entire package that they will support it.

In the making of Honduran agricultural policy reforms of the early 1990s, farmers' support for free trade was obtained in part by proposing and implementing a system of price bands that automatically increased tariffs when world prices were exceptionally low (and decreased them when prices were high, to the benefit of consumers). Similarly, they agreed to dismantle the system of guaranteed crop prices in part because the measure was packaged together with a proposal to privatize State-owned grain silos in a way that enabled farmers to become part owners of the facilities. If free trade or freeing up prices had been presented alone, it is unlikely it would have gained enough backing to be approved in the circumstances of the time.

Other elements of that reform package contributed to its acceptance as a whole. Large-scale, commercial farmers perceived the possibility that a restructuring of the agrarian reform process could bring an end to policy inconsistencies on that topic and twenty years of land invasions and violent confrontations over land, and therefore they were willing to accept the elimination of the guaranteed price system from which they had been the major beneficiaries, and a removal of quantitative controls on imports, which also had benefitted some of them. The rural poor saw potential benefits from a more effective agrarian reform sector, an elimination of the prohibition of land rentals and from other elements of the package that were targeted on their income group, and accordingly they became willing to abandon the tactic of land invasions which, in any case, sometimes rebounded to their detriment.

It is valuable if a fundamental thrust of a strategy is the creation of a level playing field in the policy arena and the elimination of special economic privileges. This is desirable from a viewpoint of both economic efficiency and equity.1 It can be difficult, however, to reach agreement in this regard. It may be easier to achieve a consensus on the need for uniform treatment of all economic actors when various interests are brought together to participate in formulating a strategy, instead of leaving them to negotiate individually with the government. When a broad range of issues is discussed in a forum with many participants, each player then can see that eliminating privileges for others requires reciprocity: its logic requires all privileges to be surrendered. Developing a widespread consensus on a reform package in this manner can be one of the more effective ways to repeal entrenched privileges, or at least reduce them significantly.

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