Credit Markets for the Poor
The proposals made throughout the book show excellent forethought, particularly regarding the feasibility of changes given existing institutions and political realities. It is a shame that so much time has elapsed since the authors began their work, as it is particularly time-sensitive material. It would have been worthwhile to include a short afterword to illustrate how the political and economic situation has changed in Colombia since the data was gathered, which policy recommendations have been acted on and to what result. As Alesina writes in Chapter 1, "some readers may wonder whether (these) issues ... even matter in a country on the brink of a civil war and rampant violence." He argues that because such problems are rooted in discontent over poor governance, the institutional reforms outlined in the book are a necessary complement to efforts at pacification. However, the book's one weakness lies in the cursory coverage of the serious and related problems of crime and civil war. The authors make it clear that the biggest drag on Colombia's growth has been the weak rule of law, not their relatively strong democratic and macroeconomic institution. It follows logically that the benefits to reform of legal institutions will be high relative to macroeconomic and political reforms. Seemingly disregarding this elementary principle, the authors devote substantially more time and energy to detailing thorough policy prescriptions for macroeconomic and political reform than they do for the comparatively more beneficial reforms of legal institutions. Without a more detailed explanation of how to prevent the kidnappings, drug-related homicide and corruption in the judiciary the potential gains from other reform in Colombia may be impossible to realize.