Kosova must eventually emerge as an independent country within its present borders.

The U.S. government emphasizes the importance of stable political leadership as a necessary condition for economic growth. Contrary to this view, I show that high leadership turnover is strongly associated with high economic growth both in autocracy and in democracy. The effect of "unstable" leadership is stronger in democracies than autocracies because democratic political systems have institutions that promote competition over policy ideas rather than over the distribution of private benefits to cronies. Two institutions are shown to be particularly important in promoting such public goods as a fair legal system, transparent decision making and accounting, a strong national defense, and a healthy, growth-oriented infrastructure. These two institutions are a large selectorate (the set of people with a say in choosing leaders) and a large winning coalition (the set of people whose support keeps the incumbent in office).

Political leaders are eager to stay in office and, contrary to the neoclassical economic model, are not benign agents of the people in whose name they lead. Because autocrats depend on small groups of supporters, they emphasize the use of private benefits to their cronies as the means to gain political loyalty and stay in office. This means that they generally have little incentive to pay attention to the overall quality of their public policies.

Democrats, in contrast, require the support of a large coalition to stay in power. Because private rewards have to be spread thinly to many people, democrats find it easier to compete for office by providing public goods that benefit everyone rather than private benefits for a few cronies. This means that, in democracies, political competition is over policy ideas. Two effects follow from the fact that democratic leaders must build large coalitions: Democratic leaders provide better policies to improve their chances of surviving in office, and because competition is over policy ideas, they are more easily turned out of office in favor of a political challenger than are autocrats. Thus, autocrats have longer terms in office and produce less-efficient economic growth. The U.S. government emphasis on stable leadership as a necessary condition for growth is mistaken and can lead to global economic contraction rather than expansion.

In July 1944, delegates from forty-four nations gathered in Bretton Woods, New Hampshire, to design a postwar international monetary system that would promote world trade, investment, and economic growth. The framers created the International Monetary Fund (IMF or fund) to supervise the new "Bretton Woods monetary regime" that sought to keep national currencies convertible at stable exchange rates and to provide temporary, low-cost financing of balance-of-payments deficits resulting from misaligned exchange rates.

In reality, the framers of the Bretton Woods regime created an international price-fixing arrangement enforced by the IMF. After joining the fund, each member country declared a value for its currency relative to the U.S. dollar. The U.S. Treasury, in turn, tied the dollar to gold by agreeing to buy and sell gold to other governments at $35 an ounce; the inflation of the 1960s, however, made the U.S. commitment to sell gold at that price unsustainable. To preserve U.S. gold reserves, President Richard Nixon closed the gold window in August 1971, effectively uncoupling the dollar from gold and ending the fund's original mission of supervising a system of pegged exchange rates. Looking for a new mission, the IMF quickly evolved into a financial medic for developing countries. Beginning in the early 1970s, the IMF skillfully used a series of global economic crises to increase its capital base and financing activities.

Has the expansion of IMF financing activities alleviated the balance-of-payments problems of member countries and encouraged prudent, progrowth economic policies? The evidence, much of it supplied by the IMF, demonstrates that the fund does more harm than good. Historical studies as well as recent initiatives in Mexico, East Asia, and Russia reveal that IMF financing programs, which rarely prescribe appropriate economic policies or sufficient institutional reforms, are at best ineffective and at worst incentives for imprudent investment and public policy decisions that reduce economic growth, encourage long-term IMF dependency, and create global financial chaos.

It is time to scrap the IMF and strengthen market-based alternatives that would promote an orderly and efficient international monetary system. Key reforms include floating exchange rates, internationally accepted accounting and disclosure practices, unfettered private financial markets, and fundamental legal, political, and constitutional rules that would allow free markets to emerge and countries to achieve self-sustaining economic growth and development.

July 1, 1998, marks the first anniversary of Hong Kong under Chinese rule. How has Hong Kong fared during its first year as the newly created Hong Kong Special Autonomous Region of China (HKSAR)? The one positive story was the HKSAR's successful defense of the fixed link between the Hong Kong dollar and the U.S. dollar, which serves as backing for Hong Kong currency. In almost every other respect, the people of Hong Kong are worse off than they were during the last years of British colonial rule. The greatest setback was in the political arena. Nearly two million Hong Kong residents lost the right to vote in the May 24, 1998, elections for thirty of the sixty representatives of the HKSAR's legislature, who were chosen from functional constituencies. In general, the principle of one man, one vote was violated in favor of extremely complicated, three-tiered, rigged electoral arrangements to ensure that pro-China candidates would constitute a legislative majority. Several civil liberties were eliminated or reduced. Mainland Chinese cronyism was reflected in the purchase of substantial stakes in Hong Kong firms by Hong Kong branches of mainland firms at a substantial discount to market prices, until the Asian financial crisis transformed connections with mainland business and political organizations from an asset into a liability. The stock and property markets lost up to half their peak August 1997 value. English-language education was curtailed over the objections of parents and students as numerous schools that formerly taught in English were converted into Chinese-language schools.