There is also a self-evident need for political decisions concerning the legal system and other matters to do with the necessary foundation or infrastructure both of markets and of society in general. Finally, there is a place for political decisions  BIS Review 2/2002  1  when it comes to basic welfare issues and matters to do with the distribution of the assets that economic activities generate. It is clearly essential that political decisions are reached in such a way that they reflect the interests of a majority. A democratic system presumably provides the best assurance of this. But that does not mean that decision-making by political assemblies is an end in itself. On the contrary, a prudent division of responsibilities between the political system and markets is essential. A great deal of the political debate is, in fact, about this dividing line between political and market decisions. Economists have quite a lot to say about this; they can elucidate the pros and cons of alternative solutions. But it is also a question of value judgements. Moreover, the political system needs to be sufficiently robust to stand up to pressure when special interest groups and other lobbyists try to secure preferential treatment, not to mention outright corruption. Another important matter is to ensure that market systems work properly as regards competition. There are certainly problems in all these respects, not least in developing countries but by no means only there.
We are being tied together more and more by trade, by emerging financial markets and, of course, by modern forms of communication. Secondly, in the past twenty-five years a great many people have become materially better off. Lima’s streets and shops are evidence of this. Yet Peru is not one of the developing countries that have benefited most from the economic developments in recent decades. On the contrary, whereas the developing countries’ aggregate GDP has grown by 89 per cent since 1980, the figure for Peru is 60 per cent. Due to differences in population growth, moreover, the corresponding per capita figures are 35 and 10 per cent. Thirdly, despite all the improvements, many people are still living in poverty. Income gaps in Peru were glaringly large throughout the twentieth century and remain so today. In 1996 the income of the richest fifth of the population was twelve times that of the poorest fifth. Turning now to the developing countries as a group, in the past fifteen years the proportion of poor people has admittedly decreased but it is still the case that the favourable trend in recent decades has failed to benefit large numbers — even practically entire countries, particularly in Africa. To me it is a healthy sign that this situation is raising questions about how the global economy functions. Personally, I do not think we should rest content with aiming for a general improvement in living conditions for everyone.