This Working Paper is one of a series of draft chapters of a book currently under preparation with the provisional title of The Adaptive Economy: Adjustment Policies on Low-income Countries. The purpose of this volume will be to discuss general principles of policies for what has become known as ' structural adjustment' and to set these in the context of longer-term economic development.

Mention was made in Working Paper 31 of government policies that actually hamper flexibility, so that some have written of the necessity to adjust from a wrong set of policies, and of the consequences of policy mistakes as a kind of domestic 'shock'. The task of this Working Paper and the next in the series is to explore ways in which policy can be made part of the solution, rather than part of the problem: how mistakes can be corrected, and how policies can promote adaptation.