Chris Blattman

Economic theory, I’d like you to meet political reality. Political reality, I believe you already know economic theory.

I have just finished Dani Rodrik’s Globalization Paradox. It’s difficult to encapsulate a book that ranges so broadly, with many bloggable bits, but here’s a thought that kept nagging throughout: As Polanyi was to the self-regulating and unbridled market in the 20th century, so is Dani to self-regulating and unbridled globalization in the 21st.

I wonder if that’s a comparison that would make Dani cringe? I hope not. It’s meant as a compliment.

Published in 1944, after a turbulent 30 years, The Great Transformation was Polanyi’s way of grabbing capitalism by the neck and sticking its nose in the mess it made. After a turbulent few years in the OECD economy, and a more turbulent decade or two in emerging markets, Dani does something similar. His argument: Ever freer trade has little growth benefit, and robs poor countries of the chance to develop industry in the same way as their rich cousins. Ever freer capital flows, meanwhile, can be blamed for volatility and financial crises in emerging markets. Both are incompatible with the twin goals of sovereignty and democracy.

I buy the bulk of what Dani has to say, though I’m not sure that I believe his prescriptions will work for the poorest areas of the planet, most of all sub-Saharan Africa. His prescriptions seem to require a much more coherent state, and professional bureaucracy, and stable polity, than most nations can boast. In this third-best environment, could Asia-style industrial and growth policy cause more harm than good? I would have liked to see this explored. The arguments seem to hold more force for middle income countries — the Turkeys and Perus and South Africas of the world — than for the Ugandas and Liberias.

Here is a WashPo review. Here is Matt Yglesias. The book has gotten far less media and blog attention than I would have expected. It ought to be the must-read development book of the year. Do buy and read it.

2 Responses

  1. Governments all over Africa are asking for help with industrial policy! Take Malawi for example, they very effectively started the fertilizer program that has boosted ag. Output enormously. Now they are unsure what to do with the surplus. They have shown they can make things happen but they now want our (ifpri’s) advice on the way forward. Botswana is another country that is looking for advice. They have a very capable govt but are in the unfortunate situation of being landlocked , being a very very small country and having a high rate of hiv. They are considering now an emphasis on services but they have sought the advice of people like Ricardo haussman on the way forward (you will hear more about this in accra). and liberia’s president is Ellen Johnson sirleaf for god’s sake. She is GREAT.

    Chris your comment reminds me of the guy at the Brookings Forum on Africa who vehemently argued that cash transfers cant work in SSA. He obviously doesn’t know about Ethiopia’s Productive Safety Net Program!!

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