Dani Rodrik is an expert in international economics, globalisation, economic growth, development and political economy. Among other degrees, he has received a PhD. in Economics and he has broad experience as a professor of International Political Economy.
This book consists of a collection of some of Rodrik’s previous published essays written between 2000 and 2006 on various facets of development and globalisation. His aim – mentioned in the introduction – is to explore whether economic growth is the most powerful instrument for reducing poverty. This is backed by a considerable amount of economic analyses, history and policy studies of different nations. His analysis are to provide recommendations for long-term development and future policymaking. However Rodrik does not end his book addressing specific recommendations, he rather suggests that in order to promote economic growth and to reduce poverty, unique strategies should be implemented in every single country and governments should work closely together with institutions. Not in any strategy globalisers are right, nor are the anti-globalisers.
Rodrik mentions that standard recipes of economic conformism – including privatising, liberalising, and deregulating – are encountering difficulties. The ‘Washington Consensus’ saw a couple of windows of opportunity to come up with more sophisticated and balanced ideas that would serve the interests of the people in developing and transition countries, rather than the elites only. Nowadays there is some degree of institutional learning in the direction of a more flexible and country-specific approach to development strategies, partly due to the economic success of countries that did not follow the Washington Consensus (China and South Korea). Rodrik: “it is difficult to identify cases of high growth where unorthodox elements have not played a role”. [Unorthodox measures are policies that can be located somewhere between the Washington Consensus and purely state-led strategies.] One option is an active industrial policy implemented by strong governments directing capital in a particular direction in order to climb the ladder of industrialisation and productivity. Like South Korea’s alternating strategy of export orientation and import substitution combined with a »heavy- handed interventionism« in the field of exchange rate and wage policy is an illustrious example of this. Consequently, development and growth are always the product of a “contingent relation between the economic environment and policy implications”.
His work, which is divided into three sections: economic growth, institutions and globalisation, is not particularly readable. Unfortunately the collection lacks coherence, jumps from one story into the other, and from one chapter to the other. Besides that, the fulfilment of his aim is not clear in his final conclusion; there is no final conclusion. Furthermore, Rodrik’s findings were sometimes contradicting. For example, Rodrik has given a lot of importance to institutions throughout his book. One of Rodrik’s main findings include that institutions should be introduced to developing countries gradually. When he talks about the governance of economic globalisation in chapter 7, he claims that, in order to reduce poverty there should be more international economic integration. To achieve this integration he suggests that multilateral institutions should be given more power and authority. However contradicting to this suggestion, in chapter 9 Rodrik claims that this mentioned strategy is not at all helpful in poor nations. In this chapter he indicates that developing countries should develop their own strategies of building institutions on their own pace.
Secondly, concerning economic growth and the building of successful institutions Rodrik gives examples of several success stories. For example in Chapter 1, he prizes the Chinese Township and Village Enterprises, which he sees as ‘institutional innovation’. However, on the other hand Rodrik is clearly in favour of democratic political systems and China definitely does not support democracy. Even though the above is somewhat contradicting, Rodrik, while he believes that democracy is the best system in which to promote economic growth, he is not afraid to think out of the box and therefore does not deny that non-democratic countries can offer success stories that can be learned of.
Regulation of markets is common sense across all economic paradigms; governance of markets falls within the paradigm of macroeconomic management, which is generally associated with Keynesianism’s of different varieties (neo-, post-, monetary). Rodrik avoids such labelling and would probably prefer to be put into the institutionalist corner, which is probably the most unsuspicious playground for a number of unconventional economic ideas. “Global economic governance would need institutions such as a genuine international lender of last resort, as well as national social security institutions and participatory political regimes, which tend to deliver higher-quality growth. Democracy (in a broader sense) is the »meta-institution« that draws out and piles up local knowledge and thereby helps build better institutions.” Rodrik’s rather forceful understanding of democracy is based on his evidence that it delivers stability, predict- ability, and better distributional outcomes.
The last part of the book, deals with globalisation, participation and the concept of sovereignty, named as the »trilemma« of global economics and national politics.
Under current structures, capital mobility, fixed exchange rates, and monetary autonomy do not go together, which is why open economies seem to be wearing a »Golden Straitjacket,« meaning a »Pepsi or Coke?« style reduction of political choices (p. 201). Rodrik does his case a disservice here. His intention is to argue in favour of a progressive global economic governance (a re-creation of the Bretton Woods compromise in the short run, and a global federalism in the long run), but in the end this third message of the book might even provide a boost to mainstream recipes. Caplan is not arguing against trade, but “the relevant point is that the benefits of trade openness are now greatly oversold”.