Alternative Perspectives on Globalization: Alice Amsden and Dani Rodrik by Mentor Nimani

Alternative Perspectives on Globalization:

Alice Amsden and Dani Rodrik

by Mentor Nimani, MALD '03

Can globalization be taken in a new direction? Leading economists Alice Amsden of MIT and Dani Rodrik of Harvard University addressed this topic on Thursday, November 21, at Tufts University when they were jointly awarded the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. Amsden and Rodrik spoke on "Ruling Out National Development? States, Markets, and Globalization."

GDAE Co- Directors Neva Goodwin and Bill Moomaw pose with

award recipients Dani Rodrik and Alice Amsden

The Leontief Prize was presented by the Tufts University Global Development and Environment Institute (GDAE), affiliated with the Fletcher School of Law and Diplomacy and the Tufts Graduate School of Arts and Sciences. The award recognizes economists who, like Nobelist Wassily Leontief, broaden the field of economics to better comprehend urgent contemporary issues. "As it becomes clear that the free market is leaving behind many in the current wave of globalization, Alice Amsden and Dani Rodrik are demonstrating why theories of free trade have not measured up to their promises," said GDAE co-director Neva Goodwin, who presented the awards.

Dani Rodrik, Professor of International Political Economy at Harvard's John F. Kennedy School of Government, is best known for his work on the globalization process and the impacts of tariff reductions and financial liberalization on developing country economies. Professor Rodrik spoke on the gap between economic theory and practice, discussing the Washington Consensus, which promotes market liberalization in the developing world. Rodrik distinguished between the "original" Washington Consensus, which focused primarily on fiscal discipline, tax reform, trade liberalization, and privatization, and the "Augmented Consensus", which includes legal and political reform, social safety nets, and poverty reduction. However, he faulted even the augmented version as failing to appreciate the realities of developing economies.

Award recipient Dani Rodrik

Using South Korea, Taiwan and China as examples Rodrik pointed out that successful developing economies have typically followed paths that do not conform to the Washington rules. These countries have used industrial policies, capital controls, and tariffs to guide their economies. On the other hand, countries that strictly followed the Washington principles have suffered severe damage to their economies as a result of capital flight, as was the case in the Asian crisis of 1997-1998 and the recent crisis in Argentina.

Professor Rodrik suggested that the transition to high growth does not require the full liberalization called for by the Washington Consensus. Openness to international trade is important, but the historical evidence favors a gradual, sequenced approach to reform. Long-term strategy and institution building is essential. In the Russian case, for example, the experience of privatization failed, in large part, because of the incapacity of state institutions to achieve the conditions in which privatization would be possible.

Professor Amsden, who is the Ellen Swallow Richards Professor of Political Economy at MIT's Department of Urban Studies and Planning, is known for her work on the role of states in newly industrial economies. She asked the question: has the new wave of globalization created new mechanisms that promotes development and business enterprises? Amsden noted that after World War II developing countries were pure learners, borrowers of technology. Despite this, a significant number were able to achieve an upsurge in development, using interventionist trade and industrial policies to create successful industries.

President Bacow, award recipient Alice Amsden, co-director of the GDAE Neva Goodwin and Dean Bosworth

Why did these countries reject market theories? Professor Amsden focused her remarks on the need to develop technologies and build up industrial capacity. Thus, Korea and Taiwan moved from textile to steel technology, then to high technology, accompanied by a political move from autocracy to democracy. These and other states that succeeded economically after WWII all had some manufacturing experience. This pre-war foundation gave investors confidence and attracted capital. These countries typically created relatively corruption-free zones where subsidies were conditioned on performance.

Amsden pointed out the world's richest countries do not follow the Washington consensus rules that they preach. "In these countries you see promotion of science and technology, acceptable under the World Trade Organization, which does not prohibit promoting industry."

Moreover, middle-income nations, such as Egypt and other Middle Eastern countries, have a post-war manufacturing experience, but their economies are now stagnating, with high unemployment and slow growth rates. These countries have difficulty in competing with the developed countries under free trade rules. Free trade alone does not help in modernizing industrial sectors. Foreign investment is hard to come by, and direct investments typically come after growth has started, rather than kick-starting the economy.

Both Amsden and Rodrik emphasized the need for new policies that are more sensitive to the specific conditions of developing countries. Globalization according to the Washington Consensus rules, both speakers agreed, has not provided such adjustments. There is, therefore, a need to examine the experience of successful developing countries, and to allow latitude for individual countries to conduct policies that enable them to emphasize their strengths and promote specific industrial development paths.

Mentor Nimani is a second-year Fletcher student concentrating his studies on International Law and Human Rights. He is also a part time research assistant for Professor Jonathan Harris of GDAE, who has served as a adjunct associate Professor of International Economics at the Fletcher School and is the author of several books on environmental economics.

Pictures taken by Sam Milton, MALD '03.

The opinions expressed in this article are the author's own, and do not necessarily represent those of The Fletcher Ledger.

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