ملاحظات

مقدمة

(1)

This article was eventually published in 2009. See Dani Rodrik and Arvind Subramanian, “Why Did Financial Globalization Disappoint?” IMF Staff Papers, vol. 56, no. 1 (March 2009), pp. 112–38.

الفصل الأول: عن الأسواق والدول

(1)

For the early history of what became known as the Hudson’s Bay Company, see Beckles Willson, The Great Company (Toronto: Copp, Clark Company, 1899).

(2)

The Garraway’s coffeehouse was itself the product of globalization, of course, coffee having made its way from the Near East to Europe during the sixteenth century. Coffeehouses spread like mushrooms in England during the second half of the seventeenth century and became popular gathering places for social and business purposes. See Deborah Hale, “The London Coffee House: A Social Institution” (April 2003), available online at http://www.rakehell.com/article.php?id=206. A fictionalized but highly informative account of the coffee trade during the seventeenth century, centered on Amsterdam, is provided in David Liss, The Coffee Trader (New York: Random House, 2003).

(3)

The online Canadian Encyclopedia is a good source on the voyage of the Nonsuch and other information related to Hudson’s Bay Company. See http://www.thecanadianencyclopedia.com/index.cfm?PgNm=ArchivedFeatures&Params=A256.

(4)

The full text of the charter is available at http://www.solon.org/Constitutions/Canada/English/PreConfederation/hbc_charter_1670.html.

(5)

Peter C. Newman, Empire of the Bay: An Illustrated History of the Hudsons Bay Company (New York: Viking/Madison Press, 1989), p. 39.

(6)

Converted to 2009 U.S. dollars with help from Lawrence H. Officer, “Five Ways to Compute the Relative Value of a UK Pound Amount, 1830 to Present,” MeasuringWorth, 2008. http://www.measuringworth.com/ukcompare/.

(7)

One percent versus 0.4 percent per annum, respectively. See Kevin H. O’Rourke and Jeffrey G. Williamson, “After Columbus: Explaining Europe’s Overseas Trade Boom, 1500–1800,” Journal of Economic History, vol. 62, no. 2 (June 2002), pp. 417–55.

(8)

Following Zeng He’s famous voyages to East Africa in the early fifteenth century, the Chinese emperors inexplicably banned such intercontinental expeditions.

(9)

Ronald Findlay and Kevin H. O’Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton and Oxford: Princeton University Press, 2007), p. 146.

(10)

This summary of their argument is taken from Eric Williams, From Columbus to Castro: The History of the Caribbean 1492–1969 (New York: Random House, 1984), pp. 138-39.

(11)

George Bryce, The Remarkable History of the Hudson’s Bay Company, 3rd ed. (London: Sampson Low, Marston & Co., 1910), pp. 22-23.

(12)

Quoted in Newman, Empire of the Bay, p. 165.

(13)

The actual quote is: “This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another”—Adam Smith, An Enquiry into the Nature and Causes of the Wealth of Nations (1776), Bk. I, chap. 2.

(14)

See David R. Cameron, “The Expansion of the Public Economy: A Comparative Analysis,” American Political Science Review, vol. 72, no. 4 (December 1978), pp. 1243–61.

(15)

Vito Tanzi and Ludger Schuknecht, Public Spending in the 20th Century: A Global Perspective (Cambridge: Cambridge University Press, 2000), chap. 1.

(16)

Dani Rodrik, “Why Do More Open Economies Have Bigger Governments?” Journal of Political Economy, vol. 106, no. 5 (October 1998), pp. 997–1032. For an update on these findings, see Giuseppe Bertola and Anna Lo Prete, “Openness, Financial Markets, and Policies: Cross-Country and Dynamic Patterns,” Unpublished paper, University of Torino, November 2008.

(17)

Jeffrey Immelt, “A Consistent Policy on Cleaner Energy,” Financial Times, June 29, 2005, quoted in Daniel W. Drezner, All Politics Is Global: Explaining International Regulatory Regimes (Princeton: Princeton University Press, 2007), p. 44.

(18)

Some idea about the terms of trade offered to the Indians can be obtained by noting that in one year (1676) the value of merchandise exported from England by the Hudson’s Bay Company was a mere £650 compared to £19,000 for the value of the furs imported—Willson, The Great Company, p. 215. Even with transport and other costs, this enabled a hefty profit for the company.

الفصل الثاني: صعود أول عولمة كبرى وانهيارها

(1)

See Kevin H. O’Rourke and Jeffrey G. Williamson, “Once More: Wlien Did Globalisation Begin?” European Review of Economic History, 8 (2004), pp. 109–17, for estimates of the growth rate of world trade during different historical eras.

(2)

John Morley, The Life of Richard Cobden (London: T. Fisher Unwin, 1905), p. 711. Quoted in the Wikipedia entry http://en.wikipedia.org/wiki/Cobden-Chevalier_Treaty.

(3)

The indispensable source on nineteenth-century tariff history is Paul Bairoch, “European Trade Policy, 1815–1914,” in Peter Mathias and Sydney Pollard, eds., The Cambridge Economic History of Europe, Vol. 8: The Industrial Economies: The Development of Economic and Social Policies (Cambridge: Cambridge University Press, 1989), pp. 11–161.

(4)

Ibid., p. 138.

(5)

Southern interests had managed to insert a clause in the U.S. Constitution that prohibits the taxation of exports. They had failed to anticipate the “Lerner theorem,” posited by the late economist Abba Lerner, which states that import tariffs are identical to export taxes with respect to their economic consequences.

(6)

Robert O. Keohane, “Associative American Development, 1776–1861: Economic Development and Political Disintegration,” in John G. Ruggie, ed., The Antinomies of Interdependence (New York: Columbia University Press, 1983), p. 48.

(7)

One relevant comparison is provided by the experience of Latin America, whose economies remained dependent on large-scale plantation agriculture and authoritarian control mechanisms over the local population. As Engerman and Sokoloff have convincingly argued, this goes far to explain why these economies never developed high-quality representative institutions and good systems of governance. The same point was also made earlier by Barrington Moore, Jr., who speculated that a Southern victory in the Civil War would have left the country “in the position of some modernizing countries today, with a latifundia economy, a dominant antidemocratic aristocracy, and a weak and dependent commercial and industrial class unable and unwilling to push forward toward political democracy.” See Stanley L. Engerman and Kenneth L. Sokoloff, “Factor Endowments, Institutions and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” in Stephen Huber, ed., How Latin America Fell Behind (Stanford, CA: Stanford University Press, 1997); Barrington Moore, Jr., Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (Boston: Beacon Press, 1966), p. 153, quoted in Keohane, “Associative American Development,” p. 73.

(8)

See Bairoch, “European Trade Policy,” who provides a range of estimates.

(9)

Ibid., pp. 88–90.

(10)

And even then, as John Nye reminds us, British enthusiasm for free trade did not extend to a few non-manufactures such as wine, on which tariffs remained high—John V. C. Nye, “The Myth of Free-Trade Britain,” March 3, 2003, available at http://www.econlib.org/library/Columns/y2003/Nyefreetrade.html.

(11)

Cited in Bairoch, “European Trade Policy,” p. 84.

(12)

This is a mercantilist fallacy that free traders, strangely enough, will often hijack whenever it suits their purpose. For example, Samuel Brittan cites approvingly the first part of the Gladstone quote in his critique of contemporary “fair traders,” excluding the mercantilist justification—Brittan, “Free Trade versus ‘Fair Trade’,” Remarks at Foreign Policy Centre meeting with Hilary Benn, January 10, 2005, available online at http://www.samuelbrittan.co.uk/spee39_p.html. A particularly jarring instance was the argument used by some of the proponents of NAFTA that it would increase U.S. employment because of its positive effects on the U.S. trade balance with Mexico. See Gary Clyde Hufbauer and Jeffrey J. Schott, NAFTA: An Assessment, rev. ed., Peterson Institute for International Economics, Washington, DC, October 1993.

(13)

Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2003), p. xxi.

(14)

Kris James Mitchener and Marc Weidenmier, “Trade and Empire,” Working Paper 13765, National Bureau of Economic Research, Cambridge, MA, January 2008, p. 2. These authors do not find any statistically significant difference between the British and other empires with respect to their trade-promoting effects.

(15)

John Gallagher and Ronald Robinson, “The Imperialism of Free Trade,” Economic History Review, new series, vol. 6, no. 1 (1953), pp. 1–15: “in any particular region, if economic opportunity seems large but political security small, then full absorption into the extending economy tends to be frustrated until power is exerted upon the state in question. Conversely, in proportion as satisfactory political frameworks are brought into being in this way, the frequency of imperialist intervention lessens and imperialist control is correspondingly relaxed” (p. 6).

(16)

One troy ounce equals 480 grains of gold, so one grain is equivalent to 0.0021 ounces.

(17)

See Barry Eichengreen, Globalizing Capital: A History of the International Monetary System, 2nd ed. (Princeton and Oxford: Princeton University Press, 2008), p. 29.

(18)

The relationship among the key central bankers of the interwar period is the subject of Liaquat Ahamed’s Lords of Finance: The Bankers Who Broke the World (New York: Penguin, 2009).

(19)

Eichengreen, Globalizing Capital, chap. 2.

(20)

John Maynard Keynes, The Economic Consequences of the Peace (London: Macmillan, 1919), p. 11.

(21)

The speech ends as follows: “Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a Gold Standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.” The “them” in question are the bankers and other northeastern interests. See http://en.wikipedia.org/wiki/Cross_of_gold_speech.

(22)

The efficacy of reputation in sustaining international lending continues to be debated about economists and political scientists. For a recent evaluation, which suggests reputation can be quite effective, see Michael Tomz, Reputation and International Cooperation: Sovereign Debt across Three Centuries (Princeton: Princeton University Press, 2007).

(23)

Quoted in Gallagher and Robinson, “The Imperialism of Free Trade,” pp. 4-5.

(24)

David J. Mentiply, “The British Invasion of Egypt, 1882,” March 23, 2009, available online at http://www.e-ir.info/?p=615.

(25)

Kris James Mitchener and Marc Weidenmier, “Empire, Public Goods, and the Roosevelt Corollary,” Journal of Economic History, vol. 65, no. 3 (September 2,005), pp. 658–92.

(26)

Quoted in Ahamed, Lords of Finance, p. 231.

(27)

Ibid., p. 220. My account of the interwar period relies heavily on Ahamed’s fascinating book.

(28)

Laura Beers, “Education or Manipulation? Labour, Democracy, and the Popular Press in Interwar Britain,” Journal of British Studies, 48 (January 2009), p. 129.

(29)

Ibid.

(30)

Findlay and O’Rourke, Power and Plenty, p. 451.

(31)

The classic study of this experience is Albert O. Hirschman’s National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1980, first published 1945).

(32)

Findlay and O’Rourke, Power and Plenty, Table 8.3. As these authors note (p. 467) there is evidence that countries in the periphery that resorted to protection recovered sooner from (or were less affected by) the Great Depression.

(33)

See Barry Eichengreen and Doug Irwin, “The Protectionist Temptation: Lessons from the Great Depression for Today,” VoxEU.org, March 17, 2009, http://voxeu.org/index.php?q=node/3280.

(34)

Jeffry Frieden, “Will Global Capitalism Fall Again?” Presentation for Bruegel’s Essay and Lecture Series. Brussels, June 2006, available online at www.people.fas.harvard.edu/~jfrieden/Selected%20Articles/Misc_Works/GIobalCapFallAgainWebversion.pdf.

الفصل الثالث: لماذا لا يفهم الجميع أسباب تأييد التجارة الحرة؟

(1)

See the discussion in Andrea Maneschi, “The Tercentenary of Henry Martyn’s Considerations Upon the East-lndia Trade,” Journal of the History of Economic Thought, vol. 24, no. 2 (2002), pp. 233–49. An excellent history of the evolution of free trade doctrine can be found in Douglas A. Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton: Princeton University Press, 1996).

(2)

P. J. Thomas, Mercantilism and the East India Trade (London: P. S. King & Son, 1926), Appendix B.

(3)

Henry Martyn, Considerations Upon the East-lndia Trade (1701), p. 32, reprinted in John R. McCulloch, ed., Early English Tracts on Commerce (Cambridge: Cambridge University Press, 1954), pp. 541–95.

(4)

Paul A. Samuelson, “The Way of an Economist,” in P. A. Samuelson, ed., International Economic Relations: Proceedings of the Third Congress of the International Economic Association (London: Macmillan, 1969), pp. 1–11, quoted at http://www.wto.org/english/res_e/reser_e/cadv_e.htm. The mathematician in question was Stanislaw Ulam.

(5)

Frank W. Taussig, “Abraham Lincoln on the Tariff: A Myth,” Quarterly Journal of Economics, vol. 28, no. 4 (August 1914), pp. 814–20.

(6)

World Values Survey online database (http://www.worldvaluessurvey.org/).

(7)

This can be seen in the cross-tabs that World Values Survey makes available online—ibid.

(8)

Anna Maria Mayda and Dani Rodrik, “Why Are Some Individuals (and Countries) More Protectionist Than Others?” European Economic Review, 49 (August 2005), pp. 1393–1430.

(9)

So Adam Smith was not correct when he famously wrote, in defense of free trade, that “What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom”—Smith, The Wealth of Nations, Bk. IV, chap. 2.

(10)

Regulatory decisions on new technologies can have large economic impacts on particular groups, just like trade policies. In October 2009, for example, when the Food and Drug Administration issued a negative judgment on a drug meant to treat osteoporosis in postmenopause women, the stock of the company that makes the drug fell by more than 2 percent. See Andrew Pollack, “F.D.A. Says No, for Now, to an Amgen Bone Drug,” New York Times, October 19, 2009; http://www.nytimes.com/2009/10/20/business/20amgen.html?_r=l&ref=business.

(11)

Lori G. Kletzer, “Job Displacement,” Journal of Economic Perspectives, vol. 12, no. 1 (Winter 1998), pp. 115–36.

(12)

Wolfgang F. Stolper and Paul A. Samuelson, “Protection and Real Wages,” Review of Economic Studies, 9 (1941), pp. 58–73. The theorem has a number of assumptions, some of which are more restrictive than others, but its central intuition is quite robust.

(13)

Another common mistake is to presume that even if some people lose from trade, most people must gain. See Robert Driskill, “Deconstructing the Argument for Free Trade,” Unpublished paper, February 2007, who interestingly uses as an illustration a New York Times profile which ascribes (wrongly) that view to me!

(14)

The models that do not generate distributional conflict tend to rely on rather special assumptions. For example, it is possible for trade based on scale economies to generate all-around gains, but this obtains only if the trading countries are sufficiently similar in factor endowments and technological capabilities. This scenario may apply to two rich countries, but it would not apply to trade between advanced and developing countries. Similarly, it is possible for trade not to generate distributional conflict when the goods being imported are “non-competing”—that is, there is no domestic production that is displaced. But a common reason why domestic production has disappeared is that import competition has driven it out of existence in an earlier period.

(15)

Dani Rodrik, “The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will It Last?” in S. Haggard and S. Webb, eds., Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York: Oxford University Press, 1994).

(16)

As is shown in Rodrik, ibid., we need two other pieces of information besides tariffs to compute this ratio: the import demand elasticity and the share of imports in GDP. For the purposes of this exercise, I have assumed (generously) values of –2 and 0.2, respectively, for these two parameters.

(17)

Technically, the reason for this is that the efficiency loss from tariffs rises with the square of the tariff, while the distributive effects are linear.

(18)

See Antoine Bouët, “The Expected Benefits from Trade Liberalization: Opening the Black Box of Global Trade Modeling,” Food Policy Review, no. 8, International Food Policy Research Institute, Washington, DC, 2008 (http://www.ifpri.org/sites/default/files/publications/pv08.pdf). This study estimates that the U.S. economy would reap a total gain of 0.1 percent of GDP by 2015 as a consequence of a complete move to free trade in the world, with the bulk of the benefits coming from other nations’ liberalization rather than the United States’ own move to free trade.

(19)

For example, the article I mentioned in a previous chapter on the complementarity between states and markets (“Why Do More Open Economies Have Bigger Governments?”) was published in the flagship journal of the Economics Department at the University of Chicago—the seat of free market orthodoxy if there ever was one. Similarly, a paper I wrote calling into question the widely held view that freer trade has promoted growth around the world was published in a publication of the National Bureau of Economic Research, the premier network for applied economists—Francisco Rodriguez and Dani Rodrik, “Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence” in Ben Bernanke and Kenneth S. Rogoff, eds., Macroeconomics Annual 2000 (Cambridge, MA: MIT Press for NBER, 2001).

(20)

Driskill, “Deconstructing the Argument for Free Trade,” p. 6.

(21)

Ibid., p. 2.

الفصل الرابع: بريتون وودز والجات ومنظمة التجارة العالمية

(1)

John Maynard Keynes, “National Self-Sufficiency,” The Yale Review, vol. 22, no. 4 (June 1933), pp. 755–69. This is the article in which the following famous quote appears: “I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”

(2)

Raymond Mikesell, The Bretton Woods Debates: A Memoir (Princeton: Princeton Dept. of Economics, International Finance Section, Essays in International Finance, no. 192, 1994).

(3)

John Ruggie has called this the “embedded liberalism” compromise. See John G. Ruggie, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” International Organization, vol. 36, no. 2 (Spring 1982), pp. 379–415. I will return to Ruggie’s ideas below.

(4)

John G. Ruggie, “Multilateralism: The Anatomy of an Institution,” International Organization, vol. 46, no. 3 (1992), pp. 561–98.

(5)

These rounds of negotiations were initially small affairs, taking less than a year to complete. The Uruguay Round, which was the round that created the WTO, took eight years to complete. See http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm.

(6)

Indeed, quantitative studies have a hard time explaining the postwar expansion of trade, without placing a lot of emphasis on economic growth itself. The declines in tariffs and transport costs clearly do not go far enough on their own. See Andrew K. Rose, “Why Has Trade Grown Faster Than Income?” Board of Governors of the Federal Reserve System, International Finance Discussion Papers no. 390, November 1990.

(7)

Ruggie, “International Regimes,” p. 393.

(8)

Peter A. Hall and David W. Soskice, eds., Varieties of Capitalism: The Institutional Foundations of Capitalism Oxford and New York: Oxford University Press, 2001).

(9)

Thomas L. Friedman’s The Lexus and the Olive Tree: Understanding Globalization (NewYork: Farrar, Straus & Giroux, 1999), captures the ethos of this era extremely well.

(10)

Susan Esserman and Robert Howse, “The WTO on Trial,” Foreign Affairs, vol. 82, no. 1 (January-February 2003), pp. 130-31.

(11)

The story of the U.S.-Europe dispute over trade in hormone-treated beef is told in Charan Devereux, Robert Z. Lawrence, and Michael D. Watkins, Case Studies in U.S. Trade Negotiations, Vol. 2: Resolving Disputes (Washington, DC: Institute for International Economics), chap. 1.

(12)

Mike Moore, A World Without Walls: Freedom, Development, Free Trade and Global Governance (New York: Cambridge University Press, 2003), p. 114. See also my review of this book—Dani Rodrik, “Free Trade Optimism: Lessons from the Battle in Seattle,” Foreign Affairs, vol. 82. no. 3 (May-June 2003), pp. 135–40.

(13)

Recent estimates suggest that removing all government barriers to trade would yield global “welfare” gains of the order of a mere 0.3 percent of world GDP, an effect that would be barely noticeable in practice. See Bouët, “The Expected Benefits from Trade Liberalization.”

(14)

The travails of the Doha Development Round are chronicled in Paul Blustein, Misadventures of the Most Favored Nations (New York: Public Affairs, 2009).

(15)

Robert Z. Lawrence, Regionalism, Multilateralism, and Deeper Integration (Washington, DC: Brookings Institution, 1996).

(16)

“Krugman’s Conundrum—Economics Focus,” The Economist, April 19, 2008, p. xx. The Krugman study is Paul Krugman, “Trade and Wages, Reconsidered,” Brookings Papers on Economic Activity (Spring 2008), pp. 103–37.

(17)

I had taken a different position in this debate, arguing that there were many channels through which globalization could imperil the incomes and economic security of the low-paid. See Dani Rodrik, Has Globalization Gone Too Far? (Washington, DC: Institute for International Economics, 1997). The empirical studies available at the time had looked at only a few of those channels and therefore had been too quick to dismiss popular concern about trade. The tendency of economists at the time was to dismiss these arguments. Even worse, books like mine could be dangerous because they would end up providing “ammunition to the barbarians,” as Krugman himself warned me in a personal communication before my book was published.

(18)

Wage inequality has stopped growing in the lower half of the distribution, while it keeps increasing in the top half. The gap in wages between production and non-production (e.g., managerial and supervisory) workers has come down since 2000.

(19)

Christian Broda and John Romalis, “Inequality and Prices: Does China Benefit the Poor in America?” University of Chicago Graduate School of Business, March 2008.

(20)

See the discussion by Douglas Irwin, Larry Katz, and Robert Lawrence that follows Paul Krugman’s essay in the Brookings Papers on Economic Activity (Spring 2008), pp. 138–54.

(21)

As measured by the import-penetration ratio.

(22)

The source for this information is Avraham Ebenstein, Ann Harrison, Margaret McMillan, and Shannon Phillips, “Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys,” National Bureau of Economic Research, Working Paper 15107, Cambridge, MA, June 2009.

(23)

Lawrence Summers, “America Needs to Make a New Case for Trade,” Financial Times, April 27, 2008 (http://www.ft.com/cms/s/0/0c185e3a-1478-11dd-a741-0000779fd2ac.html); and Summers, “A Strategy to Promote Healthy Globalization,” Financial Times, May 4, 2008 (http://www.ft.com/cms/s/0/999160e6-1a03-11dd-ba02-0000779fd2ac.html?nclick_check=1).

(24)

Summers, “America Needs to Make a New Case.”

(25)

Alan Blinder, “Offshoring: The Next Industrial Revolution,” Foreign Affairs, vol. 85, no. 2 (March-April 2006), pp. 113–28.

(26)

Ibid., p. 119.

(27)

Jagdish Bhagwati, “Does the U.S. Need a New Trade Policy?” Journal of Policy Modeling, 31 (July-August 2009), pp. 509–14.

(28)

There is a simple explanation for why compensation ex post is never quite credible ex ante. Before a trade agreement is passed, export interests want to minimize opposition from labor and other groups worried about adverse effects, and hence will promise programs such as adjustment assistance to blunt the opposition. But once the agreement is passed, the winners have much less incentive to keep the losers happy. So the promised adjustment assistance will become underfunded and ineffective over time. The history of U.S. trade adjustment assistance has followed this logic, which is why labor unions are rarely mollified these days by promises of expanded adjustment assistance.

الفصل الخامس: حماقات العولمة المالية

(1)

I served for several years as research coordinator for the Group of Twenty-Four, a developing country caucus group within the IMF. The group’s plenary gathering during the IMF annual meetings was emblematic of the treatment ministers from developing nations, save for a few among them, typically received. The World Bank president and the IMF managing director would stroll in at the beginning of the meeting, shake a few hands, read their prepared remarks, and then promptly depart. Their seats would then be filled by Bank and Fund officials several grades their junior, charged with the task of listening to (suffering through?) the presentations by the developing nations themselves.

(2)

Quoted in Rawi Abdelal, Capital Rules: The Construction of Global Finance (Cambridge, MA: Harvard University Press, 2007), p. 156. Abdelal provides an excellent account of the 1997 meetings and the run-up to them.

(3)

Communiqué of the Interim Committee of the Board of Governors of the IMF, IMF Press Release #97–44, September 21, 1997 (http://www.imf.org/external/np/sec/pr/1997/pr9744.htm).

(4)

Stanley Fischer, “Capital Account Liberalization and the Role of the IMF,” Presentation at the Seminar on Asia and the IMF, Hong Kong, September 19, 1997 (http://www.iie.com/fischer/pdf/Fischerl44.pdf).

(5)

Stanley Fischer, “Globalization and Its Challenges,” American Economic Review, vol. 93, no. 2 (May 2003), p. 14. As we shall see when we turn to trade and growth, the evidence on trade liberalization that Fischer refers to was itself quite problematic.

(6)

See Rudiger Dornbusch, “It’s Time for a Financial Transactions Tax,” International Economy (August-September 1996), and Dornbusch, “Capital Controls: An Idea Whose Time Is Past,” in Stanley Fischer, et al., Should the IMF Pursue Capital-Account Convertibility? Essays in International Finance, no. 207, Princeton University, May 1998. My own views at the time are evident in the title of an article included in the same collection as the second Dornbusch piece. See Rodrik, “Who Needs Capital-Account Convertibility?” in Fischer et al., Should the IMF Pursue Capital-Account Convertibility?

(7)

Rodrik, “Who Needs Capital-Account Convertibility?” p. 55.

(8)

In an article with the headline “ASEAN’s Sound Fundamentals Bode Well for Sustained Growth” in International Monetary Fund, IMF Survey, November 25, 1996. Quoted in Jonathan Kirshner, “Keynes, Capital Mobility and the Crisis of Embedded Liberalism,” Review of International Political Economy, vol. 6, no. 3 (Autumn 1999), pp. 313–37.

(9)

Dani Rodrik, “Governing the World Economy: Does One Architectural Style Fit All?” in Susan Collins and Robert Lawrence, eds., Brookings Trade Forum: 1999 (Washington, DC: Brookings Institution, 2000).

(10)

For an elaboration of the Sachs argument, see Steven Radelet and Jeffrey Sachs, “The Onset of the East Asian Financial Crisis.” in Paul Krugman, ed., Currency Crises, (Chicago: University of Chicago Press for the NBER, 2000). The story of the Asian financial crisis and the debates around it is well told in Paul Blustein, The Chastening: Inside the Crisis That Rocked the Global System and Humbled the IMF (New York: Public Affairs, 2001).

(11)

Arthur I. Bloomfield, “Postwar Control of International Capital Movements,” American Economic Review, vol. 36, no. 2, Papers and Proceedings of the Fifty-eighth Annual Meeting of the American Economic Association (May 1946), p. 687.

(12)

John Maynard Keynes, “Activities 1941–1946: Shaping the Post-war World, Bretton Woods and Reparations,” in D. Moggridge, ed., The Collected Writings of John Maynard Keynes, Vol. 26 (Cambridge: Cambridge University Press, 1980), p. 17.

(13)

Abdelal, Capital Rules, p. 48.

(14)

See Eichengreen, Globalizing Capital, p. 119, and the studies cited therein.

(15)

Barry Eichengreen, “From Benign Neglect to Malignant Preoccupation: U.S. Balance-of-Payments Policy in the 1960s,” National Bureau of Economic Research, Working Paper 7630, March 2000.

(16)

Jeffry Frieden provides a nice account. See Jeffry A. Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century (New York: W. W. Norton, 2006), chap. 15.

(17)

This could be done, for example, by manipulating the timing of payments for (ostensibly) trade transactions.

(18)

See Eric Helleiner, “Explaining the Globalization of Financial Markets: Bringing States Back,” Review of International Political Economy, vol. 2, no. 2 (Spring 1995), pp. 315–41.

(19)

Ibid.

(20)

Ibid.

(21)

This account draws heavily on Abdelal, Capital Rules, chaps. 4 and 5.

(22)

Cited in ibid., p. 63.

(23)

The forerunner of the OECD was the Organization for European Economic Co-operation (OEEC), established in 1948 to administer U.S. aid to Europe in the context of the Marshall Plan.

(24)

Abdelal, Capital Rules, pp. 106ff. It is striking in each of these cases how positive the OECD view was on the likely effects of capital flows, just months before financial crises struck.

(25)

As estimated by the Bank of International Settlements. See http://www.forex-brokerage-firms.com/news/currency-markets-rises.htm.

(26)

James Tobin, “A Proposal for Monetary Reform,” Eastern Economic Journal, vol. 4, nos. 3-4 (July–October 1978), pp. 153–59.

(27)

Lord Turner, chairman of the U.K. Financial Services Authority, raised an outcry in August 2009 when he expressed support for a global Tobin tax. This was the first time that a major policy maker from the United States or Britain, the two leading centers of global finance, has come out in favor of the tax.

(28)

Luc Leaven and Fabian Valencia, “Systemic Bank Crises: A New Database,” International Monetary Fund, Working Paper WP/08/224, September 2008.

(29)

Guillermo A. Calvo, “Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes,” in his Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy? (Cambridge, MA: MIT Press, 2005).

(30)

Laeven and Fabian, “Systemic Bank Crises,” p. 25.

(31)

Charles P. Kindleberger, Manias, Panics and Crashes: A History of Financial Crises (New York: Basic Books, 1989).

(32)

Carmen M. Reinhart and Kenneth S. Rogoff, “This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises,” Unpublished paper, Harvard University, April 16, 2008, p. 7 (http://www.economics.harvard.edu/faculty/rogoff/files/This_Time_Is_Different.pdf).

(33)

Research at the IMF has shown that the volatility of consumption in the developing economies rose under financial globalization—M. Ayhan Kose, Eswar S. Prasad, and Marco E. Terrones, “Growth and Volatility in an Era of Globalization,” IMF Staff Papers, vol. 52, Special Issue (September 2005). The absence of a positive relationship between capital inflows and economic growth is shown in Eswar Prasad, Raghuram G. Rajan, and Arvind Subramanian, “Foreign Capital and Economic Growth,” Brookings Papers on Economic Activity, 1 (2007), pp. 153–209.

الفصل السادس: ثعالب وقنافذ عالم المال

(1)

Isaiah Berlin, The Hedgehog and the Fox: An Essay on Tolstoy’s View of History (New York: Simon & Schuster, 1953).

(2)

Using economists’ jargon, this distinction corresponds to the difference between first-best and second-best economic analysis. The hedgehog applies first-best principles while the fox applies second-best tools.

(3)

Stanley Fischer, “Capital Account Liberalization and the Role of the IMF,” September 19, 1997, http://www.imf.org/external/np/speeches/1997/091997.htm.

(4)

Frederic S. Mishkin, The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich (Princeton: Princeton University Press, 2006).

(5)

Two prominent economists who are strong supporters of globalization but have expressed doubts on the wisdom of freeing up capital flows are Jagdish Bhagwati and Martin Wolf.

(6)

Frederic S. Mishkin, “Why We Shouldn’t Turn Our Backs on Financial Globalization,” IMF Staff Papers, vol. 56, no. 1 (2009), pp. 150ff.

(7)

Quoted at http://www.imf.org/external/np/sec/mds/1996/MDS9611.htm.

(8)

Mishkin, “Why We Shouldn’t Turn Our Backs,” p. 106.

(9)

Michael Lewis, “The End,” Portfolio.com, Nov. 11, 2008 (http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?print=true#).

(10)

James Tobin, “A Proposal for International Monetary Reform,” Eastern Economic Journal, 4 (July–October 1978), pp.153–59.

(11)

The Tobin tax rate that is contemplated usually lies in the vicinity of 0.10 to 0.25 percent. Consider, e.g., a tax of 0.10 percent. For a speculator to be willing to pay this tax on a very short term transaction that he plans to undo within a day, he must expect a return from the transaction of at least 0.20 percent on a daily basis (so that he can more than cover the tax on the round trip), or 7.4 percent on an annual basis. The tax would be prohibitive for any return differential below that threshold. Therefore it would curb financial transactions in pursuit of small short-term returns and would allow interest rates to diverge in different jurisdictions.

(12)

See Joseph E. Stiglitz, Globalization and Its Discontents (New York: W. W. Norton, 2002).

(13)

Jagdish Bhagwati, “The Capital Myth: The Difference Between Trade in Widgets and Dollars,” Foreign Affairs, vol. 77, no. 3 (May-June 1998), pp. 7–12.

(14)

Jagdish Bhagwati, In Defense of Globalization (New York: Oxford University Press, 2004), p. 239.

(15)

M. Ayhan Kose, Eswar Prasad, Kenneth Rogoff, and Shang-Jin Wei, “Financial Globalization: A Reappraisal,” IMF Staff Papers, vol. 56, no. 1 (April 2009), pp. 8–62.

(16)

Louise Story, Landon Thomas, Jr., and Nelson D. Schwartz, “Wall St. Helped to Mask Debt Fueling Europe’s Crisis,” New York Times, February 13, 2010 (http://www.nytimes.com/2010/02/14/business/global/14debt.html?emc=etal).

(17)

The story comes via Ragnar Nurkse, a leading economist of the interwar era, and is quoted in Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century, p. 197.

(18)

The best evidence for this comes, somewhat paradoxically, from research done at the IMF. See M. Ayhan Kose, Eswar S. Prasad, and Marco E. Terrones, “Growth and Volatility in an Era of Globalization,” IMF Staff Papers, vol. 52, Special Issue (September 2005).

(19)

“Crisis may be worse than Depression, Volcker says,” Reuters, February 20, 2009 (http://uk.reuters.com/article/idUKN2029103720090220).

(20)

Craig Torres, “Bernanke Says Crisis Damage Likely to Be Long-Lasting,” Bloomberg News Service, April 17, 2009.

(21)

David A. Moss, “An Ounce of Prevention: Financial regulation, moral hazard, and the end of ‘too big to fail,’” Harvard Magazine (September-October 2009) (http://harvardmagazine.com/2009/09/financial-risk-management-plan?page=0,1).

(22)

Enrque G. Mendoza and Vincenzo Quadrini, “Did Financial Globalisation Make the US Crisis Worse?” VoxEU.org, November 14, 2009 (http://voxeu.org/index.php?q=node/4206).

(23)

And not just financial havens. The reason that AIG’s credit-default swap operations were based in London is that this was a much less heavily regulated environment than New York.

(24)

Simon Johnson, “The Quiet Coup,” The Atlantic (May 2008) (http:// www.theatlantic.com/doc/200905/imf-advice).

(25)

Johnson and I had often taken stands on the opposite sides of the argument, while remaining friends and respectful of each other’s views. Johnson had been critical of my argument that capital controls had helped Malaysia avoid an even worse downturn during the Asian financial crisis. When my skeptical views on financial globalization appeared in the financial press, Johnson was quick with his letters to the editor taking me and my co-author to task for underselling the benefits of free capital flows and for overlooking the “collateral benefits” argument in their favor. These letters, one in The Economist and the other in the Financial Times, are reproduced on the IMF Web site at http://www.imf.org/external/np/vc/2008/030608.htm and http://www.imf.org/external/np/vc/2008/050108.htm. As late as October 2007, Johnson was reluctant, as the chief economist of the IMF, to recommend stronger financial regulation because he thought it was unclear whether the problems in financial markets required more or less regulation. See Transcript of a Press Briefing by Simon Johnson, Economic Counsellor and Director of the IMF’s Research Department, on the Analytic Chapters of the World Economic Outlook, Washington, DC, October 10, 2007 (http://www.imf.org/external/np/tr/2007/tr071010.htm).

(26)

Tim Fernholz, “The Unlikely Revolutionary,” The American Prospect, online, April 22, 2009 (http://www.prospect.org/cs/articles?article=the_unlikely_revolutionary).

(27)

A number of good articles and books have recently underscored this point. See in particular Barry Eichengreen, “The Last Temptation of Risk,” The National Interest, April 30, 2009; John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar, Straus & Giroux, 2009); and Yves Smith, ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism (New York: Palgrave/Macmillan, 2010).

(28)

In February 2010, the IMF published a little-noticed policy note which contained a remarkable admission. Under certain conditions, the IMF’s economists wrote, capital controls are “justified” to deal with capital inflows. So the IMF too has come a long way from its enthusiastic embrace of finance fetishism during the 1990s. Perhaps the foxes are winning after all. See Jonathan D. Ostry, et al., “Capital Inflows: The Role of Controls,” IMF Staff Position Note, February 19, 2010.

الفصل السابع: بلدان فقيرة في عالم ثري

(1)

These figures are in 1994 dollars. Here is how they are arrived at. The median “poor” country has a per capita income of $868 and an income share for the top decile of 35 percent. Therefore the average income of a rich person in a poor country is 10 × 868 × 0.35 = $3039. The median “rich” country has a per capita income of $34,767 and an income share for the bottom decile of 2.7 percent. Therefore the average income of a poor person in a rich society is 10 × 34,767 × 0.027 = $9,387.

(2)

Angus Maddison, Growth and Interaction in the World Economy: The Roots of Modernity (Washington, DC: American Enterprise Institute, 2004), Table 2.

(3)

Lant Pritchett. “Divergence, Big Time” Journal of Economic Perspectives, vol. 11, no. 3 (Summer 1997), pp. 3–17.

(4)

Angus Maddison, The World Economy: A Millennial Perspective (Paris: OECD Development Centre, 2001).

(5)

Daron Acemoglu, Simon Johnson, and James A. Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, vol. 91, no. 5 (December 2001), pp. 1369–1401. See also Stanley L. Engerman and Kenneth L. Sokoloff, “Factor Endowments, Institutions and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” in Stephen Huber, ed., How Latin America Fell Behind (Stanford, CA: Stanford University Press, 1997).

(6)

Şevket Pamuk and Jeffrey G. Williamson, “Ottoman De-Industrialization 1800–1913: Assessing the Shock, Its Impact, and the Response,” National Bureau of Economic Research, Working Paper 14763, March 2009.

(7)

Jeffrey G. Williamson, “Globalization and Under-development in the Pre-Modern Third World,” The Luca d’Agliano Lecture, Turin, Italy, March 31, 2006.

(8)

Oded Galor and Andrew Mountford, “Trading Population for Productivity: Theory and Evidence,” Review of Economic Studies, vol. 75, no. 4 (October 2008), pp. 1143–1179.

(9)

I am referring here to manufacturing output levels in per capita terms.

(10)

Paul Bairoch, “International Industrialization Levels from 1750 to 1980,” Journal of European Economic History, 11 (Spring 1982), pp. 269–310.

(11)

The tale of the contrasting paths of Argentina and the United States is told in Alan Beattie, False Economy: A Surprising Economic History of the World (New York: Riverhead Books, 2009), chap. 1.

(12)

Ichirou Inukai and Arlon R. Tussing, “Kogyo Iken: Japan’s Ten Year Plan, 1884,” Economic Development and Cultural Change, vol. 16, no. 1 (October 1967), p. 53.

(13)

For varying accounts of the role played by the state and private industry in the takeoff of cotton spinning in Japan, see W. Miles Fletcher, “The Japan Spinners Association: Creating Industrial Policy in Meiji Japan,” Journal of Japanese Studies, vol. 22, no. 1 (Winter 1996), pp. 49–75, and Gary Saxonhouse, “A Tale of Japanese Technological Diffusion in the Meiji Period,” Journal of Economic History, vol. 34, no. 1 (March 1974), pp. 149–65.

(14)

Japan as Number One: Lessons for America, the title of a bestselling book of the 1980s, captures well the aura of its manufacturing prowess at the time—Ezra F. Vogel, Japan as Number One: Lessons for America (Cambridge, MA: Harvard University Press, 1979).

(15)

The story of Japan’s drive to get the World Bank to pay more attention to the Japanese model is told in Robert Wade, “Japan, the World Bank, and the Art of Paradigm Maintenance: The East Asian Miracle in Political Perspective,” New Left Review, 217 (May-June 1996), pp. 3–36.

(16)

My views on the report were written up in Dani Rodrik, “King Kong Meets Godzilla: The World Bank and the East Asian Miracle,” in Albert Fishlow, et al., Miracle or Design? Lessons from the East Asian Experience, Overseas Development Council, Policy Essay No. 11, Washington, DC, 1994.

(17)

My interpretation of these two countries’ takeoff is in Dani Rodrik, “Getting Interventions Right: How South Korea and Taiwan Grew Rich,” Economic Policy, 20 (1995), pp. 55–107. The two best books on the subject remain Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton University Press, 1990), and Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989).

(18)

See Shaohua Chen and Martin Ravallion, “China Is Poorer Than We Thought, But No Less Successful in the Fight Against Poverty,” World Bank, Policy Research Working Paper No. 4621, Washington, DC, May 2008.

(19)

Sebastian Heilmann, “Policy Experimentation in China’s Economic Rise,” Studies in Comparative International Development, vol. 43, no. 1 (Spring 2008), pp. 1–26.

(20)

Lawrence J. Lau, Yingyi Qian, and Gerard Roland, “Reform Without Losers: An Interpretation of China’s Dual-Track Approach to Transition,” Journal of Political Economy, vol. 108, no. 1 (February 2000), pp. 120–43.

(21)

Yingyi Qian, “How Reform Worked in China,” in Dani Rodrik, ed., In Search of Prosperity: Analytic Narratives of Economic Growth (Princeton: Princeton University Press, 2003).

(22)

Dani Rodrik, “What’s So Special About China’s Exports?” China & World Economy, vol. 14. no. 5 (September-October 2006), pp. 1–19.

(23)

John Sutton, “The Auto-Component Supply Chain in China and India: A Benchmarking Study,” Unpublished paper, London School of Economics, 2005.

(24)

Jean-François Huchet characterizes China’s policies as of the mid-1990s thus: “China’s technological acquisition strategy is clear: It allows foreign firms access to the domestic market in exchange for technology transfer through joint production or joint ventures”—Huchet, “The China Circle and Technological Development in the Chinese Electronics Industry,” in Barry Naughton, ed., The China Circle: Economics and Electronics in the PRC, Taiwan, and Hong Kong (Washington, DC: Brookings Institution Press, 1997), p. 270.

(25)

See ibid., and Kenneth L. Kraemer and Jason Dedrick, “Creating a Computer Industry Giant: China’s Industrial Policies and Outcomes in the 1990s,” Center for Research on Information Technology and Organizations, UC Irvine, 2001.

(26)

Dic Lo and Thomas M. H. Chan, “Machinery and China’s Nexus of Foreign Trade and Economic Growth,” Journal of International Development, vol. 10, no. 6 (1998), pp. 733–49.

(27)

See Dani Rodrik, “The Real Exchange Rate and Economic Growth,” Brookings Papers on Economic Activity, 2 (2008).

(28)

Josh Lerner, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do About It (Princeton: Princeton University Press, 2009), p. 42. Lerner documents the role of public funding and military contracts in helping Silicon Valley get started, providing a useful counterweight to the mythology that the high-tech start-ups around Stanford University were the product of free markets alone.

الفصل الثامن: أصولية التجارة في المناطق الاستوائية

(1)

James E. Meade, The Economic and Social Structure of Mauritius (London: Methuen & Co., 1961), p. 3.

(2)

Ibid., p. 26.

(3)

Arvind Subramanian, Trade and Trade Policies in Eastern and Southern Africa, International Monetary Fund, Occasional Paper 196, Washington, DC, 2001.

(4)

See Arvind Subramanian and Devesh Roy, “Who Can Explain the Mauritian Miracle? Meade, Romer, Sachs, or Rodrik?” in Rodrik, ed., In Search of Prosperity: Analytic Narratives on Economic Growth, p. 228. For case studies of partnerships between domestic groups and foreign investors, see R. Lamusse, “Mauritius,” in Samuel M. Wangwe, ed., Exporting Africa: Technology, Trade, and Industrialization in Sub-Saharan Africa (London and New York: UNU/INTECH Studies in Technology and Development, Routledge, 1995), chap. 12.

(5)

There were a few exceptions, of course. Peter T. Bauer was the leading contrarian, arguing for a small state. See Bauer, Economic Analysis and Policy in Under-developed Countries (Cambridge: Cambridge University Press, 1957).

(6)

For John Williamson’s own account of how the Washington Consensus was developed and of its evolution over time, see Williamson, “A Short History of the Washington Consensus,” Peterson Institute for International Economics, Washington, DC, September 2004, available online at http://www.iie.com/publications/papers/williamson0904-2.pdf.

(7)

Jeffrey D. Sachs and Andrew M. Warner, “Economic Reform and the Process of Global Integration,” Brookings Papers on Economic Activity, 1 (1995), pp. 1–95.

(8)

“We therefore argue against the notion of a low-income ‘development trap’ since open trade policies (and correlated market policies) are available to even the poorest countries,” Sachs and Warner wrote (ibid., p. 52, n. 73).

(9)

My own critique of the Sachs and Warner study can be found in Francisco Rodríguez and Dani Rodrik, “Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence,” in Bernanke and Rogoff, eds., Macroeconomics Annual 2000.

(10)

This interpretation is based on a number of conversations I had with Sachs subsequently.

(11)

What Sachs and Warner considered “open” policies on import tariffs and quotas were in fact remarkably protective by today’s standard—so protective that few countries were classified as “closed” on account of their import tariffs or quantitative restrictions on imports. The real work in the classification was done by two other indicators: the black market premium for foreign currency, a measure of macroeconomic imbalance more than anything else, and an indicator for the presence of state monopoly in exports, the coverage of which was restricted to African countries. See Rodríguez and Rodrik, “Trade Policy and Economic Growth,” for details.

(12)

Anne O. Krueger, “Trade Policy and Economic Development: How We Learn,” American Economic Review, vol. 87, no. 1 (March 1997), p. 11.

(13)

So a senior U.S. Treasury economist could admonish the Mexican government to work harder to bring crime levels down, “because such high levels of crime and violence may drive foreign investors away.” See Dani Rodrik, “Trading in Illusions,” Foreign Policy (March-April 2001), p. 55.

(14)

The paper I was presenting was Rodríguez and Rodrik, “Trade Policy and Economic Growth.” Subsequent research by others has shown that tariffs on manufactures or on high-skill products can indeed promote economic growth. See Sybille Lehmann and Kevin H. O’Rourke, “The Structure of Protection and Growth in the Late 19th Century,” Review of Economics and Statistics (forthcoming); and Nathan Nunn and Daniel Trefler, “The Structure of Tariffs and Long-Term Growth,” American Economic Journal—Macroeconomics (forthcoming).

(15)

For example, it was common to argue that East Asian export subsidies simply offset the effects of import protection, resulting in near-free trade conditions. Similarly, price “distortions” in East Asia and elsewhere were rarely directly compared. If they were, it would be obvious that East Asian governments had not been on the side of angels. One of the bibles of the revisionists, a book project undertaken for the OECD, calculated an index of price distortion for a number of countries so as to compare their trade regimes in an objective manner. Among the countries included were Taiwan, the archetypal outward-oriented country, and Mexico, a leading case of inward-looking development. When one looks at the evidence in the OECD study closely, one finds that the average level of intervention in manufacturing seems to have been higher in Taiwan than it was in Mexico. See Ian M. D. Little, Tibor Scitovsky, and Maurice Scott, Industry and Trade in Some Developing Countries (London: Oxford University Press, 1970), Table 5.2.

(16)

When both inputs and outputs are valued at world prices. This is called “producing negative value added.”

(17)

Enrique Cardenas, Jose Antonio Ocampo, and Rosemary Thorp, An Economic History of Twentieth-Century Latin America, Vol. 3: Industrialization and the State in Latin America: The Postwar Years (London: Palgrave, 2000), p. 16. The post-1990 growth rate comes from the World Bank’s World Development Indicators online database.

(18)

See Barry P. Bosworth and Susan M. Collins, “The Empirics of Growth: An Update,” Brookings Papers on Economic Activity, 2 (2003), Table 1.

(19)

Kalpana Kochhar, et al., “India’s Pattern of Development: What Happened, What Follows?” Journal of Monetary Economics, vol. 53, no. 5 (July 2006), pp. 981–1019.

(20)

John Williamson, “Did the Washington Consensus Fail?” Outline of Speech at the Center for Strategic and International Studies, Washington, DC, November 6, 2002, online at http://www.iie.com/publications/papers/paper.cfm?ResearchID=488. The term “damaged brand” was used in Moisés Naím, “Washington Consensus: A Damaged Brand,” Financial Times, October 28, 2002. British prime minister Gordon Brown officially pronounced the death of the Washington Consensus in early 2009.

(21)

Sachs and Warner, “Economic Reform,” p. 44.

(22)

See Dani Rodrik, “Growth Strategies,” in Philippe Aghion and Steven Durlauf, eds., Handbook of Economic Growth, Vol. 1A (Amsterdam: North-Holland, 2005).

(23)

Jeffrey Sachs’s more recent worldview is captured in Jeffrey D. Sachs, et al., “Ending Africa’s Poverty Trap,” Brookings Papers on Economic Activity, 1 (2004).

(24)

Anoop Singh, et al., Stabilization and Reform in Latin America: A Macroeconomic Perspective on the Experience Since the Early 1990s, IMF Occasional Paper, Washington, DC, February 2005, p. xiv.

(25)

Anne O. Krueger, “Meant Well, Tried Little, Failed Much: Policy Reforms in Emerging Market Economies,” Remarks at the Roundtable Lecture at the Economic Honors Society, New York University, New York, March 23, 2004.

(26)

Arvind Panagariya, “Think Again—International Trade,” Foreign Policy (November-December 2003).

(27)

Hernando de Soto, The Mystery of Capital (New York: Basic Books, 2000).

(28)

Muhammad Yunus, Banker to the Poor: Micro-Lending and the Battle Against World Poverty (New York: Public Affairs, 2003).

(29)

William Easterly, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (New York: Penguin, 2006).

(30)

This approach, called “the Growth Diagnostics framework,” was developed by Ricardo Hausmann, Andres Velasco, and myself. It was subsequently applied to a large number of different settings. See Hausmann, Rodrik, and Velasco, “Growth Diagnostics,” in Joseph Stiglitz and Narcis Serra, eds., The Washington Consensus Reconsidered: Towards a New Global Governance (New York: Oxford University Press, 2008). Some of the country applications can be found online at http://ksghome.harvard.edu/~drodrik/Growth_Diagnostics_Index.html.

(31)

In other words, it leads to overvaluation of the home currency. See Rodrik and Subramanian, “Why Did Financial Globalization Disappoint?” pp. 112–38.

(32)

Atul Kohli, “Politics of Economic Liberalization in India,” World Development, vol. 17, no. 3 (1989), pp. 305–28.

(33)

Dani Rodrik and Arvind Subramanian, “From ‘Hindu Growth’ to Productivity Surge: The Mystery of the Indian Growth Transition,” IMF Staff Papers, vol. 52, no. 2 (2005).

(34)

The project was led by my Harvard colleague Ricardo Hausmann. For background and discussion on South Africa’s problems, see Dani Rodrik, “Understanding South Africa’s Economic Puzzles,” Economics of Transition, vol. 16, no. 4 (2008), pp. 769–97. The full set of papers prepared for this project can be found in http://www.cid.harvard.edu/southafrica/.

(35)

For further elaboration, see Ricardo Hausmann, Dani Rodrik, and Charles F. Sabel, “Reconfiguring Industrial Policy: A Framework with an Application to South Africa,” Center for International Development, Working Paper No. 168, Harvard University, May 2008. We may have exaggerated the novelty of our ideas. Meade himself was quite clear about the importance of the government-private-sector dialogue. The Industrial Development Corporation that he recommended was designed in part to stimulate the kind of strategic collaboration we had in mind for South Africa—See Meade, The Economic and Social Structure of Mauritius, p. 30.

(36)

See the speech by Rob Davies, minister of trade and industry, Budget Vote Address in Parliament delivered in Cape Town on June 30, 2009; available online at http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page71656?oid=134655&sn=Detail.

(37)

Alexander Hamilton, Report on Manufactures, Communication to the House of Representatives, December 5, 1791.

الفصل التاسع: المعضلة الثلاثية السياسية للاقتصاد العالمي

(1)

See the interview with Domingo Cavallo at http://www.pbs.org/wgbh/commandingheights/shared/pdf/int_domingocavallo.pdf.

(2)

This account draws on Dani Rodrik, “Reform in Argentina, Take Two: Trade Rout,” The New Republic, January 14, 2002, pp. 13–15.

(3)

Cavallo would later argue that the true culprit was loose fiscal policy in the years preceding the crisis. See the interview cited in note 1. From a narrow economic perspective, he may well be right. With enough fiscal austerity, price deflation, and belt-tightening, the Argentine economy would have been able to service external debts and maintain financial market confidence. The question is whether this is a sensible way to run an economy. Is it reasonable, or even desirable, to expect that the political system will deliver these drastic measures when needed (that is, when times are already tough) just to satisfy foreign creditors?

(4)

Thomas L. Friedman, The Lexus and the Olive Tree (New York: Anchor Books, 2000), pp. 104–06.

(5)

In a famous decision issued in 1905 (Lochner v. New York), the U.S. Supreme Court struck down a New York State law restricting the maximum hours of work for bakery employees. The New York statute was “an illegal interference,” the justices wrote, “with the right of individuals, both employers and employees, to make contracts regarding labor upon such terms as they may think best.” See Michael J. Sandel, Democracy’s Discontent: America in Search of a Public Philosophy (Cambridge, MA: Harvard University Press, 1996), p. 41. It wasn’t until the 1930s, following Franklin D. Roosevelt’s threat to pack the Court with sympathetic jurists, that the Supreme Court reversed course and upheld a minimum wage law for women in 1937 (West Coast Hotel Co. v. Parrish). This decision opened the way for subsequent legislation regulating employment practices including maximum work hours—Rodrik, Has Globalization Gone Too Far? Institute for International Economics, Washington, DC, 1997, p. 36.

(6)

Dani Rodrik, “Democracies Pay Higher Wages,” Quarterly Journal of Economics, vol. 114, no. 3 (August 1999), pp. 707–38.

(7)

“Transcript of First Presidential Debate,” September 9, 2008, at http://www.cnn.com/2008/POLITICS/09/26/debate.mississippi.transcript/#cnnSTCText.

(8)

Scott A. Hodge and Andre Dammert, “U.S. Lags While Competitors Accelerate Corporate Income Tax Reform,” Fiscal Fact No. I84, Tax Foundation, August 2009, http://www.taxfoundation.org/files/ff184.pdf.

(9)

Michael P. Devereux, Ben Lockwood, and Michela Redoano, “Do Countries Compete Over Corporate Tax Rates?” Journal of Public Economics, vol. 92, nos. 5-6 (June 2008), pp. 1210–1235.

(10)

Michael J. Trebilcock and Robert Howse, The Regulation of International Trade, 3rd ed. (New York: Routledge, 2005), p. 517.

(11)

In a similar case in 2006, the WTO also ruled against EU restrictions on genetically modified food and seeds, finding fault once again with the adequacy of EU scientific risk assessment.

(12)

Emma Aisbett, Larry Karp, and Carol McAusland, “Regulatory Takings and Environmental Regulation in NAFTA’s Chapter 11,” Unpublished paper, University of California at Berkeley, February 10, 2006.

(13)

For an inventory of cases brought under Chapter 11 of NAFTA, see the Public Citizen Web site: http://www.citizen.org/documents/Ch11CasesChart-2009.pdf.

(14)

Luke Peterson and Alan Beattie, “Italian Groups Challenge Pretoria Over BEE,” Financial Times, March 9, 2007.

(15)

Since these zones commonly provide differential benefits to exporting firms, it is easy to find them in violation of WTO’s subsidy rules. Some developing nations have benefited from a delay of the entry into force of these restrictions on subsidies.

(16)

For a prescient article on the costs of WTO’s patent rules, see Arvind Subramanian, “Putting Some Numbers on the TRIPs Pharmaceutical Debate,” International Journal of Technology Management, vol. 10, nos. 2-3 (1995).

(17)

Richard R. Nelson, “The Changing Institutional Requirements for Technological and Economic Catch Up,” Unpublished paper, Columbia University, June 2004.

(18)

Henrik Horn, Petros C. Mavroidis, and André Sapir, “Beyond the WTO? An Anatomy of EU and US Preferential Trade Agreements,” Bruegel Blueprint 7, Bruegel Institute, Brussels, 2009.

(19)

For more elaboration and examples, see Dani Rodrik, One Economics, Many Recipes: Globalization, Institutions and Economic Growth (Princeton: Princeton University Press, 2007), chap. 4.

(20)

Robert O. Keohane, Stephen Macedo, and Andrew Moravcsik, “Democracy-Enhancing Multilateralism,” International Organization, 63 (Winter 2009), pp. 1–31. See also Robert Howse, “Democracy, Science and Free Trade: Risk Regulation on Trial at the World Trade Organization,” Michigan Law Review, 98 (June 2000).

(21)

In a few cases (such as the U.S.-Peru trade agreement of 2006), labor groups have managed to “balance” those interests by introducing labor standards clauses into bilateral or regional trade agreements. For reasons I will discuss in subsequent chapters, this can compound the problems. Pressure from U.S. trade unions is as unlikely to serve the interests of other countries as pressure from U.S. multinationals.

الفصل العاشر: هل الحوكمة العالمية ممكنة؟ وهل هي مستحبة؟

(1)

African Development Bank and World Tourism (not Trade) Organization, respectively.

(2)

See http://voxeu.org/index.php?q=node/2544.

(3)

See Jeffrey Garten, “The Case for a Global Central Bank,” Yale School of Management, posted online, September 21, 2009, at http://ba.yale.edu/news_events/CMS/Articles/6958.shtml.

(4)

Carmen Reinhart and Kenneth Rogoff, “Regulation Should Be International,” Financial Times, November 18, 2008 (http://www.ft.com/cms/s/0/983724fc-b589-11dd-ab71-0000779fd18c.html?nclick_check=1).

(5)

David Epstein and Sharyn O’Halloran, Delegating Powers: A Transaction Cost Politics Approach to Policy Making Under Separate Powers (Cambridge and New York: Cambridge University Press, 1999).

(6)

Anne-Marie Slaughter, A New World Order (Princeton and Oxford: Princeton University Press, 2004).

(7)

John G. Ruggie, “Reconstituting the Global Public Domain—Issues, Actors, and Practices,” European Journal of International Relations, 10 (2004), pp. 499–531.

(8)

There is a parallel debate in international law on whether it is possible to institute effective legal norms and practices at the global level in the absence of global government. See, e.g., Jeffrey L. Dunoff and Joel P. Trachtman, eds., Ruling the World?: Constitutionalism, International Law, and Global Governance (Cambridge and New York: Cambridge University Press, 2009), and Eric Posner, The Perils of Global Legalism (Chicago: University of Chicago Press, 2009), in addition to the work of Anne-Marie Slaughter already cited. The case against “global legalism” is stated succinctly by Posner, who argues that without legal institutions—legislators, enforcers, and courts—law cannot control behavior.

(9)

Joshua Cohen and Charles F. Sabel, “Global Democracy?” International Law and Politics, 37 (2005), p. 779.

(10)

Ibid., p. 796.

(11)

Peter Singer, One World: The Ethics of Globalization (New Haven: Yale University Press, 2002), p. 12.

(12)

Amartya Sen, Identity and Violence: The Illusion of Destiny (New York: W. W. Norton, 2006).

(13)

Amartya Sen, The Idea of Justice (Cambridge, MA: Harvard University Press, 2009), p. 143.

(14)

See Cohen and Sabel, “Global Democracy,” and Charles F. Sabel and Jonathan Zeitlin, “Learning from Difference: The New Architecture of Experimentalist Governance in the EU,” European Law Journal, vol. 14, no. 3 (May 2008), pp. 271–327.

(15)

Stephen Castle, “Compromise with Britain Paves Way to Finance Rules in Europe,” New York Times, December 2, 2009 (http://www.nytimes.com/2009/12/03/business/global/03eubank.html?_r=1&sudsredirect=true).

(16)

The decision to send Greece to the IMF caused a certain amount of controversy within the European Union since, unlike the other two countries, Greece is a member of not only the European Union but also of the Eurozone. Ultimately, insistence on this score by German chancellor Angela Merkel overcame opposition from French president Nicolas Sarkozy and the European Central Bank president Jean-Claude Trichet.

(17)

See “After Severe Recession, Stabilization in Latvia,” IMF Survey online, February 18, 2010, http://www.imf.org/external/pubs/ft/survey/so/2010/CAR021810A.htm.

(18)

The national regulators that negotiate these international agreements have their own interests, of course, and they enter into agreements in part as a counterweight to domestic political pressures. See David Andrew Singer, Regulating Capital: Setting Standards for the International Financial System (Ithaca, NY: Cornell University Press, 2007).

(19)

Colleen E. H. Berndt, “Is Fair Trade in Coffee Production Fair and Useful? Evidence from Costa Rica and Guatemala and Implications for Policy,” Mercatus Policy Series, Policy Comment No. 11, George Mason University, June 2007.

(20)

Andrew Chambers, “Not So Fair Trade,” The Guardian, December 12, 2009. (http://www.guardian.co.uk/commentisfree/cif-green/2009/dec/12/fair-trade-fairtrade-kitkat-farmers).

(21)

See “Toy Makers Seek Standards for U.S. Safety,” New York Times, September 7, 2007 (http://www.nytimes.com/2007/09/07/business/07toys.html?_r=2).

(22)

Nick Hornby, Juliet, Naked (New York: Penguin, 2009).

(23)

This account is based on Keith Hampton, “Netville: Community On and Offline in a Wired Suburb,” in Stephen Graham, ed., The Cybercities Reader (London: Routledge, 2004), pp. 256–62. I owe the reference to this study to Nicholas A. Christakis and James H. Fowler, Connected: The Surprising Power of Our Social Networks and How They Shape Our Lives (New York: Little, Brown, 2009).

(24)

The data that I summarize here come from the World Values Survey databank at http://www.worldvaluessurvey.org/services/index.html.

الفصل الحادي عشر: صياغة الرأسمالية ٣

(1)

For a detailed statistical analysis of differences between European and American attitudes toward inequality, see Alberto Alesina, Rafael Di Tella, and Robert MacCulloch, “Inequality and Happiness: Are Europeans and Americans Different?” Journal of Public Economics, vol. 88, nos. 9-10 (August 2004), pp. 2009–42.

(2)

This argument is developed in Roberto Mangabeira Unger, Democracy Realized: The Progressive Alternative (London and New York: Verso, 1998).

(3)

There is a very large literature on the comparative economic performance of democracies versus non-democracies. This literature suggests that democratically governed economies tend to outperform authoritarian regimes on a number of dimensions: they are better at adjusting to external shocks, they provide greater stability and predictability, and they produce better social indicators and distributional outcomes. The results on long-term growth performance are more mixed, but the more recent evidence suggests that democracies have the edge there as well. See José Tavares and Romain Wacziarg, “How Democracy Affects Growth,” European Economic Review, vol. 45, no. 8 (August 2001), pp. 1341–1379; Dani Rodrik, “Participatory Politics, Social Cooperation, and Economic Stability,” American Economic Review, Papers and Proceedings (May 2000); Dani Rodrik, “Democracies Pay Higher Wages,” Quarterly Journal of Economics (August 1999); Dani Rodrik and Romain Wacziarg, “Do Democratic Transitions Produce Bad Economic Outcomes?” American Economic Review, Papers and Proceedings, vol. 95, no. 2 (May 2005), pp. 50–55; and Elias Papaioannou and Gregorios Siourounis, “Democratization and Growth,” Economic Journal, vol. 118, no. 10 (2008), pp. 1520–51.

(4)

In December 2009, three countries—Guinea, Niger, and Madagascar—were removed from the list for lack of progress toward democratic practices. Mauritania was reinstated following democratic elections.

(5)

A good example is agricultural protection in the developed countries. The costs are paid primarily by consumers and taxpayers in those same developed countries.

(6)

In the language of economics, the global climate is a “pure” public good whereas an open economy is a private good, from the standpoint of individual nations, with some external effects on others.

الفصل الثاني عشر: العولمة الرشيدة

(1)

Antoine Bouët, “The Expected Benefits of Trade Liberalization for World Income and Development,” Food Policy Review No. 8, International Food Policy Research Institute, Washington, DC, 2008. These estimates refer to the standard gains from freeing up trade, and neglect the second-best considerations we encountered earlier that might make trade restrictions economically beneficial in certain products for low-income countries.

(2)

It is a law of economics that the efficiency losses from taxes and other restrictions on economic activity are close to zero when they are small and rise with the square of the tax or restriction.

(3)

Currently the Agreement on Safeguards allows a temporary increase in trade restrictions under a fairly narrow set of conditions. It requires a domestic determination that increased imports “cause or threaten to cause serious injury to the domestic industry,” that a cause-and-effect relationship between the import surge and injury be firmly established, and that injury not be attributed to imports if there are multiple causes for it. The safeguard measures must apply to all exporters of the product. However, safeguards cannot be applied to developing country exporters unless their share of imports of the product concerned is above a threshold. A country applying safeguard measures generally has to compensate the affected exporters by providing “equivalent concessions.”

(4)

This discussion is based on Dani Rodrik, Has Globalization Gone Too Far? and Rodrik, “The Global Governance of Trade As If Development Really Mattered,” United Nations Development Program, New York, 2001.

(5)

This is what the existing agreement says: “A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article X of the GATT 1994. This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law.”

(6)

Howse’s argument is developed in the context of risk regulation, but is valid more broadly. Robert Howse, “Democracy, Science, and Free Trade: Risk Regulation on Trial at the World Trade Organization,” Michigan Law Review, vol. 98, no. 7 (June 2000), p. 2357.

(7)

Julian M. Alston, Daniel A. Sumner, and Heinrich Brunke, “Impacts of Reductions in US Cotton Subsidies on West African Farmers,” Oxfam America, June 21, 2007 (http://www.oxfamamerica.org/publications/impacts-of-reductions-in-us-cotton-subsidies-on-west-african-cotton-producers/).

(8)

Unfortunately, there has been much obfuscation on this issue by Doha’s advocates, who have tried to present an overly rosy scenario for the global poverty impact of the trade round. Removal of subsidies in the rich countries will raise the world prices of agricultural commodities. While this is good news for poor producers in the countryside (such as cotton farmers in West Africa), it is bad news for poor consumers in urban areas who do not grow their own food. The impact on poverty therefore is differentiated and depends on whether the poor are mostly urban or rural. See Dani Rodrik, “Food Prices and Poverty: Confusion or Obfuscation?” http://rodrik.typepad.com/dani_rodriks_weblog/2008/05/food-prices-and.html.

(9)

“The Global Crisis Response and the Role of US-EU Cooperation,” Remarks by Mark Sobel, Assistant Secretary of U.S. Department of Treasury for International Monetary and Financial Policy to the European Forum of Deposit Insurers at the Fédération Bancaire Française, June 29, 2009 (http://www.treas.gov/press/releases/tg196.htm). See also Marcus Walker and Stephen Fidler, “IMF Chief Urges Coordinated Finance Rules,” Wall Street Journal, January 30, 2010, p. A11.

(10)

See Christine Harper and Simon Kennedy, “Politicians Can’t Wait for Bankers Urging Caution on Regulation,” Bloomberg News Service, February 1, 2010 (http://www.bloomberg.com/apps/news?pid=20601170&sid=aBY2eGclTyqg).

(11)

Alistair MacDonald, “U.S. Enters Europe’s Fund Debate; Washington Joins U.K. in Lobbying EU for Less Stringent Regulations,” Wall Street Journal, July 27, 2009, p. C3.

(12)

In December 2009, the Basel Committee agreed on a package of reforms that, among other things, would phase out the use of “hybrid” capital which European banks rely on as part of their capital requirements. It also proposed new rules on bank leverage and liquidity, countercyclical capital buffers, and new risk weightings to reflect counterparty credit risk. But the quantitative limits on capital, leverage, and liquidity that banks have to abide by were left unclear. Some of these proposals were further refined in a broad package proposed in July 2010. See Patrick Jenkins, “Bank Capital Rules Face Overhaul,” Financial Times, December 17, 2009.

(13)

Simon Johnson, “Was the G20 Summit Actually Dangerous?” September 26, 2009, http://baselinescenario.com/2009/09/26/was-the-g20-summit-actually-dangerous/#more–5085.

(14)

Ibid.

(15)

Bankers are indeed quick to make this point when they are threatened by tighter regulations. In an October 2009 interview with the Financial Times, the chairman of Barclays warned about adverse implications for Britain’s financial sector if “regulators are too rigorous in their implementation of a global crackdown on bonuses and capital requirements while other nations, such as the US, are lax.” “There is the real risk of regulatory arbitrage,” he added. “This is a global financial system. It is fungible. So I am very concerned there should be a level playing field.” See http://www.ft.com/cms/s/0/47fd0f82-bc23-11de-9426-00144fe-ab49a.html.

(16)

These ideas were first outlined in Dani Rodrik, “A Plan B for Global Finance,” The Economist, March 12, 2009.

(17)

There is much debate among economists about whether a tax of this sort would also serve to curb destabilizing short-term speculation. If applied globally, it would certainly reduce the volume of short-term transactions on currency exchanges. Whether this would curtail more flows of the destabilizing kind versus flows of the stabilizing kind is unclear. And a small tax certainly would not do much to prevent runs on countries of the type that took place during the Asian financial crisis, since the effects of the tax would be overwhelmed by the expectation of large capital gains. What is indisputable is that such a tax would mobilize considerable resources, given the large base. It would have negligible efficiency costs at worst, at the levels typically considered.

(18)

Nicholas Dorn, “Financial Market Systemic Regulation: Stability through Democratic Diversity,” VoxEU.org, December 18, 2009, http://www.voxeu.org/index.php?q=node/4411.

(19)

Ibid.

(20)

See Dani Rodrik, “The IMF Needs Fresh Thinking on Capital Controls,” Project Syndicate column, November 11, 2009 (http://www.project-syndicate.org/commentary/rodrik37), and Arvind Subramanian and John Williamson, “Put the Puritans in Charge of the Punchbowl,” Financial Times, February 11, 2009 (http://www.ft.com/cms/s/0/a0c04b34-c196-11de-b86b-00144feab49a.html?nclick_check=1).

(21)

The figures are from Michael A. Clemens, Claudio E. Montenegro, and Lant Pritchett, “The Place Premium: Wage Differences for Identical Workers Across the U.S. Border,” Unpublished paper, Harvard Kennedy School of Government, July 2008.

(22)

I discuss these ideas in Dani Rodrik, “Globalization for Whom?” Harvard Magazine (July-August 2002) (http://harvardmagazine.com/2002/07/globalization-for-whom.html), and Rodrik, “Feasible Globalizations,” in Michael Weinstein, ed., Globalization: What’s New? (New York: Columbia University Press, 2005). My Harvard colleague Lant Pritchett has developed them further in his Let Their People Come: Breaking the Gridlock on Global Labor Mobility (Washington, DC: Center for Global Development, 2006). For a legal scholar’s perspective on these issues, see Joel P. Trachtman, The International Law of Economic Migration: Toward the Fourth Freedom (New York: Upjohn Institute, 2009).

(23)

The global gains from a full movement to free trade in goods would be around $100 billion—see Bouët, cited in note 1. The estimate on gains from labor mobility comes from World Bank, Global Economic Prospects 2006, Washington, DC, 2005.

(24)

See Devesh Kapur and John McHale, “Sojourns and Software: Internationally Mobile Human Capital and High-Tech Industry Development in India, Ireland, and Israel,” in Ashish Arora and Alfonso Gamberdella, eds., From Underdogs to Tigers: The Rise and Growth of the Software Industry in Some Emerging Market Eocnomies (New York: Oxford University Press, 2005, pp. 236–74, and Annalee Saxenian, Local and Global Networks of Immigrant Professionals in Silicon Valley (San Francisco: Public Policy Institute of California, 2002). For a detailed study of the impact of the Indian diaspora on the country’s political and economic development, see Devesh Kapur, Diaspora, Development, and Democracy: The Domestic Impact of International Migration from India (Princeton and Oxford: Princeton University Press, 2010).

(25)

See the discussion on this question at http://rodrik.typepad.com/dani_rodriks_weblog/2007/05/the_new_york_ti.html.

(26)

The World Bank (Global Economic Prospects 2006) estimates a reduction in advanced country wages of 0.5 percent under a program that increases migration by 3 percent of the receiving countries’ labor force. An earlier study, by Terri Louise Walmsley and L. Alan Winters, calculates that real wages in the United States would fall by 0.6–0.8 percent—Walmsley and Winters, “Relaxing the Restrictions on the Temporary Movements of Natural Persons: A Simulation Analysis,” CEPR Discussion Paper No. 3719, London, 2003. The benchmark elasticity used by George Borjas in his analysis of the wage effect of immigration (−0.3) produces a similar estimate: −0.3 × 3 percent = −0.9 percent. See George J. Borjas, “The Analytics of the Wage Effects of Immigration,” Harvard Kennedy School of Government, August 2009.

(27)

The simulations I referred to earlier assume that much of these benefits would accrue to foreign nationals. But the work visas can be administered in ways that retain some of these gains in the labor-importing countries. The issue here is who captures the wage differential between the home and host countries. Suppose, e.g., that the host government auctions the limited visas to domestic businesses or labor contractors who wish to bring workers from abroad. This would result in the bulk of the “rents” being captured by the host government rather than the workers themselves. Any conceivable distribution of the gains is possible with imaginative design of the visa allotment scheme.

(28)

Paul Krugman, “Chinese New Year,” New York Times, December 31, 2009.

(29)

See Dani Rodrik, “The Real Exchange Rate and Economic Growth,” Brookings Papers on Economic Activity (Fall 2008).

(30)

For the technically minded, here is a bit more explanation. An import tariff or export subsidy will have the effect, on impact, of improving the trade balance. However, this can be offset (and will be offset, unless the government actively intervenes) by an appreciation of the (real) exchange rate. The appreciation of the real exchange rate does not fully neutralize the stimulating effect of the original tariff or subsidy policies, as long as domestic demand for tradables responds positively to the appreciation (which makes the relative price of tradables lower). Therefore, industrial policy combined with real exchange rate appreciation can promote the production of tradables without affecting the trade balance. See Dani Rodrik, “Growth After the Crisis,” in Globalization and Growth: Implications for a Post-Crisis World, Commission on Growth and Development, Washington, DC, 2010.

(31)

This would be an appreciation of around 25 percent. See Dani Rodrik, “Making Room for China in the World Economy,” VoxEU.org, December 17, 2009, http://voxeu.org/index.php?q=node/4399.

(32)

What links the two is that the Chinese government has to buy dollars in order to prevent the renminbi from appreciating.

(33)

Martin Jacques, When China Rules the World: The End of the Western World and the Birth of a New Global Order (New York: Penguin, 2009).

(34)

Stephen S. Cohen and Bradford DeLong express concern about the implications for global economic stability of the loss in the relative economic standing of the United States. See their work The End of Influence: What Happens When Other Countries Have the Money (New York: Basic Books, 2010).