- Paperback: 336 pages
- Publisher: Princeton University Press; 1 edition (15 July 2019)
- Language: English
- ISBN-10: 0691196087
- ISBN-13: 978-0691196084
- Product Dimensions: 13.3 x 2.5 x 21 cm
- Boxed-product Weight: 331 g
- Average Customer Review: Be the first to review this item
- Amazon Bestsellers Rank: 187,633 in Books (See Top 100 in Books)
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Straight Talk on Trade: Ideas for a Sane World Economy Paperback – 15 Jul 2019
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From the Back Cover
"All economists should read Straight Talk on Trade to appreciate how their own models are often richer than their policy advice. And all noneconomists should read this book to appreciate how much economics has to offer on the biggest questions of growth and inequality. The length of this book belies its stunning scope, ranging from developed to developing countries, the past to the present, and political science to economics. Dani Rodrik's eclectic methodology and advice support his unwavering, optimistic belief that economic ideas can and should help people shape their destinies."--Jason Furman, Harvard Kennedy School and former chairman of the White House Council of Economic Advisers
"There is a ton of erudition and not an ounce of orthodoxy in this compact, incisive book. Dani Rodrik analyzes policy like an economist and analyzes economics like a philosopher. The net effect is a disarmingly fresh and penetrating set of insights on national self-determination, fair versus free trade, and the rich interplay between markets, governments, and individual identity in sustaining stable nation-states. Arguing for a rethinking and rebalancing of the teetering project of globalization, Rodrik offers something to delight and offend every reader."--David Autor, Massachusetts Institute of Technology
"Dani Rodrik is one of the most original thinkers today on economics and development. In Straight Talk on Trade, he explains why there is so much discontentment with the multilateral system, and offers interesting proposals for how we might preserve what is good about it. This is a must-read for anyone interested in the roots of populist nationalism and the widespread angst in industrial societies today."--Raghuram Rajan, University of Chicago
"Straight Talk on Trade presents a straightforward and readable agenda to make globalization serve democracy rather than undermine it, while avoiding the populist remedies being hawked by politicians today."--Francis Fukuyama, Stanford University
"Amongst today's mainstream economists, there is a cottage industry of experts rationalizing the backlash against globalization. Dani Rodrik was one of the very few who warned about this backlash at least a decade in advance when the world was in thrall to the globalization fetish. A terrific guide to understanding this swinging pendulum, Straight Talk on Trade offers sensible suggestions on how not to love globalization if we are to preserve its many undeniable benefits."--Arvind Subramanian, chief economic adviser to the Government of India
"Straight Talk on Trade looks at the possibility that the world has proceeded too hastily with globalization and emphasized globalization of the wrong kind. Dani Rodrik contends that we have neglected notions of national sovereignty at our peril, and his knowledge, sources, methods, and arguments are all first-rate and battle-tested."--Tyler Cowen, author of The Complacent Class
"Not many economists are able to make astute observations about economics and politics based not only on professional knowledge but also on common sense. And only a few can speak at once to the academic economist, the economics student, applied economists, and intelligent readers outside the field. In Straight Talk on Trade, Dani Rodrik accomplishes this and more."--Ariel Rubinstein, Tel Aviv University and New York University
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Most helpful customer reviews on Amazon.com
Building upon his main ideas from "The Globalization Paradox", Rodrik presents the academic work himself and others have done in development, trade and political economy to support his arguments. I enjoyed the section which highlighted the unappreciated role ideology plays in political economy, in addition to self-interest (which receives much of the attention) as well as the distinction between liberal and "illiberal" democracy. The book is as much politics as it is economics. And like Rodrik's previous books, the writing was readable and engaging.
I would recommend this book to the interested layperson, poli sci and econ undergrads and the general public. However, professional economists may be underwhelmed if they are already familiar with Rodrik's work.
After about 100 pages I wondered about the intended audience because the nature of the presentation changed from chapter to chapter, subject to subject. It was all very well presented and I learned about areas of the globe where knowledge was scant, or where I had chosen not to learn.
Overall the book is a considered, thoughtful view of the global landscape of which trade is a part. The tone is counsel from an insightful, knowledgeable observer who is willing to identify and describe the challenging issues, seemingly unsolvable dilemmas, ask tough questions, and offer a few prescriptions. Unfortunately, as noted in the first sentence, the solutions come down to politics, power structures, and vested interests.
I recommend the book with the proviso that if you do a lot of reading, many (but not all) insights have either been expressed in other places or you have figured them out yourself. It’s a 5 star book if you wish an overview on the current politics that affect global economics and trade, 4 star if you are into reading about global politics. For me, 4.
Rodrik accepts the Ricardian Theory of Comparative Advantage, which holds that trade benefits all participating countries through efficiencies from specialization. Opening an economy to trade has further benefits: it lowers domestic costs of production by subjecting protected, state-owned, and oligopolistic industries to the discipline of import competition, introduces new technology and products, and transfers knowledge. All this delivers macroeconomic benefits to each trading country, but some groups of workers and owners usually lose, and the recovery of unemployed workers can be long and painful.
Therefore, Rodrik argues that it’s reasonable for national governments to insist on greater transition and compensation arrangements for its citizens and even to place limits on trade. It’s the refusal of trade liberals to tolerate government intervention in trade which Rodrik sees as destabilizing and as provoking a populist reaction against free-trading elites.
Extremist resistance to imports and to immigration is gaining on the Right in the US (Trump), the UK (Brexit), France (Front National & Yellow Vests), Italy (Five Star Party), Poland (Duda), Hungary (Oban), and Brazil (Bolsonaro). Resistance to Free Trading policies is strong on the Left in Spain, Greece, Mexico, Venezuela, and Ecuador. At the very least, this suggests it’s time to hear-out Rodrik’s case for legitimate claims to protection.
Rodrik thinks that there is no single formula for development, each country must find its own way. Several successful countries --Japan, China, and Korea-- never followed the discipline of abstention from government intervention advocated by the IMF and the World Bank. Instead, these countries pursued policies of aggressive export promotion. China practiced suppressed interest rates in the entirely state-owned banking sector low, and then directed credit at low interest rates to export industries.
For some countries, rapid liberalization seemed to work. Poland was able to revive after a few years of, ‘shock therapy’ Chile followed a free and open market path. The Chile Model of relaxing import restraints to force domestic enterprises to compete with foreigners would not have worked in China, where it would have caused massive unemployed with destabilizing social consequences.
When the Soviet Union collapsed, Stan Fisher told his economists at the World Bank Research Department that, “There is no Third Way”, only the planned economy or free markets. He was wrong. If only the Russians had built institutions, like a reliable justice system, before selling-off state industries. If only that had pursued a step-by-step policy of liberalization. Maybe they wouldn’t have succumbed to a decade of distress, suffered the Russian Financial Crisis, the Tough Guy Economy, and then regressed …
Rodrik is skeptical about the claims made for several of the free trade agreements, such as the Trans Pacific Partnership (TPP). He writes that the claims rest on macro-econometric simulations that find no job losses because they assume perfect flexibility of wages and thus (Petri, Plummer. 2016). Allowing imperfect wage flexibility and slow worker migration in this simulation leads to a finding of substantial job loss (Capaldo, Izurieta. 2016).
He claims that the main advantage to the US of the TPP would have been the control of intellectual property and rent generation. He claims this would have an uncertain impact on innovation --I’m not sure why. To him, the main point of the agreements was corporate control. Ending non-tariff barriers to trade reduced the scope for national action on social and environmental conditions of production. Introducing the Investor-State Dispute Settlement system would have given private firms power over states, when settlements fell in firms’ favor.
The central response to trade problems, for Rodrik, is national-level laws against what he calls, ‘social dumping.’
“Advocates of globalization lecture the rest of the world incessantly about how countries must change their policies and institutions to expand their international trade and to become more attractive to investors. This way of thinking confuses means for ends. Globalization should be an instrument for achieving the goals that societies seek... …we can break the deadlock between the proponents and opponents of globalization by acknowledging a simple proposition: social dumping that undermines the democratically legitimated domestic practices is not acceptable.”
For example, if a nation imports garments produced by cheap sweatshop labor, Rodrik would presumably advocate for a countervailing tax on the brands of garments at issue. He would not hand the issue over to an international bureaucracy because that would invite nationalists to demagogue the issue, nor would he propose exporting labor standards through trade treaties, on the grounds that’s not effective.
I have sympathies for Rodrik’s argument for moderation. The neoclassical orthodoxy of Washington, Europe, and multilateral institutions over the past decades was too rigid, but not entirely wrong. A lot of trade protection in developing countries is for the worst of reasons, for instance, to protect government subsidy-wasting state-owned industries. Sometimes, protection protects criminal behavior. The infamous example was the Mrs. Gandhi's system of import quotas. This resulted in the, License Raj, as the corrupt sale of scarce import licenses became a source of bribery income for bureaucrats.
Moreover, the fight in the US today is not about whether Americans can eat hamburgers and hold picnics and set off fireworks on the 4th of July, it's about immigration. The same is true in Britain, France, Germany and many other countries. Immigration is about income and hence about protecting a middle-class way of live, since immigration, like imports can drive down wages in labor intensive industries. But immigration is also about racism and religious bias.
Turning to the future, Rodrik’s main concern is that today’s poor countries will suffer from pre-mature industrialization. China grew rapidly by moving uneducated farmers into basic manufacturing industries. It took many years for manufacturing to mature, wages to rise, and the country to make the transition from low-value entry-level manufacturing (raw materials and food processing, textiles and garments, and shoes) to heavy industry (iron and steel, ship-building, automobiles, locomotives), and from there to smaller-scale production of high-value manufactures (pharmaceuticals, medical equipment, electronics, avionics, weapons) and to intellectual and personal services.
Today’s developing countries are proceeding directly from agriculture to services, with limited industrialization, in what Rodrik describes as premature deindustrialization. In Mexico, McKinsey found that over 1999 to 2009 labor productivity rose by 5.8 percent per year in large firms with over 500 employees and fell by 6.5 percent per year in firms with 10 or less employees. The share of employment in these small firms rose from 39 to 42 percent as people migrated to cities to find higher paying service jobs.
There is a risk that Africa, as well as parts of South Asia and the Middle East, will miss out on their chance to industrialize. Large scale production in East Asia has driven down the international price of manufactures to the point that Africa will find it difficult to compete. Moreover, technological change has boosted the required level of education for workers and lowered labor-requirements.
China has long shipped old labor-absorbing factories for reconstruction and operation in Ethiopia. They have sustained that model of production, but it hasn’t spread across the continent. Instead, recent growth and poverty reduction has been driven by expanding foreign demand and commodity price increases. Rodrik points to a solid trend in GDP growth in Ethiopia and Rwanda, but he may be over-confident in the quality of the statistics and distribution of the benefits.
Africans will have to tame their autocrats, build accountable institutions, and establish rule of law to persuade domestic and foreign residents to invest for the long-term. Aid agencies cannot impose institutions on them. They have repeatedly proven that they don’t know what would work.
My view is that developing counties will not grow over the decades ahead without intensive and repeated investment in the health and education of their population and without a broader vision of the objectives of development. These are human needs and aspirations in terms of health, learning, and engagement in the social, sports, cultural, and political life of the country and a campaign to right the environment and climate. This program for poor countries will never be more than fractionally financeable through aid from industrial countries. In poor countries, it will have to be financed largely through taxation and domestic borrowing. The good news is that growing population and the production and new goods that this generates should become a growth and employment-generating and partly self-sustaining process.