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tyler cowen: not long ago, a journalist calledme up and asked me, “whose papers do you look forward to reading more than any others?â€my answer, without really hesitating, was dani rodrik. he’s our guest today. he’s arguably theworld’s leading and most important economist on trade, globalization, industrial policy,and lately the prerequisites for liberal democracy. his new book, which i’ll mention again,economics rules‚—‚that’s spelled r-u-l-e-s. why should i not read my own blurb? quote, “the best economists make the bestmethodologists, and dani rodrik is both. his economics rules is the single best sourcefor explaining the strengths and weaknesses
of economics to an outside audience.†on premature deindustrializationâ we’regoing to start this conversation with some questions about some of your recent paperson this topic of premature deindustrialization. i find this one of the most interesting themesin your work. the notion that a mix of automation and competitive trade with wealthier nationsmight mean that poorer nations today will not be able to industrialize and follow thepath of south korea or taiwan or singapore. now, if this is the case, if a lot of economiesout there are deindustrializing prematurely, before they’ve built up a significant middleclass, what do you see happening, for instance, for the future of africa? the parts of africawhich do relatively well, but let’s say
they do not industrialize. what does thatfuture look like in your vision? dani rodrik: i don’t think it means thatthere is a very bleak future for the countries of sub-saharan africa. i just think that isgoing to be very difficult, if not impossible, for them to replicate the very rapid convergenceexperience of east and southeast asian countries. if you look throughout economic history, thecountries that have made that very rapid leap into middle income and beyond that advancedcountry status, starting from the non-western countries first, japan from the late 19thcentury onward, and then after the second world war, south korea, taiwan, and then eventually,of course, china, along with a number of countries that did more or less the same in the peripheryof western europe, closer to western europe.
the one thing that’s common in all of themis very rapid industrialization. with very rapid industrialization, you can get growthrates on a per capita basis of 4 or 5 percent per year on an ongoing basis for decade afterdecade. that’s sort of what’s made south korea what it is today, in that kind of rapidgrowth. but that’s, if you will, a very exceptionalkind of experience. i think if the possibilities of rapid industrialization are no longer there‚—‚asyou suggest, i think they are no longer there‚—‚what we’re going to get is slower growth. what i call growth is based much more on thesteady and hard work of accumulating basic capabilities, human capital, skills, institutionalimprovement. all of those things that are
required for the long run, but don’t producethe kind of 4 percent, 5 percent growth on a per annum basis, as we’ve seen in thoserapid growth countries. cowen: but say, let’s think of it from apolitical economy point of view. south korea has done very well exporting, and that createdfor them a set of interest groups which were willing to fund that infrastructure, bringthe whole country together so to speak. you end up with a middle class being builtrapidly. that middle class is the foundation for a democracy. the special interest groupsbehind the infrastructure, it’s clear who they are. they win almost every politicalbattle, even without a democracy. you see some version of the same in china.
the countries that don’t industrialize,could you imagine them having an ongoing kind of ramshackle existence where consumer goodsflood in at cheap prices? they grow at 4 percent instead of 10 percent. but lagos, in a way, always looks a bit likecurrent lagos and never looks like seoul, south korea. what’s even a developed country,maybe, in some fundamental psychological sense, changes? rodrik: i think what matters here is probablyless the quantitative side, how rapidly you’re growing, but the qualitative things that arehappening during the growth process. you have to bear in mind that there are archetypal,successful industrialization growth, liberal
democracy kind of countries in fact, neverexperienced the kind of growth rate that japan and south korea or china did. in the aftermathof the industrial revolution, great britain was growing at rates that we would scoff attoday for any emerging market. so, it wasn’t the growth itself that enabledthe development of the middle class and the emergence and the spread of liberal valuesand the creating of the liberal democracy, but the transformation of the economy andits social structure in a particular kind of way. if you will, the spread of bourgeoisliberal values, the restraints placed on the state in terms of how much it could do andunder what kind of circumstances. [i]t wasn’t the growth itself that enabledthe development of the middle class and the
you’re right that in countries like nigeriaand many others, which have had very rapid population growth, where the urban areas haveswollen with people from the countryside. i think managing these kinds of tensions,especially when you’re in a sort of open economy and the markets are being floodedby cheap consumer goods from elsewhere, managing these transitions are very difficult, especiallysince these countries, and africa, of course, particularly so, are torn apart by a numberof additional cleavages of ethnic, language, regional, tribal, and so forth. those areall things that are making it very, very difficult for these countries. i’m not so sure that rapid growth wouldnecessarily have eliminated these kinds of
problems. in some ways, it might even aggravatethem. think, for example, that in the arab spring,the kind of troubles and the riots that started the arab spring, arose not in those partsof the arab world which had had the least amount of development but, in fact, in thosecountries like tunisia and egypt which had had the most rapid development. it wasn’t just gdp growth, per se. tunisiawas always an exemplar of improvements in human and social development. cowen: civil society. rodrik: civil society, improvements in health,improvements in education. of course, it was
an authoritarian regime, but you had the undevelopment program, the world bank touting the tunisian example of in the middle eastas an arab country that had done very well. i think it’s less the rate of growth andthen what is happening underneath that in terms of the overall structure. there youhave many, many different paths that are possible. one of my favorite economists is albert hirschman.for a while, two years, i occupied the chair that was named after him at the institutefor advanced study. he coined the term of possibilism, which wasthe notion that as much as in social science you think you want to generate theories thatare deterministic theories ofâ .â .â . you have industrialization and then the urbanizationand then the bourgeoisie. that’s going to
generate capitalist democracy and so forth. a lot of what happens is just maneuveringaround the constraints that geography and history have bequeathed and doing things thatotherwise might not have seemed possible. if 50 percent is driven by exogenous conditions,50 percent is still basically in your hands is one way of looking at it. i always look for things in how you can manipulateand maneuver the context in which you find yourself in. i think those possibilities alwaysexist. cowen: let me try to pin down a fundamentalaspect of your thought that i see running through a lot of different papers. that’sthe idea that there’s something special
about manufacturing. as i understand you, if you do industrialpolicy and you get the right kind of manufacturing that puts you on a better path. your paperson productivity convergence‚—‚once you’re started in manufacturing, according to yourdata, you get bigger ongoing gains than you do an agriculture. catch-up in agricultureis especially slow. i find this intuitively plausible but if wetry to ask at the most foundational level, what is it exactly that’s the differencebetween agriculture and manufacturing which accounts for this? what are the microfoundationsof where that comes from? rodrik: i think a couple of things. one isthat manufacturing technology is much more
easily transportable across internationalborders. it’s much easier to adopt and adapt manufacturing technology. you can take a textileand clothing plant. you still have to tinker with it, but it’s much easier to transplant,unlike many agricultural technologies. we’ve seen that, for example, in the caseof the green revolution. it required a lot of on-the-ground adaptation because the weatherand soil conditions can be very different. if you will, the non-traded component of thattechnology transfer is much greater in agriculture. for that matter, it’s also in services.you can figure out how to run a hospital system or education system in an advanced country.you’re never going to be able to just take that and transplant in a developing countrybecause, technically speaking, the non-traded
component of that technology, or the latentpart of the technology that requires that adaptation to local contexts. cowen: so it’s about the people and theculture? rodrik: i wouldn’t say it’s the culture.in the case of agriculture, it’s the soil and the weather. i don’t want to say thatsome people are lazy and, therefore, they’re culturally not predisposed to this. i’mjust sayingâ .â .â . tyler cowen: that we see it in services suggestthe weather and soil may be part of it but they can’t be driving it. rodrik: no, no. in services, i’m sayinga lot of services have been very difficult
to transplant. for example, mobile telephonyhas been very easy. it stands out as one area. but most services are basically figuring outhow to do education and health.â .â . cowen: or a good health care system. rodrik: exactly. cowen: that seems to make it culture. rodrik: if you want to talk about culture,let’s open up a big parenthesis and get into that. i don’t know exactly where institutionsand organizations and incentives move into a domain where we start calling it culture. culture is back in economics. i still haveto be convinced that it’s actually adding
a significant amount to what we learn. let me get back to the question about manufacturing.one thing i said is that it’s much easier to move technology. if you’ve seen the waythat toyota manufactures cars in japan or in the united states or in south africa, it’smore or less the same. that is possible. the second thing, which i think is the microeconomicsof why it is that manufacturing is so special is that manufacturing, standard, traditionalmanufacturing like making cars or garments or toys or wigs, has the feature that youcan absorb a lot of very unskilled workers into that. being a production worker, evenin an auto factory, certainly in a footwear factory, doesn’t take a whole lot of skill.
that means that you can absorb a lot of peopleoff the countryside in a much more rapid way than you could in a lot of other activitieswhere technology and skill are actually highly complementary. i heard once a chinese entrepreneur tellingme that she was running a footwear factory and she was hiring people from the countrysidewhen the industry was starting. basically, the only skill that was required to get thatthing going was not whether they could read, not whether they were numerate, but basicallywhether they could do this with their hands. basic eye-hand coordination is all the skillthat was required. you could put thousands of people into these factories. the fact thatyou can absorb a lot of people, you can increase
their productivity threefold, fourfold offthe farm by putting them in these factories is an opportunity that very few other economicsectors provide. a third, and i’ll just mention it. a thirdthing, which is very important in manufacturing, is tradable. you don’t have to develop awhole industrial complex. you can import inputs and then export the outputs. you don’t require domestic demand to takeoff. you don’t require an economy-wide productivity revolution in order to have consumers to whomyou can sell your output. you can simply sell it on world markets. what that means is that it’s enough to developmastery in one segment of manufacturing at
a time. that provides the kind of engine thatyou need. compare that with the kind of transformationyou need in services where most of the output has to be sold domestically. you need basicallyeverybody’s incomes to grow, every sector to experience a productivity increase so youhave a large enough market that you can sell. otherwise, any service sector that is doingreally well eventually is going to experience very rapid terms of trade deterioration domestically. those things, the transferability of the technology,the fact that it can absorb a lot of unskilled workers‚—‚traditionally, this is what’schanging‚—‚off the countryside, or out of informality and tradability i think iswhat makes manufacturing, historically has
made it special. cowen: a question about industrial policy.i think we would agree in a number of the east asian tigers, industrial policy has workedout pretty well. but take the case now, there’s premature deindustrialization going on inmany countries. it might be hard to reverse. richard baldwin writes of the splitting upof supply chains. so south korea and japan had relatively integrated supply chains. now,the supply chains are all around the globe. in a time like this, where manufacturing ischanging rapidly and policy itself is subject to a status quo bias, as we know from yourown writings, what do you think is the new role for industrial policy, if any? shouldwe today, perhaps, not be more skeptical about
it than we were, say, when singapore startedit? rodrik: i think the answer to your last questionis yes, although i wouldn’t say we should be more skeptical. i think we should expectlower return to it, is what i like to say, simply because i think the possibilities ofindustrialization in the sense that you could put, in the old days, 30, 35 percent of yourlabor force into manufacturing‚—‚that is not going to happen. sub-saharan africawill not get there. what that means is that the returns to even successful industrialpolicy these days are less. that has a couple of implications. one isthat, increasingly, i think we really need a different term. we shouldn’t say industrialpolicy. maybe we should talk about a structural
transformation policy. your perspective interms of how do you get to rapid transformation. you should move away a little bit at the marginfrom manufacturing into other parts of the economy. i think you should be thinking more aboutservices, as well. a lot of services are tradable. to some extent, some of the advantages mightexist in tradable services, as well. the other thing which i think a lot ofâ .â .â .a common mistake in industrial policy that low- and middle-income countries do, whichis to look at industrial policy or criteria for success of industrial policy in termsof output, exports, innovation, r&d, patents, and things like that. whereas i would puta lot more emphasis on actually employment.
the question is, are you generating adequateemployment in these more productive industries that are oriented into world markets? becausethe kind of industrial policy that ends up generating profits and investment and r&din a low-to-middle-income country, but at the same time your employment is shrinking,is not going to be the kind of high-return activity for the economy as a whole. i think you’re basically right. i go aroundthese days a lot less advocating for very forceful industrial policy, in large partbecause i do think that the returns to it have fallen. i think also we need to thinkthrough a lot more what it should look like in a world where in fact we are concernedat least as much about services as manufacturing,
even in the middle-income or low-income countries. on “trilemmas†around the world cowen:let me introduce one of your best-known ideas. it’s sometimes called rodrik’s trilemmaof the world economy. here’s how one of my readers defined it. “according to thistheory, democracy, national sovereignty, and global economic integration are mutually incompatible.we can combine any two of the three, but never have all three simultaneously and in full.†given that, which i would agree with, if wetake the eurozone today, something clearly isn’t working. i don’t mean just greece.but every now and then we have of a nascent recovery, and the recovery’s over beforeit really has even gotten underway. the eurozone
is now sliding back to deflation. france,italy seem to be slow-growth countries permanently. let’s say it’s up to you. given rodrik’strilemma, what should the eurozone do? rodrik: academically, it’s very easy togive an answer. it’s what the trilemma suggests. that europe or europe’s policymakers shoulddecide whether they wantâ .â .â . cowen: but they ask you. we’re about todecide, professor rodrik. please tell us which one to give up. rodrik: tyler, as you know, we’re very goodabout, our job is to lay out the tradeoffs, but not to decide where we want to be on those. cowen: but you as a citizen. say you’rea europeanâ .â .â .
rodrik: i’ll tell you that too. let me answerthe first question. the first question is i as somebody who cannot put myâ .â .â . ifi cannot put myself in the shoes of the european electorate, european citizenry, i say thechoice is very clear-cut‚—‚either more political integration or less economic integration. that’s the choice thatâ .â .â . assumingthat we don’t want to give up on democracy. if we want to subject to the constraint thatwe want europe to remain, or regain its thriving democracy, then this is the inescapable choicethat the trilemma points to. which is to say, you have to decide whether you’re goingto politically integrate, and if you’re not going to politically integrate, you haveto figure out a way of economically beginning
at least some of this integration. that meanslosing the monetary integration in particular. now, you ask me which would be my preference.my preference certainly would have been before this crisis or well into the crisis, a yearor two into the crisis, would have been this is the opportunity where you just basicallygo to your electorates and say, “this is why we need to federalize europe. this iswhy we need to politically integrate. this is why we need not just banking integration,but we also need a significant amount of fiscal integration, and the creation of pan-europeanpolitical spaceâ .â .â .†cowen: that’s your first choice is fullsteam ahead with integration. rodrik: i would be full steam ahead with politicalintegration to back up the significant amount
of economic integration that already exists. cowen: but now, you’ve seen three or fourmore years. we know one of rodrik’s principles is economics is almost always about the 2nd,3rd, or 17th best. what do you choose today? rodrik: i’m afraid that, and i say thisvery, very reluctantly, that i do think that for a number of countries at least, that aloosening of the restraints of monetary integration, of a common currency. cowen: so you’d create a graceful path outof the euro for some nations. rodrik: well, of course, that’s the difficulty,because it’s very difficult to figure out what that grace, if in fact that gracefulpath exists. but yes. laying that aside, those
transitional costs aside, i think at thispoint i just do not see the kind ofâ .â .â . european integration was always an elite project.european integration was never something that the people demanded, and then the leaderssaid, “ok, we will do whatever you ask.†but it was always an elite project the governmentalleaders sold to their population, to their electorate. it was always an elite project the governmentalleaders sold to their population, to their i think what happened with the euro crisisis that somebody like america, instead of going out and saying, “look, this is nota crisis ofâ .â .â . it’s not a moral issue, that here you have a profligate country thatwe need to discipline. but this is really
a crisis of interdependence. that it was asmuch a german problem or german banks that are the source of the problem as the greekswho borrowed, or the spaniards who borrowed.†that line was never put forth to the germanpopulation. it was always become the moralistic narrative of the north versus south. i thinkthat’s where the political elite failed in europe. i think with that, it’s verydifficult to see now how you’re going to undo that in europe, unfortunately. cowen: let’s say you’re china. you’reon the ruling council. they haven’t even discarded democracy yet. maybe they’re sittingin rodrik’s bilemma or dilemma, whatever it would be called, and they’re trying tomaintain capital controls.
but there’s more phony invoicing all thetime, exports running through hong kong. a lot of chicanery, people trading money outthrough bitcoin. a lot of leakage. in the last few months, they’ve spent three orfour hundred billion of reserves, that’s real money, trying to keep the value of theircurrency up. it still doesn’t seem to be working. in the past, you’ve argued eloquently capitalcontrols often make a good deal of sense. their capital controls now, should they doubledown and defend the value of the yuan at all costs? or should they let it go, open up thecapital account, and see what the new value of the currency will be?
rodrik: i don’t think this isâ .â .â . cowen: you’re in charge, again. rodrik: i would not do anything hasty on thecapital controls front at all. i don’t think that the chinese have mismanaged this as badlyas often it is described in the financial press. cowen: i agree with that. rodrik: i think that there was a run up inthe stock market and then they were, they did a bunch of things to try to prop the bubble,and eventually they did, and maybe it went a little bit too far.
but they did more or less the right thingsin this whole process. they’ve allowed the currency in the last few years to move morefreely. they’re true to their policy roots, which have paid off very handsomely over thelast three decades. i think the last thing that we outsiders shoulddo is second-guess the wisdom of chinese economic policymaking. we’re talking about the countrythat has engineered history’s most miraculous poverty reduction program ever. cowen: let’s say another $300 billion ofreserves go out the door to keep the peg. your phone rings in cambridge, mass.â .â .â . rodrik: you’re starting from $300 billion.it’s nothing. it’s just a drop in the
bucket. why did they accumulate those reservesto begin with? obviously, yeah, it’s not like they’re running out of reserves. thatis not the issue. if they weren’t losing some reserves, that’s part of the optimaladjustment. if you ask me, “tell me why i should beworried about china?†i can give you real reasons why you should be worrying about chinarelating to the fact that they in fact have both a huge political transformation aheadof them, as well as a huge economic transformation. the political transformation being the oneof having to open up eventually, become more democratic, and we have no idea how they willmanage that. the economic transformation, which they havenot really gotten underway seriously‚—‚they’ve
started, but it’s really, they are at thevery beginning‚—‚it’s hard to turn into more of a domestically consumer-oriented,less investing, more consuming kind of economy, and less dependent on the world market. thoseare hugely challenging problems. managing the currency right now, and the financials.there’s the stock market, which is a tiny, tiny part of the chinese economy. it pales,i think, in comparison to those bigger issues. cowen: let’s take milton friedman’s dilemma,which is in a way an early version of rodrik’s trilemma. friedman argued there was a naturaltension between high levels of immigration and the welfare state. you see this quitesharply now in western europe. in some ways, you see it in the united states, even thoughour immigration has not been up lately. but
the tension is there. if politically it turned out that you hadto choose at the margin, cutting back immigration or cutting back the welfare state, you asa citizen, the economist cannot say. but what are your thoughts on that? rodrik: i start from the supposition thatborders matter. borders have moral significance. i accept the notion that let’s say we asa democracy or our citizens don’t necessarily put the same weight on somebody on the otherside of the border as they do somebody who’s their neighbor or share the same politicalsystem. cowen: but you can, if you choose to.
rodrik: but i can if i choose to. the questioni ask myself is this. let’s suppose that the tradeoffs are, let’s suppose is as you’veput it. which is that we can allow some people to come in, and those who are coming in aregoing to be better off, potentially at the cost of some of my own conationals being worseoff. my answer is that, at the margin, this isa relatively easy question to answer. because i say, “ok, how much weight would i haveto place on somebody on the other side of the border, relative to somebody on my sideof the border, for me not to let that person in?†if you do the calculation, which ihave done recently, which is to sayâ .â .â . let me be clear about what i’m saying. i’masking the question, under what kind of weighting
of outsiders would it be a bad idea for menot to let some more people to come in? the answer is that i would have to put a weightof less than one-fifth of somebody on the other side of the border compared to somebodyhere. then i say, look, i might understand thatit’s reasonable to say, “ok, maybe i care twice as much as somebody who’s my neighboras somebody who’s not,†but five times as much? i’m not so sure. that seems excessive. given how restrictive and how high these barriersare at the moment, at the margin, to me it’s a relatively easy answer. which is to say,yes, at this point, it makes sense for rich countries to take in more people from thepoor countries.
to put it in a somewhat, to draw an analogybetween the trade regime, what has happened in terms of trade liberalization and the migrationregime, the migration regime today is more or less where the trade regime was back inthe 1950s. back in the 1950s, the global gains from further liberalizing of trade relativeto the income distributional costs within countries and so forth was relatively huge.* i think the migration regime is somehow backthere. we need to rationalize it and liberalize it a little bit more. i’m evading the tougherquestion, of course, which is where would you stop? it’s easy for me to answer atthis point‚—‚the regulations are too restrictive.
but where would you actually stop? i wouldcertainly stop at a point where the integrity of public institutions and the welfare systemsof the advanced countries would be seriously threatened. but i don’t know where thatis. cowen: i would say today germans are a relativelycosmopolitan people on the world stage. how well will the absorption of 800,000-plus syriansgo in germany? what is your opinion? rodrik: i think they have absorbed more turksover the 1960s and 1970s, and look at the german national team. cowen: if you grade that on a scale of a tof, how well has it gone, in your view? turkish absorption into germany?
rodrik: i think it’s gone actually remarkablywell. there’re certainly some lessons that could be drawn from that. i don’t know anybodywho would say that this has been a terrible mistake for germany. i think they certainlyhave enriched, leaving aside their economic contribution, they’ve enriched german life. i think that’s the most direct comparisonand analogue is what happened with the turkish inflow of the ‘60s and ‘70s. that washuge. i don’t remember offhand what the numbers are, but certainly it was huge, andit’s worked quite well. on turkey cowen: you were born in turkey,you grew up in turkey. i have so many questions about turkey to ask you, but let me just trytwo or three. let’s take the turkish city
of konya. i’ve been to konya. outsiderssometimes call konya the bible belt of turkey. i’m not sure that’s a good comparison,but it’s a more religious city than istanbul. it’s a kind of heartland city in turkey. just a little simple question. i would putit this way. do you trust the median voter in konya? if you think about turkey’s troubles,if turkey were truly ruled by the median voter in konya, to what extent would things be fine,or to what extent is the problem it’s not really democratic enough? do you see whati’m asking? because in some obvious ways, the current regime is not very democratic,even though there are elections of a sort. but do you trust the median voter in konya?
rodrik: i do trust the median voter in konya,as i would trust the median voter in any country. however, i think when you think about democracy,it’s not just about the median voter. i think, and this is why i’m working on thistopic, on the question of liberal democracy. the things about democracy that we reallycare about are just two-fold. one is that we want the median voter’s views to be reflected.the second is we don’t want to allow the median voter to do whatever he or she wantsto the rest of the population. that’s why i think the constraints thatliberalism or liberal institutions, the rule of law, the constraints of non-discriminationof minorities of ideological or ethnic or religious sort. those are equally importantparts of well-functioning democracies.
one thing that has happened in countries liketurkey, which is actually a very widespread phenomenon around the world, is as the franchiseand elections have spread around the world, by the count of the polity, which is thisgroup that keeps track of this, we have now more democracies than autocracies in the world. but they’re all electoral democracies. they’redemocracies precisely in the sense that you meant, which is that you have elections regularlythey’re generally free and fair. but what they do, however, is that they allowthe winners of those elections to more or less freely trample on the rights of thosewho are not part of that winning majority. so the liberal element of that democracy isreally what’s missing. i’m all for empowering
the median voter in turkey or elsewhere, butall in the context of rules and practices that ensure equal treatment of minoritiesof all kind. that’s really the part that i think, forexample, the whole political economy literature on democracy has missed out on, because essentiallyit’s just thinking about it in terms of elections and the median voter, not thinkingabout it in terms of these restraints on what the median voter can do. cowen: thinking in terms of minorities, ifwe go to the eastern mediterranean in times past, today’s ä°zmir was once smyrna. itwas a fantastically cosmopolitan city. greeks, armenians, people from all over the middleeast, westerners lived there. it was for quite
a while in harmony. the earlier ottoman empirewas quite a cosmopolitan place in many parts. again, by its time, a fair degree of harmony. in the early part of the 20th century, thatchanges very fundamentally. you have some very violent events, and it’s never goneback. do you think it’s possible for the eastern mediterranean to be an area wherethese civil minorities have protection, or do you think the more monoglot version, turksplus kurds, now plus refugees, is simply what we’re going to have? how do you think about that whole change?a great, terrible, unfortunate development, or somehow, it’s a bit like the european17th century. great human tragedy, but a clearing
out that enabled nation-states to in someway move forward? rodrik: the big change, of course, was nationalismand the creation of the nation-state. i don’t think that the old order was a particularlydesirable one. it is one that of course significantly circumscribed what the greeks or the armeniansor the jews or the other minorities were allowed to do in these multinational empires. it’snot like this wonderful ancien rã©gime that we can’t resuscitate. of course, the forces of nationalism and thecreation of the nation-state moved us into this new world where i think what happenedin the eastern mediterranean as in so many other parts of the world was that you hadmobilization of the masses under a nationalist
rubric relatively early in terms of historicaldevelopment compared to western european countries. for example, in western europe you had liberalideas developed before the franchise became a mass franchise. in fact in britain and westerneurope, the liberals didn’t want‚—‚liberalism existed before democracy came into being. whereas, of course, in the eastern mediterraneanand places like turkey we’re trying to create liberalism, after you had a nationalist mobilizationand the creation of democratic-like regimes based on the mass franchise. it’s harderto bring those ideas of tolerance, the separation of powers, the rule of law and so forth relativelylater in the game. that’s what’s happening. but it is not impossible. one of the placesthat i like to talk about, in fact i talk
about this in my latest paper on liberal democracy,is the case of lebanon in the eastern mediterranean. lebanon until 1975 was a fascinating exampleof‚—‚it wasn’t exactly a liberal democracy because it was based on these different groups.they each had their shares in power and constitutionally they were each allocatedâ .â .â . [crosstalk] rodrik: but it was, political scientists writingabout lebanon in the ’60s and ’70s talked about it as a liberal democracy. the reasonwas because you had so many different groups, so many cross-cutting cleavages. you had themuslims and christians, the christians were between the greek orthodox and the muslimswere between the shia and the sunni.
there were so many of these cross-cuttingcleavages that they essentially had reached a modus operandi that no individual grouphad this notion that if simply they could prevail, then they could rule forever. whenyou don’t have that expectation, then you work out bargains with alternatives. becauseyou are afraid of what the other side is going to do to you when they come to power, if theyhave a chance of doing that. of course, how that system came to an endis also interesting, because once you had the massive influx of palestinian refugeesfrom jordan, that balance was upset. you now have one group that can, has potentially,can see itself as having a majority for an indefinite period time, so no longer has toessentially keep on with that basic compromise.
that’s how the lebanese consociational systemcame to an end after 1975 with the civil war. but at least that gives you an idea of thepossibilities that this, i don’t think is cultural. i don’t think this has anythingto do necessarily with islam. it’s not in the water. these things can happen. but you need this experience of learning tocompromise and to think that you need to be moderate in your policies because it mightbe that some other group will rule after you. so that you have this, if you will, theserepeated game incentives to basically not discriminate against those not in power verymuch. i can certainly come up with scenarios forturkey where this might have developed over
time. i would have to blame successive mistakesmade by political leaderships at different times as to why this process has so oftenbeen short-circuited. first, of course, the military by interveningrepeatedly and, therefore, short-circuiting this process of building up these habits ofregular change in power and therefore moderation and compromise developing. of course, thesedays with the government of erdoäÿan, who basically has just chosen the tactic thathe’ll do anything to remain in power, including aggravate all the cleavages on the basis ofsect, on the basis of nationality, and so forth. cowen: what then is the equilibrium with thekurds? they’re scattered across several
nations. it’s a burning issue in turkey.even with kurdish circles there are multiple languages and different points of view. do you see that is headed toward somethinglike lebanon in its more vital, feistier time? or do you see it going very badly wrong? thekurds, turkey, and to some extent kurds and iraq. will there be a kurdish state, and isthere any equilibrium at all? rodrik: i think it’s very unlikely thatthere will be redrawing of the borders, formally. i see that as a very remote possibility. ithink there was a possibility that the turkish government would have reached a modus vivendiwith the kurds and some kind of resolution in the same way that the basque problem inspain was resolved.
cowen: is that resolved? rodrik: they’re not asking for independence.there’s not terrorism in the streets every day. i think in that way, i think, it’sbeenâ .â .â . in that sense it’s been resolved. whereas the kurdish problem right now in turkeyis terrible. violence has flared up again and so forth. we’re back to some of theworst kind of conflict. but i don’t think that there is somethingdeeply structural that prevents the kind of compromise. i think the kurdish nationalistsare, in turkey at least, are very clear-sighted in understanding that full independence isneither in their interests nor something that they are likely to get.
the kinds of things that they do want realisticallyare not things that the turkish national government could not give up. there’s no fundamentalproblem as to why that cannot be resolved. if it not being exploited for political reasons.right now, for example, what’s happening is that erdoäÿan is exploiting the kurdishproblem as a way of building up his own nationalist base. that’s being used, that particularcleavage is being used for a political purpose. but one can imagine other political strategies,other winning strategies that would involve compromise. cowen: orhan pamuk, by far the most famousturkish author today. overrated or underrated? what’s your take?
rodrik: i have to say, i have never been ableto finish one of his books. [laughter] rodrik: this is not true. there’s one thati finished, but this actually wasn’t fiction. it was his memoirs of istanbul. i did finishthat because he grew up in a part of town which is very close to where i grew up too,so it was, i could associate. but his novels, i have to say, are, i findconvoluted and going around and around and around in circles. i’m not a big orhan pamukfan. i love his older brother, by the way, who’s an economic historian, who’s a verydistinguished economic historian, åževket pamuk, and i finished a lot of his books.
cowen: so who’s your favorite novelist? rodrik: i love john le carrã©. i think i’veread probably every one of his novels. i like ian mcewan a lot. i’m reading jonathan franzen’sbook, purity, right now, which i enjoy. he draws you in. cowen: if we take le carrã©â€™s vision ofhow a spy agency works, is that rodrik-esque political economy? or does it force you torevise your views of politics? rodrik: no, no. it’s very human, right?it’s just the mundane and the small things that happen. it’s a very good way of actuallyputting it. i had not thought of this until you said it, tyler. it’s a great point,that there’s a lot of lot of political economy
in john le carrã©â€™s description of how thesebureaucracies operate and the personal relationships and so forth. i have to think about it. i’ve never had this starry-eyed view ofhow government agencies operate. it’s not one that is jarring with respect to my ownworldview. cowen: if i think of your work as a whole,i always like to ask this question about thinkers. what’s the underlying current which tiesa lot of the different parts together? one thing that struck me going through your work.by the way, this pile is a small fraction of your work, and i feel sorry for my assistantwho had to print it all out. but even a lot of your papers that don’tmention turkey at all, i guess personally,
i read them as asking the question, “whyhasn’t turkey become a fully free and modern society?†even if i think of your work onpremature deindustrialization, if i think of turkey in the 19th century, a big themefrom my understanding is that turkey is then prematurely industrializing, and that’swhy the ottoman empire becomes the sick man of europe. i read a lot of your papers as looking atthis elephant from different sides, even if not about turkey at all. would you respondto that? do you think that’s a fair characterization? rodrik: i think that’s very perceptive.i think from my first foray into social science, i think that has been the question that i’vebeen motivated by. just to back up a little
bit, when i was growing up in turkey, in highschool, of course social science was probably the last thing on my mind, just because ofthe way that social science is taught in turkish schools‚—‚rote memorization and so forth.that wasn’t fun. like all turkish kids of my generation withsome academic pretensions or at least relatively good in school, my goal was to do engineering.so i came to harvard as an undergraduate to study engineering, only to find out that there’sactually no engineering major at harvard. cowen: not yet. rodrik: then i discovered the library andthe books, and the fact that they had more books in turkish, on turkey and turkish historyin widener library than i could ever possibly
find in turkey. then i started taking coursesin political science and economics, and it just opened up to me what it meant to be thinkingabout these social, economic, and political questions. but the one thing that motivated me alwayswas this question of why was turkey relatively poor and not developed, and the rest of theworld, and the united states or western europe developed. cowen: given this motivation, let me ask youfor the simplest, crudest version of your answer. we all know boiling things down toa sentence is a horrible oversimplification, and you above virtually all other economistsare about the complex and the multifaceted.
but nonetheless, if you had to give us thesuper boiled down version of why hasn’t turkey become a, more or less, fully freeand modernized society, what would it be? cowen: and you’ll be allowed some follow-up.give us the super short and then we’ll give you follow-up. rodrik: i’ll give you the general answerto that question, not for turkey, but for countries like turkey, and my general sortof question would be 50 percent structure, 50 percent agency, which is to say you startwith a lot of initial conditions that aren’t very favorable. going back to the 19th century,you start on the wrong end of the global division of labor. everybody else is industrializedand you’re not, plus, then, the british
come and they open up your trade regime andall the craft industries you have in the18th century are just decimated because of importsfrom britain and other western europeans. then you get defeated in a world war. youstart in very inauspicious circumstances. then agency. what happened, for example, undermustafa kemal atatã¼rk, who was the leader who made turkey, who took turkey from theashes of the ottoman empire, erected the turkish republic on top of that. he did a lot of verygood things and a lot of very silly things, and we’re still living with the consequencesof many of those things, including the good things. the fact that turkey is a relatively secularcountry with a large middle class to a large
extent is the result of his top-down, extremelybrutal, extremely narrow-minded view of what it meant to be a modern nation-state‚—‚basicallytake the swiss civil code and the french criminal code and german commercial code and just applyit. extent is the result of [atatã¼rk’s] top-down,extremely brutal, extremely narrow-minded view of what it meant to be a modern nation-state‚—‚basicallytake the swiss civil code and the french criminal but also a lot of the problems that we arehaving are also the residue of the fact that in that rigid view of how to modernize, hepushed out a lot of the people who need to be included back into the turkish polity,including the conservatives, the religious conservatives, and a lot of others, and thekurds.
cowen: but if i look at europe as a whole,there seems to be a line somewhere, maybe it’s at slovenia or croatia. you can debatewhere the line is. but east of that line, you don’t see full development. that atleast suggests to me, it’s not mostly agency. there’s something structural. because tothink the leaders or the citizens in these different countries all made the same mistake,it doesn’t quite fit my other views about the world. if you’re comparing eastern and westerneurope, again, this isn’t only about turkey. it’s not about atatã¼rk. you could say thesame about most of eastern europe, except possibly poland. what’s that fundamentaldifference between west and east that is giving
rise structurally to whatever percent of theexplanation you want to assign to structural forces? rodrik: you know, i would go back to peoplelike barrington moore, who tried to explain why is it that western europe, britain developeddemocratic institutions and it became very difficult elsewhere in central europe to dothe same. i think a lot of what he said had to do withthe nature of, how did market forces and social structures interact? in particular, what wasthe mode of commercialization of agriculture? if you started out with sort of peasant agriculture,small scale farms and landlords that weren’t interested in labor-repressive agriculture,who diversified into commercial businesses
in urban areas, as in britain, you got a verydifferent kind of path of industrialization and political development. where you got large commercial estates, largelandlords, absentee or not, interested in labor-repressive methods of farming, who didnot diversify to a large extent into industry, into commercial enterprises, allied themselveswith the state, so as to be able to continue their repression of the agrarian sector. cowen: so your three-word answer would bestructure of agriculture, if we had to boil it down? rodrik: yeah, i mean it has to be agriculture,because that’s where everything started.
that’s where everybody was. that’s wherethe wealth was. if you go backâ .â .â . cowen: but not ideology? so, you’re an economicstructuralist? rodrik: no.â .â .â . let me put it this way.if france was not in western europe but in eastern europe, i don’t think it would bethe kind of democracy or the kind of industrial economy it came to be. i think having the netherlands in the northand britain to the west, i think both the competition, the benchmarking, and the ideas,i think in that way geography made a difference. but geography, it sort of enables the transferof ideas and who are you looking at as what kind of a country you want to be.
in many ways, france had the initial conditionsthat would have made it look more like a central or eastern european country than a westerneuropean one. but the fact that it’s part of western europe i think has to do that itwas it was so much closer to britain. i think you see the same about why is it thatvietnam has developed in the way that it has after it opened up its economy. i think ifvietnam was located in latin america or central america, i don’t think it would have beenhalf the miracle that it was. cowen: keep in mind, vietnam is still poorerthan bolivia, which is the poorest country in south america. so, vietnam has yet to showit’s a success. rodrik: wouldn’t you bet in 10 years itwon’t be?
cowen: no, i wouldn’t bet. i’d say it’san even money bet. rodrik: [laughs] ok. on things under- and overrated cowen: let’sgo to a short question and answer part of the talk. i’m going to shout something out,ask you if it’s overrated or underrated. you give me a short answer. you’re freeto pass if you want to. as an economic method, going back to yourbook, this book economic rules, randomized control trials as an economic method. overratedor underrated? rodrik: today, overrated. cowen: give us a quick why.
rodrik: that’s the only thing that studentsdo these days. i think that’s not the only way we’ll learn. so, it’s crowding outa lot. i think it was a fantastic contribution to the economics literature. the way that i think about it is internalvalidity is not the only thing. the good thing about all these rcts is they’re very goodabout being able to identify causal effects. but they’re very poor about being able tosay anything about why is it that we get these effects or in fact whether the same effectswould occur in other contexts elsewhere. so, it worked here. we don’t know if it’sgoing to work somewhere else. it’s crowding out the kind of work thatâ .â .â .
the good thing about all these rcts is they’revery good about being able to identify causal effects. but they’re very poor about beingable to say anything about why is it that we get these effects or in fact whether thesame effects would occur in other contexts elsewhere. cowen: political economy, because it’s hardto do an rct on political economy. rodrik: but even in micro things. i thinkeven in the kinds of things where we’ve applied rcts, i think we should be thinkinga lot harder conceptually and theoretically. there was a time, when i came out of graduateschool, if you were doing development economics and you were doing something empirical, youcould never get a job. probably in development
economics at the time, you couldn’t geta job period. but the point was, doing empirical economics would not make you sort of riseup. i think that was terrible, and i we’ve nowbasically moved all the way to the other extreme, where empirical work also means doing somethingwhere you put 100 percent weight on internal validity, but very little thought into issuesof external validity or the basic theory. i think we just have to correct some of thatbalance. cowen: rumi, the 13th century persian poetand his sufi mysticism. as you know, he wrote some in turkish. overrated or underrated? rodrik: not enough known.
cowen: nã¢zä±m hikmet, turkish poet, famousleft wing figure, flirted with the soviet union. rodrik: fantastic poet. cowen: so underrated? rodrik: underrated. cowen: underrated. the iran nuclear deal.overrated or underrated? rodrik: i think it’s just right. cowen: just right. the idea of an independentcatalonia? rodrik: a lot of my friends will hate me forsaying this, but overrated.
tyler cowen: and why? rodrik: again, my catalonian friends are goingto hate me for this, but when i ask what is it that they want to get out of independence,it seems that basically it’s just very much a sense of having been treated very badlyby madrid. it’s almost like a very sort of 19th centurysense of nationalism that is driving it. i sort of think that we should be beyond that.i think that in a thriving european union, hopefully, if we get there, that basicallya lot of regions can do a lot more things than they can do on their own. i think the right evolution of political authorityis up for grabs. breaking up spain i don’t
think is going to really help that biggergoal of having a politically richer and deeply democratic europe. i don’t see what the upside really is exceptfor this deep sense of 19th century ressentiment. cowen: what’s a country right now investorsare underrating and a country they’re overrating in today’s world, given your understanding. rodrik: brazil, i think, is deeply underratedright now. i think that when you look at what’s happening, on the one hand, in brazil it shocksyou that there is all this widespread corruption with petrobras that seems to go all the wayup. on the other hand, when you look at how they’redealing with this situation it’s incredibly
impressive. it’s something that even inan advanced country you wouldn’t think would happen, that there you have these prosecutorsand judges who are actually following the rule of the law. cowen: real accountability. rodrik: real accountability. this is not beingused to settle political scores in the way that it would happen anywhere, if it was happeningat all. cowen: they have industrial policies. rodrik: their industrial policy isn’t greatbut they at least are trying to do something about it. that’s a somewhat separate issue.
to me, when i look at brazil, they’re demonstratinga political maturity in the way that their system operates that is decades ahead of eventhe advanced industrial countries. i think the fact that they’re dealing with thisand are going to have it behind them five years from now, eventually, it’s going toput themâ .â .â . i would put in the long play for brazil. when i look at brazil, they’re demonstratinga political maturity in the way that their system operates that is decades ahead of eventhe advanced industrial countries.â cowen: overrated. rodrik: i think india, because i think thekind of growth that india has had, i don’t
think it’s sustainable. partly going backto our earlier discussion about premature deindustrialization. i think they have theseplans to significantly strengthen their manufacturing base. i just don’t see it happening. i think india can grow at 4, 5 percent peryear on a sustainable basis. i don’t think it’s going to be 8 or 9 percent. when thissinks in, i think there’s going to be a negative overreaction, would be my fear. on the need for gap years in graduate economicscowen: last question before we turn to the audience. this, again, is getting back toyour book. a reader wrote to me, “rodrik was the albert hirschman professor at princeton.before that he received an albert hirschman
prize. both hirschman and rodrik are economistswho look at the same facts as everyone else but they see what nobody else has seen. if you were allowed to make one change inthe economics profession or academia‚—‚†this is an institutional change or rules change,not an attitudinal change, but an actual change in how things are done, a change in a graduateprogram. “if you could make one change to help producemore dani rodriks for all the rest of us, what would that be?†rodrik: i wish i had a very quick and goodanswer to this but it’s not a great answer but it probably would help. i was helped alot by going into economics after having done
political science. i think a lot of what’swrong in economics is that it’s so much driven by people who first do engineeringor math before they go into economics. and so, it’s relatively late that they get immersedinto the real world. i think anything that would get them a littlebit more cognizant of the problems of the real world. i would say that there are partsof political science that have become even worse than economics right now. i’m notsure that that would work. i don’t know. maybe a gap year, spendinga year in a developing country between your first and second year? cowen: that’s actually my idea, as well.i’m glad to hear you say that.
rodrik: there we go. we just now have to findsomebody to finance it. q&a cowen: we now open up to the audience.there are two mics. please get in line. i will alternate. please note‚—‚theseare questions for our guest, not lengthy statements. if you start making a lengthy statement iwill cut you off. please head up to the mics with your questionsand i will call on you and you will hear responses. at the mic over here. please just announceyour name, also. audience member: hi. i’m a master’s studenthere. i’m actually considering spending the summer in a developing country. what onewould you recommend? rodrik: one that you have not been to beforeor one in a continent that you haven’t been
to before. i always tell my students that they shouldalways go to a country, when they have that chance to spend a summer or a year, to gosomewhere which is as different from where they have some experience as possible. that comparativeâ .â .â . there are so manythings you take for granted that you don’t even understand are things to be questioned.it’s only when you see another country that’s so different, then you start asking, “buthow come that is working there? it’s not working here?†for that, as many opportunities as you haveto be asking that question, which is as different
a place you can imagine from where you’vebeen to. audience member: given that i’ve only beenin america and mexico and i only have one summer, what would be the top of the list?i’m looking for specifics. rodrik: go to india and travel. you will haveseen so much diversity and variety. cowen: on this side. audience member: thank you. i’m a teacherhere. i have my class here, in fact, today. we are at the moment studying systems thatproduce structural conflicts. it makes me want to ask you, when you talk about prematuredeindustrialization, we’re in the middle of looking at rosa luxemburg’s work.
i wondered what your explanation is for whetherthere are structural causes for premature deindustrialization. if luxemburg were hereshe would be talking about the effects of imperialism. i wonder how you would explainit. rodrik: of course, in the 19th century, itwas formal and informal empire. the so-called unequal trade treaties and so forth. you hadindia and china and the ottoman empire, all these nascent textile industries being decimatedby imports from britain. but, of course, we also have cases like japan,which in the late 19th century, despite having very low tariffs, being able to develop itsown domestic industry. we have at least one exception, even back then, of a country thatcould industrialize despite those circumstances.
the late 20th and 21st century analogue ofthat imperialism, if you will, is china because it’s been china that has been essentiallyswamping the world with manufactured goods. you go to a country like ethiopia today inafrica and basically everything is imported from china. fifty years ago, a country like ethiopia wouldbe manufacturing very simple things, from footwear to tables and chairs to cardboardboxes. but now, everything is coming from china. the fact that we moved to a stage of the worldwhere a country like china is able to exert such strong effect on world markets in manufacturingmeans that the opportunities for import substitution
in manufacturing is significantly less todayin the low income countries that have opened themselves up. it’s not, obviously, imperialism but it’ssort of like, if you will, the imperialism of free trade might be one way of puttingit for our current experience. that’s clearly one. it’s also, in termsof the fact that earlier i was saying that traditionally manufacturing has had the abilityto absorb a lot of unskilled labor. manufacturing has become more and more capital-intensiveover time. that means that now even garments or textiles, footwear, they’ve become fairlyskill-intensive activities. the chinese entrepreneur i mentioned, whenshe goes to ethiopia and opens up a footwear
plant, she’s using a very different kindof labor. university graduates and many, many fewer of them compared to what the chineseexperience was. i think changes in technology and globalizationhave been, i think, the two structural factors behind pushing for premature deindustrialization. audience member: thank you. audience member: when referring to the pastpolitical situation in lebanon, you characterized it as preferable to the current, more autocratic,situation of today inasmuch as a large number of crosscutting cleavages and the mutual understandingamong them to the effect that once in power it’s not necessarily guaranteed in the future,or something like the mutual fear of what
the other will do, effectively necessitateddeal-making and compromise. given this, what would be your position onnuclear proliferation? aren’t you, by virtue of this, beholden to the position that themore countries with nukes, the more crosscutting there would be and the more effective, betterfunctioning democracy? cowen: and when will turkey have nuclear weapons?want to discuss that? rodrik: you’re really pushing me to my areasof incompetency. i have no idea for that question. i have no inside knowledge of that to share. i think the question you were asking is extendingthe notion that more crosscutting cleavages imply greater political stability and toleranceand moderation. can we take that idea to the
international sphere, in particular applyit to nuclear proliferation? if more states have nuclear weapons, would that make theworld safer? i’m not quite sure about the analogy, theway that you’ve taken that idea and extended it to the global sphere because the notionof crosscutting cleavages has to do with when you’re operating not in a state of anarchy,so to speak, but when you’re operating in a well-ordered polity. i’m not sure that that analogy carries towhat is effectively the state of anarchy at the global level, where there is no globalgovernment so the nature of competition is very different.
the idea of nuclear proliferation globallygreatly worries me. not because i think that the marginal country is going to be less responsiblethan the countries that already have nuclear weapons, but just because the more countriesthat have them, the greater the chance that at least one of them will be irresponsiblerises. i think just probabilistically that makesme very, very nervous. the analogy, i don’t think really quite applies. audience member: that’s fair. cowen: next question. audience member: thank you. i’m brazilian.i have developing country experience that
is more than enough, probably. thank you foryour words of hope on what’s going on down there. still, beside your words of hope, crony capitalismand draconian regulations are more the rule than the exception in brazil. i would liketo know if you believe that brazil‚—‚is there a way of brazil ever overcoming thatin those five, six years that you said? or, putting it in another way, do those issuesactually matter? rodrik: maybe it’s easier to say‚—‚look,i come to brazil as a turk. i watch what’s happening in brazil. i compare it to whatis happening to turkey. it’s not like turkey has had an easy timeeconomically but the way that the financial
markets have treated turkey is incomparableto how badly brazil has been treated. i look at crony capitalism. i see at leastthat in brazil, we have a system that’s actually dealing with it, and they’re dealingwith it in a way that’s as clean as one could hope for. what’s happening in turkey? what’s happeningin turkey is that the extent of corruption and crony capitalism, the part of it thatwe have already seen, is vastly superior than anything that has come out in brazil. we knowthat the president and his immediate family have been greatly implicated in vast amountsof corruption. we know that. it’s the kind of thing that dilma couldbe guilty of pales in comparison. the fact
that anything in turkey, in terms of tryingto delete the judiciary when it went into trying to clean this system up, it did itin a way that was explicitly politically motivated. therefore, it made it much easier for erdoäÿanto clamp down on it because it was clear that it was a politically motivated attack on him,which makes neither side really right. this essentially means that in a country liketurkey, basically you’re postponing all these problems into the future. they’regoing to hamper your development, hamper your politics for decades to come. at least in brazil, you’re dealing withthese things. you’re trying to overcome them. maybe it won’t be five years. maybeyou’ll find other things that are happening.
my recommendation to you is at least takepride that you have a system that is actually trying to clean it up. that’s really rare.it’s not happening in turkey. it’s not happening in thailand. it’s not happeningin most developing countries that i know of. i think, in that way, brazil is exemplary. audience member: thank you very much. rodrik: next question. audience member: i read a small excerpt aboutyour new book, and i know that it’s about economic models. i was wondering how do youfactor in best practice institutions when you consider economic models. is there roomto factor in, say, in your own words, second
best institutions, and how effective wouldthat be in the ultimate analysis of a country or a model? rodrik: i’ve said this before. i hate thenotion of best practice. i think this is probably a very harmful notion. i was a student ofavinash dixit, who was a great economist at princeton. he likes to say, “the world issecond best at best.†i hate the notion of best practice. i thinkthis is probably a very harmful notion. i was a student of avinash dixit, who was agreat economist at princeton. he likes to say, “the world is second best at best.†you always have to think in those terms. thenotion of a best practice is based on the
idea that you can simply just have somethingthat worked somewhere and take it and copy it and apply it somewhere else. not only does that not work in general, itgives us a very lazy frame of mind. we end up developing all these world economic forumscorecards where we have all these checklists of the business environment rankings, or eventhe sustainable development goals. i think to some extent, these things can beimportant as public relations, as pr for it. but you look at all successful countries andwhat you’ll see is that you’ve had their societies and leaders who have always distilledexperience from elsewhere from the lens of their own local knowledge.
i think that when you get that combinationis really when things work. a best practice mindset, i think, is an enemy of that. cowen: question here. last question. audience member: given that industrial policylargely failed in post-independence india to a great extent, do you advise the presentindian government to go ahead with the conventional industrial policy of picking winners and losersor should they, instead, liberalize factors and focus on expanding access to capital? the second part, if they do go ahead withthe strategy, do you think global demand right now is strong enough to sustain an export-basedgrowth strategy or will it largely fail?
cowen: you have three minutes to answer fora billion people. rodrik: first, i would never recommend a countryto do anything unconventional. i think it relates to some of the things thatwe were discussing. yes, i think the returns to industrial policy are lower now. the returnsto any export-oriented strategy are also lower now. we haven’t talked about this but i thinkthere’s a sense in which the world economy isn’t going to be as much of an engine forgrowth for developing and emerging markets in the future as it has been until now. aswill manufacturing industry will not be that. i don’t see this trade off between fundamentalsversus a more proactive government policy
that’s trying to generate new industries,not just manufacturing but also services. what i always look for is a very pragmatickind of attitude towards the private sector and the business sector, which is a governmentthat’s sort of saying, “what is it that we can do to unlock possibilities?†andkeep an open mind on that. it doesn’t mean you’re going to be pickingwinners but it does mean that you’re going to be willing to get activity started thatmight not have started otherwise. some of them will fail. that’s in the nature ofthings. i think having tried and failed is betteroften than not having tried at all. there’s no trade-off, really. you can do that andalso work on your fundamentals, on your skills,
and your capital base, and your infrastructure,certainly as india has to do. indian economic policy has very much movedin that direction. i think that’s fairly consistent with what the government is alreadydoing except that i think they exaggerate how much growth and how much industrializationthey can really get. cowen: thank you so much for all of the stimulatingwords. [applause] cowen: there will be a book signing out frontwith dani, economics rules, it is out this october. all of you here should buy and readit. thank you again. rodrik: thank you. thank you, tyler.