More good sense from Martin Wolf

Martin Wolf reviews two books that are sympathetic to trade protection, and he breaks rank with trade fundamentalists:

South Korea and Taiwan were exceptional cases. The argument that success will follow the overthrow of the neo-liberal consensus and the return of protection is nonsense. But the authors are right that those who argued that free trade alone is the answer were wrong. There are no magic potions for development. Developmental states can work. Many fail. But some may succeed.

Above all, developing countries should be allowed to try, and so learn from their own mistakes. Countries should be warned of the difficulties of following South Korea’s example, but allowed to do so if they wish.

Big and relatively successful developing countries, such as China and India, must participate in and be bound by global rules. They cannot be free riders. But the bulk of developing countries should be allowed to choose their own policies. Almost all will need to attract inward foreign direct investment. A few might still manage without it.

Chang is right that some of the constraints imposed upon developing countries, notably on intellectual property, are unconscionable. Most should enjoy the benefit of open markets from the rich, but be allowed to pursue their own paths, from laissez-faire to its opposite. They will make many mistakes. So be it. That is what sovereignty means.

Wow! This is the second thing Martin has written this summer that I completely agree with--and I am beginning to wonder if it is him or me...

By the way, the two books that he is reviewing are "How Rich Countries Got Rich...and Why Poor Countries Stay Poor" by Erik S. Reinert, and "Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World" by Ha-Joon Chang.

Comments

[paine]

i find martin a wind bag

and this free to choose ones path... really

then why strike this darker note

" developing countries should be allowed to try"

"allowed "

hmmmmm

"allowed "

clearly forces in play
----" our north country
pri-sec
'global credit mangers'"??------could...un allow...
choice ...
if something "better"
were to their pleasure
or
i should say
long (or even just short run)interest

[jonfernquest]

Protectionist sentiments in the US had something to do with Korea's success too. Nixon was pressuring Korea to reduce textile exports, there was the pullback from Vietnam that was feeding the Korean economy, the World Bank told Park Chung Hee he just couldn't jump all the development steps he was planning to do, and then within a decade, Korea had a steel and shipbuilding industry, with a lot of subsidies from Japan. "Race to the Swift: State and Finance in Korean Industrialisation, 1991, Jung-en Woo.

I just don't see how economists can get away without studying or addressing history. In some ways it sets a feasibility constraint.

[James]

Hi Dani,

Great blog. I just finished the paper you wrote a couple of years ago regarding the political trilemma of the global economy. I'm a bond trader at the CBOT and a lot of problems you describe with the nation state and self determination resonate very well. Take for instance the current arrangement in the US treasury market where the Chinese are buying treasuries holding down rates in order to stimulate exports. I have a strong suspicion that many in the private sector know that rates should go higher to curb inflation, but long ago the last vigilante was killed because foreign CB's are becoming too dominate. The long end of the yield curve is still inverted! Who should hold the keys to interest rates? Foreign CB's or the private sector who is trying to sell bonds because they are overvalued. I enjoyed your review of Argentina. The rest or world and especially Asia is greatly misreading the general US public if they think that congress is not going to respond to domestic concerns of most Americans whatever the potential adverse consequences to "globalization" are. Have a good night
James

[Emmanuel]

Dr. Rodrik, it seems to me that Wolf comes out as an apologist for but not a contrarian to "neoliberal" measures if you read the entire book review as I note in my post:

http://ipezone.blogspot.com/2007/07/fts-wolf-in-defense-of-neoliberalism.html

Here is an excerpt that I think demonstrates Wolf's generally unfavorable view of "mercantilist" measures:

South Korea and Taiwan were exceptional cases. The argument that success will follow the overthrow of the neo-liberal consensus and the return of protection is nonsense. But the [books'] authors are right that those who argued that free trade alone is the answer were wrong. There are no magic potions for development. Developmental states can work. Many fail. But some may succeed.

[Justin Rietz]

I echo Emmanuel's sentiments. I don't believe Wolf agrees with a more mercantilist approach, but rather that outsiders shouldn't interfere with a country's chosen economic path.

I would say it is quite similar to Easterly's position.

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