Dani Rodrik (DR)
Thank you Nazan, thank you very much for the invitation. Thank you also, Shingirai, for the invitation.
It’s very nice to be virtually at Wellesley with this audience. The title that I gave for my talk is, “How Much Globalization Do We Really Need” and I actually have to start by arguing that in fact, this particular framing is not a very useful one that views globalization on a kind of a scale from you know sort of you know, globalization to lots of globalization, or in terms of today’s discussions hyper versus the globalization.
And I think the kind of debatat we have about globalization that views it as sort of you know, as on this uni-directional scale, we the can have more globalization, we can have less globalization. It really does not make a lot of sense, as I will try to argue that globalization is something that, in fact, has many different dimensions. That in many dimensions, in fact, I believe we have gone too far in globalization, and I have some raining in of that will be possibly quite beneficial.
But in many other dimensions globalization, it has not gone nearly far enough and I would say in social, environmental, human rights, and in light of our pandemic crisis at present. In global public health, I think that globalization has probably not gone far enough, so there are many ways in which I think we can improve globalization.
And the bulk of my presentation is going to be focusing on how we can do that by stepping back a little bit and thinking about it from the standpoint of first principles about what kind of a globalization should we really want. But I do want to start out with a kind of an introductory note that says that ultimately, the health of our global economy, the health of our system of globalization, as we designed it, rests on healthy domestic economy. So the best way to really achieve a healthier globalization and the more sustainable one is to improve the governance of our national economies, and I think our crisis today is fundamentally rooted in the inadequacies of our current policy regime. Our current welfare state model, and I think our divisions in our society, are in need of a new type of economic approach. 90% of addressing that challenge is going to come through domestic economic policies that don’t necessarily have a lot to do with globalization.
An appropriate model of economic globalization would be one that actually leaves space opens up space for governments and gives them the autonomy to pursue these domestic objectives, and I think that it will be one of my conclusions, but I’m not going to say much in this talk on the domestic economic agenda. I’m going to be focusing much more on the kind of global economic regime that we want to construct.
So, the first key point is really for us to understand that you know, globalization is a choice that we actually make a choice about the type of globalization. There was nothing inevitable about the globalization we experienced after the 1990s. And it’s important to say this because there was for a long time, and in some quarters, there still exists to spew that there’s really you know, not because of technology, because you know sort of.
You know the Internet because of everything that’s happened with communications. There’s nothing you can do about globalization, and we have no control over it. Tony Blair, back in 2005, Prime Minister of the UK, famously said, he was getting upset about people wanting to debate globalization.
“You know I hear people say we have to stop and debate globalization,” and he said, “You might as well debate whether autumn should follow summer. You know what is there today to debate, in other words, this is something that happens.”
Around the same time, Bill Clinton said something like, “Oh, you know globalization is the economic equivalent of a force of nature, it’s sort of like wind or water.” You know, so all these physical metaphors to suggest that there was something inevitable and movable and honorable about globalization.
But the point is that I think it’s quite false that the specific form today’s economic globalization, which are sometimes called hyper-globalization, did not come out of happenstance or it was not a necessity. And the reason for this is that globalization runs on rules and norms, and the decisions we make to enact those rules or internalize those norms are our own decisions, so we have agency in how we shape globalization. Now some of these rules are actually written explicitly into legislation or into trade agreements, so we have trade and investment agreements that span the entire world. We have banking laws in financial centers to ensure.
To establish the underpinnings legal underpinnings and the contractual environment or financial globalization, the OECD has membership rules. In the EU, which is really the most economically integrated part of the world, there is the RT communitarian know nearly 20,000 pages of rules and regulations that detail the rules of the single markets. But beyond the actual rules and agreements and legislation that sustain international trade and finance, there’re also various norms of good behavior. It might not be explicitly written into laws or legislations or international agreements, but they are also part of the set of rules on which shape globalization.
For example,there are no international rules or international agreements, but in general, for example, unlike in the train domain that forces countries to maintain openness to capital flow to be part of financial globalization. But for a long time, it was viewed as for governments, it was a rule of sort of normal behavior that good governments essentially have to liberalize their external capital accounts. To join financial globalization, they have to be open to cross border financial flows, so it’s a kind of a normal behavior.
So the question therefore is when we think about how we design globalization is what rules do we select, who writes these rules, whose preferences are privileged, and depending on the answers to those questions, we are going to have very different kinds of globalization.
So, in terms of today’s globalization, I would argue that we have gone too far in some respects and haven’t gone nearly far enough in some orders, so I think in a lot of areas in trade and ends. Where we have privileged corporations large firms big tech pharmaceutical companies multinationals over other interests. So we see this in the investor state dispute settlement agreements that give big firms international firm certain legal privileges, such as legal privileges in the international rules on patents and copyrights that privilege pharmaceutical companies. And so forth, the rules of financial globalization that allow large firms to engage in corporate tax arbitrage essentially go where the taxes are lower.
And in general, privileging market access, free trade, and finance over domestic regulatory autonomy or freedom to conduct industrial policies freedom to have your own social and labor standards at home at relatively higher levels and having sort of your own tax regime unburdened by the threat of capital and corporations to leave if your tax rates are high. On the other hand, there are many areas where I think we have not gone far enough and that’s mostly true in areas with respect to what I would call a true global public goods, the provision of true global public goods, such as controlling carbon emissions, fighting global pandemics, or establishing a true global human rights raging. With no human rights being really not under the same power is one of these global public goods, as you know, controlling climate change and controlling global health pandemics.
Just to imagine what that might mean, imagine that we might have had alternate globalization’s that you know, focusing on global health and globalization, centered on the World Health Organization. A globalization that might have centered on climate change or environmental agreements, a globalization that focus on social and labor rights with UNICEF. as the key agencies or a globalization that focused on the priorities of developing countries, Poor nations that had uncovered the United Nations conference on create and development, which is much more heavily influenced by developing country interest and then many other agencies.
Instead, we have a globalization that is essentially focused on organizations like the OECD. But, again, this was a choice we privileged these organizations over others. I think the fundamental error of hyper-globalization was to start thinking of economic globalization as the end rather than a means, and I think you know sort of in the kind of an approach to globalization that was represented in that quote from Tony Blair. I gave you at the outset was one that sort of view that wellness as individual nations have to adjust ourselves to globalization. We need to do what is required to compete effectively in the world economy, so that means we need to have to deploy our economic, social, regulatory tax policies to position ourselves in globalization, as opposed to changing the rules of globalization in a way that serves our social, economic, political needs the most.
I think the main corrected, that we need, therefore, is to start thinking of globalization as a means to domestic economic and social goals, rather than band and, interestingly, this actually was the original conception that drove the design of international economic arrangements after in the immediate aftermath of the Second World War. So, if you look at the original agreement in 1947, it makes it very clear that the objectives are things like raising standards of living, ensuring full employment.
You know, ensuring steadily growing volume of real income and effective demand developing the full use of the resources of the world. And trade was really a vehicle for achieving those ads. We turn to more recent trade agreements such as the trans-Pacific partnership of 2016 or the most recent European-Canadian trade agreement. It’s the other way around, so the objectives are really to promote economic integration liberalize trade and investment to establish expanded and secure market for goods and services across borders, reduce or eliminate barriers to trade, investment, and so forth.
So, in some ways, what I’m calling for, therefore, is not a kind of you know, a revolutionary idea. It’s really going back to the original conception of our international economy at the onset of the post-war period. In fact, our current good hyper-globalization, or at least the regime of globalization that existed prior to the pandemic, is much more reminiscent of an earlier era of globalization that goes back to the sort of the gold standard.
I don’t know if, in your economics courses you study the Gold Standard, but it was an earlier era of globalization between the late 19th century and the First World War with a brief resumption. And what was critical about the Gold Standard was the period of relatively free trade in financial globalization, where essentially, capital and gold were free to move across countries. Countries essentially pegged their currency towards gold, so their domestic monetary and fiscal policies were essentially completely driven by the requirements of free capital mobility and the requirement to maintain a fixed parity to court.
And in fact interestingly, the very first self consciously populist backlash against globalization is the one that took place in the late 19th century against the gold standard. And in what is probably the most famous piece of political oratory in U.S. history, William Jennings Bryan who ran as a populist would alter these famous words, “We shall, you shall not crucify mankind of going across all gold.” The background was the suffering of farmers in the United States as a consequence in, on the one hand, declining world prices for their crops.
And on the other, a kind of very tight monetary policies that were imposed through the gold standard, so they were facing very high real interest rates. Being squeezed on the one hand by their debt costs, on the other hand, by their declining prices of the commodities they produced.
The bankers and the industrialist in the northeastern part of the country argue that those were the rules of the gold standard. There was nothing you could do. Tight money was a consequence of the globalization. Society had to adjust to the requirements of the globalization of the time and the populace argue the other ways, we need to essentially monetize silver, increasing the money supply to get out of the gold standard effectively.
In order to be able to revive our economy and sort of “you shall not crucified mankind open across of gold,” you will not ask your people to suffer the consequences of this rigid global economic system. So that’s a very kind of a you know, many of the tensions that hyper globalization has created today is sort of reminiscent of these kinds of the tensions that were felt back then, the late 19th century.
Why does the advanced stages of economic globalization create these these tensions, as they did back in the late 19th century again in the interwar period? And then, more recently, in the last few decades, I think the answer is that there are there are you know, three fundamental tensions in when we think about economic globalization, the narrowly economic tension is that you know, there’re no contending logics to economic logics that if we will, we might represent with the idea of Adam Smith, who emphasized the gains from the division of labor and therefore, there are gains from specialization and therefore, you know sort of you want one as larger market as possible. And then the logical Friedrich Liszt or in the American context of Alexander Hamilton, both of whom argued for industrial policies and trade restrictions, because they viewed that countries that were not at the forefront of technology needed the space, needed a temporary protection, in order to promote economic diversification domestically.
So these are two contending logics that are at odds with each other, and if you move, I think too far in the direction of one, you lose sight of the benefits of the other logic. So, in other words, you move too far into globalization and let all the barriers on trade go. You have many countries that are left behind because they cannot effectively compete in the kinds of industrial or more advanced products, which richer countries have an advantage of. So that’s the sort of the economics tension that doesn’t necessarily benefit all countries equally.
There is a tension with respect to distributive justice because the flip side of the economic gains from trade is that not everybody benefits within countries, so there is the issue of the international gains and losses. But there is no sort of domestic gains and losses. In the theory of economic trade, these distributional effects, which are very shocked will always be present.
The theory of trade says that, by opening up the train and becoming part of the world economy, this overall size of the pie becomes larger. However, this comes along with some groups, are some industries or some regions necessarily losing out okay. So these are distributed effects and therefore, there’s a tension between managing these recent distributional effects which, in the context of not the last two or three decades, has been the very adverse effects and in regions that were competing with Mexico or China that lost significant factories were closed employment.
Important segments of society lost out on the third, and there was also a kind of a political tension tension with respect to whom should our political institutions and our regulatory systems be accountable to because there’s again two different contending logics which are somewhat at odds with each other, the logic of the gains from trade is that we want to eliminate all.
Transactions costs to trade and finance across borders and the way to do that is to actually eliminate differences in regulations and differences in taxes, differences in consumer product safety regulations, and means that took to maximize the gains from trade, you need to actually minimize regulatory diversity.
On the other hand, there are benefits from regulatory diversity, because different countries are different. They may want different environmental rules. They may want different tax rules, I may want to consumer product safety rules that if you have those different rules, you need to be able to maintain them by preventing regulatory arbitrage from essentially, you know, goods and services and finance. Essentially, running across borders to undermine the differences in costs that are created by regulatory diversity and, therefore, if you push too much in the direction of reaping the gains from trade that is getting hyper-globalization, you’re going to lose out on the benefits from regulatory diversity being able to provide your own nation, with the kinds of regulations, the tax regime, the fiscal policies that it wants that might differ from.
Those of its office partners, now you know, so all of this suggests that we need to be somewhat moderate in our ambitions to how much we want to reap the gains from trade because reaping the gains from trade by maximizing the size of the market.
By eliminating beyond the border transactions costs that impede international trade and finance, those will come at some costs to some other contending values and distributive justice or whether it’s about political accountability. But this, therefore, we need to be clear about where we actually need to design global rules and where, in fact, we can leave nations pretty much sort of, in other words, where do we need global rules one thing we need. Global rules are where there are serious breezes to believe that what each nation would do at a very large cost to others, unless unless we have these global rules or global disciplines.
Now, in much of economics, actually, this is not a problem that arises because in economics. Domestic virtue is generally its own reward internationally, that is, when we teach, for example, the theory of trade at the gains from trade, the reason we say that countries should maintain open trade policies is because it expands domestic national well-being. It’s the expensive domestic size of the pie.
It’s not because we want to provide benefits to other countries, so therefore you know, in most of economics actually. There is not a very strong argument for why we should have rules that prevent what countries want to do domestically because, by and large, there is going to be correspondence between what’s required for domestic economic health, and what’s going to be required for global economic health instability. There are two major areas where there are exceptions to that generalization.
And those two areas are sort of the technical names with those would be neighbor policies and then olicies that are in the domain of global public goods and those are really where I thik we would in general need rules.
So beggar thy neighbor policies are our policies that provide benefits at home, only to the extent they actually impose cause some foreign countries. So examples would be things like exploiting a country’s monopoly power international trade, exporting, unemployment to other countries to currency manipulation. Or to shift the tax base through bank secrecy or very low corporate taxation to attract financial corporations. Not really investment, but financial corporation just to shift the tax base.
But really, there aren’t that many other examples, beyond these maybe there are, but these would be the three key ones. So most of trade and most of financial globalization actually is not subject to these bigger thy neighbor considerations. Global public goods refer to policies where there are in fact very, very strong incentive for individual nations to free donations policies, and because it’s the same for every other nation, then.
These are in the common interest will be significantly under-provided. so two very important areas where that is true, is with respect to climate change and control of greenhouse gases. On one hand, and a global health pandemics, where we actually were just living through one and we’ve seen what the global costs of lack of information sharing, or lack of vaccine for the global public good.
You know, puts us all at a disadvantage. And therefore, I think the kind of globalization we want. We should really focus on those areas where there are in fact, very large economic gains where the issues are not first order redistributive. That disciplines these domains of beggared I neighbor policies and enforces rules for global public goods but otherwise and here, I’m returning to the theme that I started out with. Otherwise, it’s going to leave space for policy autonomy and institutional diversity across nations, so let me just conclude by just saying a couple of words about what the implications of this might be in an of different areas.
So you know I could talk a little bit about you know sort of different versions of globalization, we have had in the past and how that fits with the kind of ideas that I’ve just presented to you, but I just want to end really about the globalization of the future and whereI think these ideas would take us up first with respect to trade, I think, and referring out to the issue that the chimney identified as on
You know sort of his policies that are very, very different from those that prevailed in the United States or the West, because that’s largely, I think in the domain of things that are of Chinese economic policy concerns that are not, for the most part, with some exceptions exceptions, but not for the most part, are bigger thy neighbor policies and on the other hand, that the China must understand that US and Western countries need want to uphold their domestic Labor environmental technological national security standards, so that Chinese imports or investments that threatened launder mind those arrangements.
Also, it could be potentially restricted so, for example, with respect to you know, anti-social dumping rules with respect to trade and investment restrictions in response to privacy or national security concerns. Or if the United States and Western Europe are going to have real de-carbonization policies.
Carbon policies elsewhere don’t undermine the competitiveness of domestic firms that are being held to higher standards because of these decarbonization policies. So that means that countries in general and the US and China in particular, would have the right to protect their own standards, but they don’t have the right to really export those standards to others.
United States feels that Huawei undermines the technology or potential privacy issues in the United States. It’s perfectly okay for the United States to keep Huawei out of the U.S. market, but I don’t think the U.S. should then try to keep away third country markets as well, because that’s for other foreign countries to decide. I think, with respect to international finance, will need to see much greater willingness to manage the capital account.
For prudential reasons, for developmental reasons, as well as for distributional reasons, we need much creative oversight of global tax havens. For example, by establishing global financial registry that reduce the ability of wealthy corporations, a wealthy individuals to evade taxes in their in their domestic jurisdictions, one economic area where I think we have not reached the gains of globalization so efficiently is actually labor mobility here.
The economic gains to temporary Labor mobility remains very, very large. Now, this is something that could be expanded through temporary work visa programs. It also understand that this is, you know, certainly at the at the moment, politically very, very contentious. But I put this out on the agenda is an area where, in fact, the gains from trade remains very, very large compared to trade and finance, where most of the gains have already been removed, so I think this should remain on the agenda and put respect to governance, I would say that.
I think we need to be careful not to stretch trade agreements or the World Trade Organization, or the IMF. We have to restrict dispute settlement to a much narrower range of domains where the bigger neighbor problems are global comments. Issues prevail, and we should really conserve global governance, which is really is very scarce resource for beggar thy neighbor policies and true global local public goods, again I emphasized the importance of environmental and health issues, there does as key global public goods.
So to sum up with some up and conclude I think it’s possible to conceive of a thinner. But eventually, much more sustainable globalization that revolves around the new set of traffic rules for the world economy that provides greater policy space that allows richer nations to address issues of inequality at home, while providing room for poorer countries will devise their own growth strategies.
I think the key would be to think about our border policy, trade, and financial policies that will put our domestic priorities first.. That doesn’t mean protection for its own sake, it means having good domestic economic policies which are worth protecting, and if need be protecting those policies. And therefore, I think global governance should focus on areas where the gains are very, very large and those are the ones that and I just mentioned, so in some, I think this would be a considerable departure from the type of globalization we have pursued in recent decades, but in many ways, be returned back to the original conception of the Bretton Woods right in the aftermath of the Second World War which actually served the world economy very well for a number of decades. Before, I think we got overly ambitious on the economic front and created lots of instability and deep cleavages within societies as a result. So let me stop here, I’ll be very happy to take some some questions.
Nazan Bedirhanoglu (NB) Thank you so much for this extremely inspiring and very comprehensive projection, especially on the future of globalization.
Thank you very much. Right now, we can open the floor for questions and answers, please feel free to type your questions in the chat box. Once we receive some questions, we might even have room to let the audience ask questions in person as well. So while people are gathering to formulate questions or close their questions, I would like to ask the first question, if you have
Some over the last couple of years, I think we also saw this change in the, if not the policies, but the public discourse of the very global institutions that pushed for time session. If you will with such as especially the World Trade Organization and even the former administration of the World Bank, how do you interpret this? I mean they all of a sudden do that from the World Bank, and even the World Trade Organization about redistributing concerns all around the world. Is this because of a push coming from the critical side, or is this a sign of a future direction for globalization?
Yes, I mean, I do think that there’s been a significant there’s been a significant change in the narrative over globalization on the part of the globalization enthusiasts. I mean,
I think probably the turning point is around 2008-2009 with the global financial crisis, although now, there were already pre-existing trends, but I think what happened was that, in the aftermath of 2008-2009 became much harder to sustain the idea that the financial possession of our economies and financial globalization, where these wonderful things would not only fuel growth, but would actually as the argument was a bring stability.
Because international organization were meant to allow people to diversify to smooth consumptions, there were all these theoretical arguments as to how you would actually get not just more investment and growth, you would get also greater stability. In fact, the area of financial globalization was basically one crisis after another. It wasn’t until the United States and Western Europe were hit with a big financial crisis that those centers decided, maybe the problem was not with the policies of individual countries, but it was with the already institutions. That was maybe the whole construct somewhat, so there were these notes or after the financial crisis, it became much also the narrative about the benefits the knock on their door and benefits of financial globalization came to be questioned.
There was a very significant political backlash against trade, you know Trump of course, benefited from this, but it wasn’t it was sort of recurring political, You know, populist movements that was rallying and straight and sort of essentially you know, taking a significant amount of fuel from this distributive conflict created so they need to be in a reason there wasn’t needed to be a response to that.
So you got to see these international institutions taking on very different lines, I mean the IMF, for example, dropped its opposition to capital controls essentially said that capital controls could be useful. You know the World Bank became much less doctrinaire in areas of industrial policy, for example, became much more willing to condone it. The OECD turned itself from being you know sort of you know from this agency, promoting free flow of capital and Labor market directly to regulation to a spokesman for inclusive inclusive city and an equity and, and so I think you know it was just a kind of World Trade Organization, for its part, became completely ineffective, of course, under the under Trump because of this assault that
You know, deep down, it was that you know you were you sold us a bill of goods and it’s not what it’s showing to do because China was supposed to do all these things and. play by our rules and it’s not anymore, and so, for a variety of reasons, I think you know these institutions had to change their their to now that does not necessarily translate into an overall vision of how we move forward, so I think the all census has dissolved.
Neoliberalism Consensus market fundamentalism, the hyper globalist consensus, no matter what you want to call it, nobody believes in those things anymore. But we don’t have a new vision, I don’t think there is a clear sense of how we’re going to be moving forward, and I think that’s my concern now. I mean i’ve outlined sort of a vision, where I think i’d like us to to see moving forward, but you know, but there is no consensus over this anymore.
Nazan Bedirhanoglu (NB) Thank you very much, we do have some questions, and I would like to read them. The first question is a specific one regarding, let me just read it, “What comments do you have regarding the United States pressing on the issue of human rights and the treatment of workers?”
I do think that as a fundamental violation of human rights and it’s a near genocidal situation from what we can tell, in China, with respect to occurs. And I think it’s you know, human rights, this is an area where I think it is a global issue, I do think that you know that that countries need to talk about this to to press China on this, and they need to not be complicit in it.
And I think it’s perfectly appropriate for countries, for example, to ban trade and investment with Chinese firms that are actually involved in forced labor. In China and at the same time, I think we need to recognize that the US or Western countries have very, very limited leverage to actually make a difference, and Turkey is not nowhere near as powerful that country as China is.
But I think there’s, let me speak just you know, let me not put words in his mouth, but I think the ability of the European Union. For example, to fundamentally affect the course of the growing authoritarianism and united in Turkey or the violation of human rights which, from which NASA herself has suffered is very, very limited, so I think Turkey is not a change on this. There’s a domestic social and political movements and the opposition.
I think it’s the same for China. You don’t have to come from within, so I think we need to combine those two things first. I think Democrats, by their own values, make sure that they’re not complicit in its abusers, but also have to understand that their ability to do something to affect real change is very, very limited.
Nazan Bedirhanoglu (NB) Thank you so much, Professor Rodrik. I agree with you, I’m on the same page of these authoritarian governments, namely China and Turkey and many others are being at peace, right now, so there’s really more pressure on behalf of protecting human rights. forgot to name the person who asked the question, answer the last question for you, so we have the second question now coming from David and they’re asking, “text of intellectual property, maybe the number one concern of the United States and other firms in both FBI and trading with China, r&d investments by US firms may not feel the return if a Chinese firm steals yes, technology and turns around them produces these products for domestic consumption in China or export these products, why don’t you see this as an example of a beggar thy neighbor policy?”
Um yes, I don’t think intellectual property rights are generically a beggar thy neighbor policy, because let’s be clear that you know the framing of this question as a property rights question is already, you know, buying into a kind of a narrative which is not entirely correct, which is that every country in their development process has had very different rules with respect to what today we call intellectual property rights. And in the past, used to be called things like that, and some copyrights right for the longest time, the United States protected patterns of domestic residents, but did not protect the patterns of non US citizens because the United States was trying to catch upw ith Britain, which had much more advanced technologies at the time, and it was very convenient not to protect the so called intellectual property rights of the British. You know, European nations, similarly, so you know it’s it’s very common for countries to apply very different rules. To patents and copyrights when they’re at you know sort of trying to catch up with intellectual frontier.
Now, why is this, why is this not a moral issue? It’s not a moral issue, because property rights, you know patents are sort of a mixed economic blessing in the sense that patterns provide the incentive for firms and innovate, invest in new technologies, so that goes to the part that the question was asking but patents also delayed the dissemination of Innovation and Technology, which is a bad thing.
So you know it’s a mixed blessing and from an economic standpoint, you cannot say that for every country. There is no trade-off that will be resolved in exactly the same way, so now, the United States and partly US firms which already have the technology and are perfectly sort of happy restricting access to that technology to countries or firms that are behind them in the technological frontier, will naturally want to choose a level in that trade off. A very high level of protection, which implies very little dissemination and countries that are behind will say well, you know no I mean i’d rather have the dissemination and not protect the innovation that often has already taken place, which would have taken place, really, regardless of what i’ve done.
Now, why is this not a bigger die neighbor policy? Because you know what happens when you don’t protect so called intellectual property rights in a country like China. Foreign investors will not come in, if, in fact, it is a big deal that they are losing their intellectual property rights. If they don’t invest, it’s the country that loses the investment, so obviously you know from their standpoint they’re making a somewhat different calculus than the foreign firms are, and I think one of the biggest I think you know.
You know misunderstandings and international trade or the capture of the international trade agenda there’s gone astray. In the last few decades, is how multinational corporations big tech big Pharma has presented this as a kind of a trade or his own moral or legitimacy issue when, in fact, I think it’s the argument that you really should leave countries much greater leeway to design their own patent intellectual property rights, rules and internalize the consequences of having week rules that might mean they might be getting less investment, but they have access to technology innovation that they might not have otherwise.
Nazan Bedirhanoglu (NB) Thank you very much, and I would like to move on to the next question by Adams, they would like to thank you for the talk before delving into so many factors of globalization and global transactions, the question is, “Can you talk more specifically about how the reality that certain countries with less global power are in a sense, highly pressured or even forced forced to specialize.
For example, in specific crops resources, tourism, how this plays into the tree pensions, namely economics distributive justice and politics?”
I mean, I think actually most countries are not forced by anybody. I mean, I think there’s a there’s a kind of intellectual capture it’s not like you know, a kind of a power capture or military it’s not like you know the wt or the IMF or they have a. an army that they sent to your country and they say you have to specialize you have to grow these particular crops.
And it’s, not even the United States it’s not like the US Embassy in some you know African country essentially goes to the government and says, you have to specialize if not we’re going to make you pay. Really, what happens is that it’s much more actually that it’s a domestic political process domestic intellectual capture, which is that you know policymakers in those countries decide that this is, you know what they want to do now it’s not I mean this is not to say that.
Two states or international institutions don’t have any power, particularly if you get caught up in a debt crisis, if you need the World Bank money, if you need the US to provide you for military assistance, you’ll need to know pay attention to what they’re doing, but I would say that, even for the the least powerful and the poorest countries, what happens domestically is determined by the preferences of domestic elites and domestic policy makers, so I don’t think you know, we should really blame foreigners for the choices that we make in the poor countries in developing countries. Because I come from a from a developing country, too. And in line with what I was saying before with regard to human rights, I think, ultimately, it’s our choice. For example in Ethiopia, which is a very low income country in sub-Saharan Africa.
Most of the time, they know exactly what they want to do when economic policy, they do it ,and they take the advice and the money of the World Bank and the IMF when they think it makes sense. And they don’t take the advice and the money when they think it doesn’t make sense.
Now you know doesn’t mean they’ve gotten everything right, but at least you know sort of why it’s been a vivid example to me, of how even countries that are relatively powerless and very low income bureaucratic capacity and ability to project power internationally.
Essentially, what happens is determined more or less by the decisions they make just an empirical indicator of this. Look at sort of the variety of economic performance around the world. In the last 50,60,70 years, the right performance has varied incredibly from countries that have grown extremely rapidly.
From very, very poor beginnings, South Korea was back in the late 50s with the same income level as Ghana. Nobody had any hope for South Korea’s future. If we come in rich country, you know many countries that used to be rich. Argentina has remained basically where they are in variation and economic performance.
That’s true actually developing countries are essentially hadn’t been. By the requirements of big powers or international organizations, it would be very difficult to explain why, in fact, their economics and politics have taken such diverse course. I think my explanation is that because it’s been driven mostly by domestic developments and domestic economic policy choices rather than by the international context.
Nazan Bedirhanoglu (NB)
Thank you, Professor Rodrik. So I’d like to move on to the next question. Melanie would like to ask, “Is it really possible for every country to benefit economically from regulated globalization, how can richer countries be kept under check from taking advantage?”
I think there’s one word that I have not mentioned, which I think it’s important to bring to the forefront, and this question makes me do and that word is “multilateralism.” I think you know, probably the biggest, most important thing that post-Second World War brought into the international economy was the principle of mark collateral ISM and what that means is that you have a set of rules that apply to everybody equally and so. And, things are not decided by you know sort of bilateral relations bilateral isn’t horror, so you know countries imposing their own will on their on their trade partners. And, by and large, I think this is multilateralism is the most important principle that developing countries are low income countries should push for in international institutions that there is.
A similar set of rules similar set, a mechanism that all countries have have have have recourse now. If we clean gone to multilateralism, I don’t see developing countries as losers from regulated globalization. If you look at the Bretton Woods era set, which was you know the kind of regulated globalization, South Korea, Taiwan, Singapore, Hong Kong – Southeast Asian countries that did extremely well.
Latin American, sub-Saharan African countries did very well until the late 1970s, so there was a period of rapid globalization, where you know trade barriers were moderate. They were not as low as they were when there was no financial globalization, yet it was actually a very conducive environment.
For countries that got their domestic act in shape to actually benefit, the term related globalization itself is a kind of a misnomer, because every globalization has to be regulated, because, as I said at the outset, that it always relies on rules, so it’s not like we have globalization without walls. Every component comparing to what i’m proposing is just a different sets of rules that might allow countries, for example, perhaps occasionally higher levels of restrictions on trade and finance which i’m suggesting would not be that costly. And might make the regime more resilient and more sustainable in the long term.
Nazan Bedirhanoglu (NB)
Thank you so much, we have another question. I’m sorry I’m pronouncing this beautiful name. They would like to ask, “Where does the Internet, especially E commerce, factor into discussions of globalization?”
Well, you know clearly, this is an area of expansion and digital trade and has been a big part of growth in services, trade.
You know that has not been, for which there have not been many agreements which, and so they you know it fits it’s like one of these new issues in international trade. We need to go to the logic that I talked about, which is to say that there’s this tension between wanting to have the least amount of barriers to trade, that you know these E-commerce just one global marketplace, that you can trade with.
Against the logic of each country sort of having somewhat different rules on privacy somewhat different rules on you know consumer information somewhat different roles on. You know the the technological integrity of their you know Internet infrastructure and things of that car so there’s always going to be some tension between. The desire to reap the gains from trade by having a single market in electronic commerce and the desire of individual nations to have
You know, a digital cloud of their own, because they told it or to have different rules with respect to consumer information or consumer privacy. too much on either one, because if we push too much interaction of just letting every country has their own. complete island, then we will have to little trade if we just simply put tried to push you know single regime where you know you know digital commerce is single market.
That will have little upon me for individual nations to devise their own regulations. Keep those the detention in mind and allowed it different countries will want to deal with that trade off somewhat differently, so I think that it fits into the kind of framework that I was suggesting where we need to Consider those trade offs. Economics is the science of trade-offs, as we sometimes say, and then we should not move to either extreme.
Nazan Bedirhanoglu (NB)
Thank you very much for this answer, I would like to read the other question by she writes holds that are up and I would like to announce that we are going to end the event around 5:45pm or so, so if you have I’m not sure whether we would have time to accommodate another question, but if you would like to pose a question, this will be the last chance to write it so.
Shingirai would like to thank you very much for an insightful and informative talk. His question is, “To what extent is a thinner and more sustainable globalization feasible, given that, since the industrial revolution neoliberal capitalism at its core has thrived on rapid and large the unconstrained competitive expansion and securing of new markets and sources of raw materials?”
Um yeah it’s a big question, obviously I mean. But I don’t necessarily see kind of an index inexhaustible logic.That means that we will necessarily try to push deeper and deeper into hyper globalization or an inexhaustible logic that suggests that it would be impossible to have a thinner model of of globalization and the way that I’ve described it.
F or one thing, I think we have had such a system, and it was the Bretton Woods regime, I think, for the you know, three or four decades after the end of the Second World War was, in fact. A version of this globalization, where our ambitions with respect to international trade were relatively modest.
It was limited to tariffs and quarters on manufacturing most developing countries could do whatever they wanted there was very little liberalization in agriculture. In services, trade rules did not reach beyond the borders and capital controls were to nor rather than the exception.
So there was you know, the proof of concept that went from the kind of high PR globalization of the gold standard to, in fact, and much more moderate kind of globalization and then after the 1990s back into it kind of hybrid globalization, I mean what expand what explains the cycles, I mean, so I think they’re both you know you know interest and ideas that matter.
She was talking about interest in the vested interest of corporations have international capital to to you know expand access other markets cross borders. And I think there’s also you know the interest of national capital, which is often sometimes you know in developing countries or middle income countries, which may go in the opposite direction, which is to maintain domestic market, so that they can so there was always you know some domestic pressure from domestic capital to restrain international trade, investment, but I think more importantly, that international capital and corporations rarely impose their will on politics by saying this is what we want, and we are the powerful group here and, therefore, you have to do what you want. Instead, it’s always a debate of ideas about narratives about you know conceptual frameworks, so it was the reason we got hyper globalization.
International corporations were able to leverage their power through the intellectual arguments that existed at the time. Economists saying wouldn’t it be great if you know, we had capital to move freely and so therefore would get the benefits of global diversification. we’d have you know savings of rich countries being transferred into investment in the poor nations which mobile financial capital markets wouldn’t be wonderful if we got the benefits of deep trade integration that would provide all these productivity benefits, so, in other words the argument was sold, not on the basis of power.
On the basis of a kind of an intellectual argument now, as I said earlier that intellectual argument has dissolved, but nothing has replaced it. Short I do think that the power of interests can always be reshaped and restrained by the power of intellectual arguments. I think that’s why this may be this a self-serving argument we know we’re scholars academics, you know we deal with ideas and we’d like to believe. that we have more power than we do, simply because of the arguments that we present, but historically, it’s been very important that its interest may be better served through a more moderate more sustainable healthier kind of globalization.
That reinforces the legitimacy of the open economy, as opposed to one that’s going to result in a kind of populace backlash and that might actually end up doing business, a lot more harm in the medium term. So even there you know the power of ideas to transform how businesses view their own interests can be very, very powerful. So that’s why I remain more optimistic. We have more control over our future and we’re not simply hostage to free-willing capital and the wishes of investors.
Nazan Bedirhanoglu (NB)
I’m in the hope that we would have the political willingness or the political courage, maybe to bring about the institutional and infrastructural changes that you mentioned about to yeah it’s a very about the end of our time, so I would like to first thank the audience for their thoughtful questions, and thank you for being with us today here as much as I miss being in the same place with all the audience and you’re feeling the environment, but it’s also nice that we can gather this kind of a crowd and all these on an online event, and I would like to thank Professor Rodrik for being here with us today for joining us and providing us a very. to find perspective of issues and put things in place which is impossible hard thing to do. So thank you so much for being with us here today, again, and I would like to end the event and before I’m ending demand, of course, I would like to say if there’s anything you would like to say at the end, you’re also welcome.
Thank you, thank you, it was my pleasure to be here with you, and thank you to all the audience members and their questions and comments. Still, have you here.
Nazan Bedirhanoglu (NB) is a Freedom Project Post-Doctoral fellow in Political Science Department at Wellesley College. She received her PhD in Sociology from Binghamton University and her MA in International Relations from Ankara University. Her research interests include political economy, intellectual property, cultural expressions, foreign policy, international organizations, the Middle East, and the Kurdish question. She teaches courses on international political economy and development at Wellesley College.
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