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Surely, a
rhetorical question. I also read
overtones to the local living economies thread, which attracted some good
commentary on FW. - KWC Looking Beyond Free Trade
By Jeff Madrick, NYT, June 12, 2003 @ http://www.nytimes.com/2003/06/12/business/12SCEN.html SINCE the Iraq war, developed nations like France and the
United States seem to be vying to show that they care about the world's poor.
The events of Sept. 11, 2001, made us all more aware of the deprived state of
citizens around the world. The difficult aftermath of the war has also shown us
that overthrowing a dictator is not enough to ensure security, economic
opportunity and sustained decency. Interestingly, President Bush has taken the lead on these
issues at home. His Democratic rivals for president are hardly heard on the
subject. Mr. Bush has proposed a free trade region for the Middle East, a
number of bilateral trade pacts, a 50 percent increase in international aid and
a costly new program to combat AIDS. But with the exception of the AIDS plan, is all this mostly
talk? Economic development of Afghanistan seems to be faltering. And Mr. Bush's
rationale is disturbingly ideological. "Across the globe, free markets and
trade have helped defeat poverty, and taught men and women the habits of
liberty," he said last month. In the last decade, economists have discovered
how much more difficult development is than just promoting trade and free
markets. Despite the adoption of such policies in the developing world, poverty
remains high, inequality at unacceptable levels, and economic growth poor. The Middle East, many agree, seems far
from ready for free trade. The amount Mr. Bush plans to devote to nontrade
reforms is peanuts. What
do economists know about growth? "At the
more practical end of things — how do we make growth happen? — things have turned out to be somewhat
disappointing," the Harvard economist Dani Rodrik writes in a fine summary
of the state of development economics in the forthcoming "Handbook on Economic Growth"
(North-Holland). That is an understatement. But the danger is to think that nothing has been learned in
the last decade, or that the developed world has truly tried hard to help. A useful contribution to our understanding has been put
together by the Center
for Global Development and Foreign Policy magazine.
It is an
index — based on a variety of components, not just quantity of aid — that ranks
the contribution developed nations make to the developing world. Why an index?
"A horse race attracts attention," said Nancy Birdsall, the
center's president. It also helps broaden thinking about just what contributes
to growth. Even the highest-ranked nation, the Netherlands, scored only
5.6 out of a possible 10. But for the United States, the results are
disturbing; second to last out of 21 nations, nosing out Japan. Even though many factors are used in the index — some
debatable — the United States, as a basic matter, gives so little to the
developing world as a percentage of gross domestic product that its score is
brought down significantly. In the
days of the Marshall Plan, Ms. Birdsall notes, the United States spent 1 to 2
percent of its G.D.P. on aid. Now
it spends 0.1 percent. President
Bush says he would like to raise that figure to 0.15 percent, but his most
recent budget made no allowance for that. America's score is also reduced by other factors. The index penalizes nations for
polluting the world, and America's carbon emissions are the highest of the
21. Surprisingly, our immigration
policy is also more restrictive than in most other nations. But we lead the pack in openness to
imports, an urgent issue for many developing nations. European nations are significantly more closed to
agricultural imports. Yet even
here, our credibility has been hurt by Congress's recent protectionist farm
bill, signed by Mr. Bush without a fight. Although it certainly looks as if Mr. Bush is moving in the
right direction, questions arise over his tenacity and whether his commitment
to development will essentially be only about free trade. "Free trade agreements are at best only part of the solution," said Robert Z. Lawrence, a
Harvard economist. "They must be
complemented with other reforms." What are those reforms? There seem to be two broad lessons to be drawn from recent experience. Perhaps most important,
as Mr. Rodrik emphasizes, there is no single set of policies for all countries. Any
one-size-fits-all strategy, including the formulaic demands of the World Bank,
the International Monetary Fund and the Treasury Department, can hurt more than
help. In fact, he notes, Latin America came closest to following the precepts of the
"Washington consensus,"
which includes budget discipline, deregulation and the liberalization of trade
and finance, but the record has mostly been dismal. East
Asian nations like South Korea and Taiwan, not to mention China, followed
different, often contradictory paths to success. The
second lesson,
closely related to the first, is to tap local
strengths while constructing policies. David Ellerman, a consultant
to the World Bank, argues that it is important to recognize what existing
institutions can work in a nation and not impose rapid-fire Western-style
privatization. As an example, the Bush administration's anger toward the
Baath Party in Iraq could backfire because the skilled technical and
administrative people needed to rebuild Iraq turn out, inevitably, to have been
party members. Most should be
incorporated into developing the nation, not banished from it. Similarly, a locally run
regional development bank may now make sense for the Middle East. "Successful reforms are those that package sound
economic principles around local capabilities, constraints and opportunities,"
Mr. Rodrik writes. This is also where liberty and democracy
can matter. They are integral to
respect for local concerns. Development
is now clearly about elbow grease, not canned ideas. It is about tenacity and pragmatism, not political
values or the export of ways of doing business that are congenial to our own
companies. Now is the
time to hold the Bush administration and others to their promises, and to
broaden our thinking beyond slogans and ideology. |
MADRICK Looking Beyond Free Trade.doc
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