Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Sunday, September 10, 2006

Neoliberalism Plus?

Robert Wade on world development and the global economy:

Foreign Affairs - Questions of Fairness - Robert H. Wade: The second problem with Kapstein's analysis is that it treats all states the same. But we know that some states are much better at promoting development than others. The Princeton political scientist Atul Kohli has proposed a threefold typology:

  1. A "neopatrimonial state," in which the ruler treats state resources as his own (such as Nigeria and many other countries in Africa and the Middle East), is likely to make a mess of many instruments of industrial policy if given the latitude.
  2. A "cohesive-capitalist state" (such as South Korea and Taiwan up to around 1990) is likely to be much more effective at using dirigiste methods to upgrade and diversify the structure of its economy (although it may be no better at protecting human rights).
  3. In between these two types is the "fragmented-multiclass state" (such as many in Latin America and Southeast Asia), the capacity of which to implement strong industrial policy is more varied and more contingent.

Should the boundaries of policy space -- defined by WTO rules and World Bank and International Monetary Fund loan conditions -- vary according to the type of state, on the grounds that neopatrimonial ones are more likely to abuse policy space than cohesive-capitalist ones are? How could such rules be accommodated in the regimes of international organizations and in international agreements when there is such pressure to treat all states, or at least all developing economies, equally?

Nigeria, after all, would not appreciate the World Bank's refusing to give it help with industrial policy on the grounds of its neopatrimonialism while the bank helped another country on the grounds that it had a fragmented-multiclass state moving toward cohesive capitalism.

Such questions deserve more extended discussion. But the main point is simply that a typology of developing states should be fundamental to how we think about development policy. At present, it is not -- and Kapstein's commitment to universal rules obscures the need.

In thinking about these issues, we should also give up talk of "the developing world" in contrast to "the developed world," and talk instead of a "1:3:2 world" (one billion people live in the rich countries, three billion live in countries where growth rates are faster than those of the rich countries, and two billion live in countries where they are substantially slower). When will the states representing the slow-growing two billion link up with the states representing the fast-growing but low-income three billion to force changes in the rules of engagement in the international economy?...

I think the answer is "never." The current neoliberal rules of engagement make it difficult for the rich post-industrial core to succumb to protectionist and nativist pressures that would slow growth for the three billion significantly. And the current neoliberal rules of engagement give the largely-kleptocratic rulers of the two billion nice lives as well.

Wade seems, if I read him correctly, to ask us to think about neoliberalism plus--where the "plus" seems to take the form of some sort of benevolent developmental imperialism to remove the rulers and reform the institutions of the two billion.

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