Rodrik: One Economics-Many Recipes

Rodrik, D. 2007. One economics-Many recipes. Globalization, institutions, and economic growth. Princeton University Press.

Why do some countries grow faster than other countries? One must look at national politics to understand the diverse causes of growth. Countries that are able to harness the power of globalization are those that are likely to grow the most effectively.

"First, this book is strictly grounded in neoclassical economic analysis. At the core of neoclassical economics lies the following methodological predisposition: social phenomena can best be understood by considering them to be an aggregation of purposeful behavior by individuals...interacting with each other and acting under the constraints that their environment imposes" (3).

The book then explores three major issues: economic growth, institutions and globalization. The first two were not of great interest to me.

"On the plus side, the global expansion of markets promises greater prosperity through the channels of division of labor and specialization according to comparative advantage...But globalization also undercuts the ability of nation-states to erect regulatory and redistributive institutions, and does so at the same time that it increases the premium on solid national institutions" (196).

Globalization: Rodrik posits a trilemma for globalization. In this world, there are three possibilities for the future of globalization that rely on the interaction of three different variables, only two of which can be a reality at the same time. The three variables are the following: integrated national economies, the nation state or mass politics. If the world is made up of integrated national economies and mass politics, a kind of global federalism emerges. If the world is made up of integrated national economies and the nation state, the Friedman golden-straightjacket will be imposed. If the world is comprised of nations and mass politics, then a world described as the Bretton Woods compromise (ala no capital mobility, monetary policy autonomy and fixed exchange rates) will emerge.

"...I suggest two different paths, one appropriate for the short to medium term, and the other for the long term. The first path consists of re-creating the Bretton Woods compromise: under this scenario, we would accept the continued centrality of the nation-state, and therefore combine international rules and standards with built-in opt-out schemes...The long-term path is one of global federalism: since this scenario obviously lies far in the future, it allows our imagination to run freely" (204-5).