Frontiers of Economic Globalization?

At the Project Syndicate website you can find an interesting new article by Dani Rodrik. The column starts with an overview of the explanations of economic problems in distinct countries since 2008:

In Washington, accusing fingers point to China, blaming its currency policy for causing large trade imbalances and “destroying jobs” in the United States. Go to Seoul or Brasilia, and you will hear complaints about the US Federal Reserve’s hyper-expansionary monetary policies, which are leaving emerging markets awash in hot money and raising the specter of asset bubbles. Ask in Berlin, and you will get an earful about the absence of fiscal probity and structural reforms elsewhere in Europe or in the US.

Rodrik argues that, in some way, all these claims are right. And therefore he calls for economic policies which are more concentrated on the own economy (i.e., in many cases, industrial policies), while at the same time the mainstream solution proposal is strengthening global governance:

Another approach is to recognize that global governance is bound to remain incomplete, and to moderate the side-effects through a more cautious form of economic globalization.  This strategy entails throwing some sand in the wheels of the global economy in order to expand room for domestic policy and limit the impact of adverse spillovers from other countries’ actions. This option may seem protectionist, but it could ultimately ensure a more durable globalization.

In the end, Rodrik points out that there is a difference between global warming and the economic crises of the recent years (although many commentators seem to treat them similarly): while climate change, no matter where it is forced (i.e., where the greenhouse gas emissions come from), is a threat to the whole world, “[e]xposing the domestic economy to global markets […] brings its own rewards.” Therefore he warns not to concentrate too much on global economic issues, while forgetting one’s own country’s problems.

Since economic globalization is ever more criticized for not bringing development to those really needing it, maybe such calls as Rodrik’s are worth consideration – sometimes it seems that policy makers view globalization (at least its economic component) as an end in itself.



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