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The Inclusive Economy
Recently Read Books on the Picture: How Fares the Global Marketplace?
By Bill Schweke on 07/27/2007 @ 01:33 PM
A Book Review
MIT professor and expert on Asian economies, Alice Amsden, takes aim at different game in Escape from Empire: The Developing World’s Journey through Heaven and Hell: U.S. foreign economic policies. Professor Amsden thinks that these policies have taken a turn for the worse. In the recent past, she argues that the United States let other countries, unless they were communist or in danger of “going communist,” do their own thing. (American-aided coups in places, such as Guatemala, Iran and Chile, were the response if you turned toward what U.S. policymakers regarded as the “Dark Side.”) In general, however, the U.S. took a hands-off approach, offering aid and encouragement while putting some modest pressure on nations to lower tariffs or other traditional protectionist tools. This practice allowed the Third World to explore scores of different economic development approaches, ranging from export promotion to import substitution, from state ownership to partnerships with Big Oil.
From the end of World War II until the Reagan Administration, “poor countries, including Africa and the Middle East, enjoyed a modicum of growth.” Setting aside the East Asian economies and the recent takeoff of India and China, the following two decades have delivered much slower growth for the poorer countries. When the U.S. forced these countries to adopt status-quo economic development policies in the 1980’s, growth slowed, income inequalities skyrocketed and financial meltdowns set some strong economies back for years. America bears some responsibilities here and needs to stand aside and allow greater experimentation to occur. We must become less controlling, dictatorial and ideological.
Amsden contends that policymakers in their countries have the on-site, local knowledge to identify the best path to take. Forcing a free market Neo-Liberal model on these countries will be a disaster for most. And the two emerging powerhouse economies—China and India—are not following the U.S., NAFTA and WTO scripts. Rolling back so-called non-tariff barriers to trade is a bad idea, because it does not allow developing nations to operate like developed ones, who pursued a variety of models—some more laissez faire, some more statist—to promote growth and an indigenous capitalist class. The book implies that practically every policy has worked somewhere and failed disastrously elsewhere, which underlines the need for a flexible approach.
It’s an interesting read. Amsden knows a lot. My only gripe is that she does not build, chapter-by-chapter, an argument as solid as her facts.
After reading Amsden, you might consider looking at these issues from another viewpoint and dive into The Harvard Business Review on Managing the Value Chain (a great compilation of significant articles) and McKinsey and Company’s (Diana Ferrell, editor) Off-shoring: Understanding the Emerging Global Labor Market. The former leaves the reader with the perception that off-shoring is pretty unstoppable, but it might be tamed and shaped for a larger good. The McKinsey book covers all the major issues in simple prose, but tends to only see the half-full glass, not the half-empty one. Amsden’s work, on the other hand, shows the positives and negatives of current off-shoring practices.
So, what do you come away with, if you read these books in close succession? Here are my conclusions:
- The 21st century global marketplace is amazing in its energy, power and flexibility. (It’s sort of in the “cloning” business.)
- The new business model for transnational corporations, which makes regular and systematic use of out-sourcing and off-shoring, puts both rich and poor nations between a rock and a hard place.
- The accelerated evolution and greater integration of “One World Economy” works for some, harms others, but can be made to work better for all.
- What was true yesterday may become false today.
- We must be more humble in our judgments and our recommendations, because our way is not always the best way.
Finally, even if the global economy has seemed to put all the human race on an accelerating tread mill, that does not mean that your only choice is to run like a grizzly is after you. You can still adjust your speed. And you can get off and do other things, if you have done your “quota for keeping your health.”
Commerce should not trump all other values.
Let me leave the last words with John Maynard Keynes and Jesus of Nazareth.
- A paraphrase of Keynes: “Economics has only one ultimate function – it creates the possibility for a civilization.”
- When Jesus was being tempted by the devil, the New Testament states that he said: “man does not live by bread alone.”
A final thought. Given his living under Roman rule, he might have said: “Man and woman do not live by bread and circuses alone.
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