------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (August 2007)

Richard H. K. Vietor, _How Countries Compete: Strategy, Structure, 
and Government in the Global Economy_. Boston: Harvard Business 
School Press, 2007. vi + 308 pp. $35 (hardcover), ISBN: 
978-1-4221-1035-5.

Reviewed for EH.NET by Jari Eloranta, Department of History, 
Appalachian State University.


Richard Vietor, a prominent Harvard scholar who is comfortable in 
many fields including business history, economics, and management, 
has written a comprehensive and rich survey of the "unique social, 
economic, cultural, and historical forces that shape individual 
governments' approach to economic growth." The book builds from his 
extensive research and consulting experience, providing in essence a 
thesis of why government can serve a crucial role in the economic 
development of nations. Vietor argues that government can do this in 
a variety of ways in order to advance the performance of business, 
namely by inducing savings and offering low interest rates, 
guaranteeing property rights and other necessary institutions, 
providing an educated workforce, and maintaining low inflation. The 
main thrust of the book is to posit that institutions are the central 
building blocks of any economy, and that "good" institutions are 
vital for sustained economic development. This argument is not very 
new, albeit his emphasis on the role of the government is a bit more 
novel. He wants the book to serve as sort of a manual for business 
managers, so that they can learn from the past and the present, as 
well as to be able to handle future challenges.

This volume is divided into three sections. The first focuses on the 
Asian high growth experience, in particular on Japan, Singapore, 
China, and India. Vietor's reason for this is that he wants to reel 
in the casual reader by discussing the cases that are the most 
visible examples of his arguments. The spectacular growth 
performances of these nations are discussed at length in the book, 
usually preceded by rather skimpy historical introductions. By and 
large, he emphasizes the role of government policies and institutions 
in producing high savings and investment, low inflation and wages, 
and the transitions toward export-led development strategies. The 
second part discusses cases in which institutional transitions have 
been less successful, such as Russia and Mexico. Vietor argues that 
the main difference between for example Latin America and Asia has 
been the lack of institutional progress and stability. The third, and 
final, section of the book analyzes the role played by deficits, debt 
patterns, and persistent stagnation in the development of the biggest 
economies in the world. His main focus is on comparative analysis of 
the development paths of the European Union, Japan, and the United 
States. The main message of this section appears to be that having a 
strong governmental presence in the economy does not necessarily have 
adverse effects for economic growth, a message that is obviously 
aimed at American policymakers.

While this volume is certainly well researched and fluently written, 
even appealing for lay readers too, it has some weaknesses. The first 
is that it is written for a general audience and mostly lacks 
theoretical depth, for example in its treatment of institutions. 
Vietor does not address some of the major developments in the field 
of institutional economics and history, in particular the common 
division between formal and informal institutions. For him 
institutions seem to mainly consist of the former kind, produced by 
various governmental organizations. The analysis would have been 
enriched by a comparative analysis of the _evolution_ of particular 
informal institutions and cultural development patterns, as done 
before by Douglass North and Avner Greif, among others. My second 
point of criticism, or curiosity, pertains to the selection of the 
country cases. For example, why focus so heavily on the European 
Union as a uniform entity and then select Italy as an illustrative 
case study of its problems? Vietor's treatment of the integration 
process itself, and its history, is superficial at best. Moreover, if 
the author wanted to make a point about government-business relations 
and the beneficial role of the state, why not choose the Nordic 
countries as cases, given the performance of their welfare states and 
corporatist institutions? Third, the book is very light in terms of 
quantitative evidence to support the main arguments, mostly because 
the book is meant for a broader audience. Specialists, however, will 
be clamoring for more evidence to prove some of the causal linkages 
inferred by the author. For instance, the link between military 
spending and economic growth, as Vietor intimates in the case of 
Japan, is not necessarily that straightforward and the so-called 
peace dividend is often hard to come by.

All in all, it is very difficult to do justice to such a broad, 
proficient, and comparative analysis of today's global economy in 
such a brief review. It is certainly a worthwhile read for anyone 
interested in the issues of institutional and economic development, 
role of the state in the current era of globalization, and 
comparative analysis of economic processes. If the reader is 
interested in detailed economic history and analysis of the countries 
covered in the book, then perhaps it would be useful to refer to more 
specific studies on those polities. While this book lacks some of the 
explanatory power and evidence of the usual academic tomes, it more 
than makes up for this in its powerful narrative. It is also very 
well written and should appeal to policymakers, business managers, 
and other informed readers both domestically and abroad.


Jari Eloranta is Assistant Professor in the Department of History, 
Appalachian State University in Boone, North Carolina. His research 
interests include corporate political action in the long run, defense 
economics and the financing of wars, as well as the analysis of 
government spending in the nineteenth and twentieth centuries. His 
publications include: "The Evolution of Corporate Political Action: A 
Framework for Processual Analysis" (with Juha-Antti Lamberg, Mika 
Skippari, and Saku M?kinen) _Business and Society_ (2004); "Rent 
Seeking and Collusion in the Military Allocation Decisions of 
Finland, Sweden, and the UK, 1920-1938" (forthcoming, 2008) _Economic 
History Review_; and "Struggle for Leadership? Military Spending 
Behavior of the Great Powers, 1870-1913" (2007) _European Review of 
Economic History_.

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