------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (October 2008)

Dani Rodrik, _One Economics, Many Recipes: Globalization, Institutions, 
and Economic Growth _. Princeton, NJ:  Princeton University Press, 2007. 
xi + 263 pp.  $35 (hardcover), ISBN: 978-0691-12591-8.

Reviewed for EH.NET by Alice Amsden, Department of Urban Studies and 
Planning, MIT.


Dani Rodrik, professor at Harvard?s Kennedy School of Government, comes 
out of the closet early on in _One Economics, Many Recipes_:  ?This book 
is strictly grounded in neoclassical economic analysis.? Yet Rodrik wins 
all hearts and minds by a careful consideration of the facts and sheer 
breadth of coverage.  He remains ?a believer in the ability of 
governments to do good and change societies for the better.?   He 
bemoans ?exaggerated rumors of industrial policy?s death.?  He 
identifies ?institutional arrangements that best support economic 
development over the long term.?   He claims ?national policy choices 
are the ultimate determinant of economic growth.?  Yet he declares 
?successful countries are those that have leveraged the forces of 
globalization to their benefit.?  Thus, market mavens, policy pros, 
global gurus and institutional irredentists can all savor what he says!

Rodrik concludes on an institutional note: ?It will take a lot of work 
to make globalization?s rules friendlier to poor nations.  Leaders of 
the advanced countries will have to stop dressing up policies championed 
by special interests at home as responses to the needs of the poor in 
the developing world.  Remembering their own history, they will have to 
provide room for poor nations to develop their own strategies of 
institution-building and economic catch-up. ...  Perhaps most difficult 
of all, economists will have to be more humble.?

Rodrik promises to get his hands dirty redesigning international 
policies, but his first three chapters (the second is co-authored with 
Ricardo Hausmann and Andres Velasco) are concerned with why some 
countries grow faster than others.   These make the greatest 
contribution.  In chapter one, ?Fifty Years of Growth,? we meet a 
Martian, thought experiments, and ?flexible neoclassical economics,? 
meaning ?there is no unique correspondence between the functions that 
good institutions perform and the form that such institutions take.? 
Eclecticism reigns in the policy sphere -- some good, some bad.  But how 
to pick the winners?  Rodrik relies on a consensus among sensible 
economists.  He, of course, is right that economists are sensible, but 
economic development is a haphazard, haywire affair, and consensus about 
policies tends to exist only at the extremes.  No one would demur that 
raging inflation will wreck an economy, but how about 20 percent year 
after year, which characterized Korea?s early growth phase?

Rodrik is adamant that no poor country has experienced rapid growth 
without ?higher-order principles of sound economic governance -- 
property rights, market-oriented incentives, sound money and fiscal 
solvency.?  But are all of these building blocks really irreducible?

After World War II, economists tried to predict which developing 
countries would succeed, and wrongly chose those with high export/GDP 
ratios, such as Nicaragua and Suriname.  I?ve argued that if the clock 
starts ticking around 1900 or earlier (Rodrik?s starts in 1960), then it 
becomes clear that since World War II, all the developing countries that 
have entered the orbit of modern world industry had prewar manufacturing 
experience (manufacturing/GDP), including experience in forming business 
enterprises bigger than a single individual.  There was no 
leap-frogging, especially in the areas of project execution and 
production engineering.  Of these dozen or so countries, which includes 
Argentina, Brazil, Chile, Mexico, India and Turkey, as well as much of 
East Asia, the biggest winners are in Asia because at the time of 
de-colonization (one of the twentieth century?s most neglected 
upheavals), only Asian countries kicked out not just foreign rulers but 
also foreign companies.  This didn?t happen in the Philippines.  In 
Latin America, which was de-colonized a century earlier, politics and 
foreign ownership remained unchanged after World War II.  Triggered by 
communist off-shoots from China, Asia?s convulsions gave birth to 
nationally-owned firms and land reforms (in China, the Koreas, Taiwan, 
parts of India, Malaysia, and later Vietnam), which arguably helped 
subsequent economic development.  So, sometimes ?getting the property 
rights ?wrong,?? through violence, puts food on the plate of a hungry 
nation.

Rodrik is critical of the World Trade Organization?s failure to 
customize, and pleads that ?trade rules have to allow for diversity in 
national institutions and standards.?  Does this mean tolerance of 
different policies (capital controls), or just institutions and 
standards (postal savings banks)?  How customization is to occur is 
unclear, but maybe the world should return to the GATT, whose members 
could choose which protocols to honor, whereas all or nothing is the 
condition for WTO membership.

With a keen sense of what's important, Rodrik takes a paper of mine to 
task for arguing that WTO members go about their business willy-nilly. I 
bet that not a single Northern country would have joined the WTO if it 
couldn?t subsidize science and technology, regional development, small- 
and medium-size enterprises, and the environment (these days, there is 
hardly a firm in existence that isn?t investing in the environment and 
getting state support). None of these areas is adjudicated by the WTO, 
and all increase the competitiveness of countries with money to throw at 
them.  Meanwhile, savvy developing countries are stirring up their own 
brew.  Korea now controls its financial markets by a creative use of 
technology, learned from Singapore.  Korea?s computers monitor every 
foreign financial flow on a 24-hour basis -- a new kind of ?free? 
market. Thailand uses regional policies to strengthen its automobile 
sector.   But I agree with Rodrik?s important point:  forcing everyone 
into the same tight shoe pinches business and world peace.

The toughest item on Rodrik?s wish-list is less haughty economists.  The 
snootiest may be American-trained foreign economists, but they have the 
best excuse! The U.S. knows itself, but Asia?s new elite not only knows 
itself, it also knows the U.S., having studied and worked there, and it 
knows Japan even better, having participated in its Greater East Asia 
Co-Prosperity Sphere. With experience and knowledge, why do you think 
Asia?s economies are growing so fast?


Alice Amsden?s recent books are _The Rise of ?the Rest?_ (Oxford 
University Press, 2001) and _Escape From Empire_ (MIT Press 2007).  She 
is the Barton L. Weller Professor of Political Economy at MIT.

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