RODRIK: I think India, because I think the kind of growth that India has had, I don’t think it’s sustainable. Partly going back to our earlier discussion about premature deindustrialization. I think they have these plans to significantly strengthen their manufacturing base. I just don’t see it happening.
I think India can grow at 4, 5 percent per year on a sustainable basis. I don’t think it’s going to be 8 or 9 percent. When this sinks in, I think there’s going to be a negative overreaction, would be my fear.
On the need for gap years in graduate economics
COWEN: Last question before we turn to the audience. This, again, is getting back to your book. A reader wrote to me, “Rodrik was the Albert Hirschman professor at Princeton. Before that he received an Albert Hirschman Prize. Both Hirschman and Rodrik are economists who look at the same facts as everyone else but they see what nobody else has seen.
If you were allowed to make one change in the economics profession or academia — ” this is an institutional change or rules change, not an attitudinal change, but an actual change in how things are done, a change in a graduate program.
“If you could make one change to help produce more Dani Rodriks for all the rest of us, what would that be?”
RODRIK: I wish I had a very quick and good answer to this but it’s not a great answer but it probably would help. I was helped a lot by going into economics after having done political science. I think a lot of what’s wrong in economics is that it’s so much driven by people who first do engineering or math before they go into economics. And so, it’s relatively late that they get immersed into the real world.
I think anything that would get them a little bit more cognizant of the problems of the real world. I would say that there are parts of political science that have become even worse than economics right now. I’m not sure that that would work.
I don’t know. Maybe a gap year, spending a year in a developing country between your first and second year?
COWEN: That’s actually my idea, as well. I’m glad to hear you say that.
RODRIK: There we go. We just now have to find somebody to finance it.
COWEN: We now open up to the audience. There are two mics. Please get in line. I will alternate. Please note — these are questions for our guest, not lengthy statements. If you start making a lengthy statement I will cut you off.
Please head up to the mics with your questions and I will call on you and you will hear responses. At the mic over here. Please just announce your name, also.
AUDIENCE MEMBER: Hi. I’m a master’s student here. I’m actually considering spending the summer in a developing country. What one would you recommend?
RODRIK: One that you have not been to before or one in a continent that you haven’t been to before.
I always tell my students that they should always go to a country, when they have that chance to spend a summer or a year, to go somewhere which is as different from where they have some experience as possible.
That comparative . . . there are so many things you take for granted that you don’t even understand are things to be questioned. It’s only when you see another country that’s so different, then you start asking, “But how come that is working there? It’s not working here?”
For that, as many opportunities as you have to be asking that question, which is as different a place you can imagine from where you’ve been to.
AUDIENCE MEMBER: Given that I’ve only been in America and Mexico and I only have one summer, what would be the top of the list? I’m looking for specifics.
RODRIK: Go to India and travel. You will have seen so much diversity and variety.
COWEN: On this side.
AUDIENCE MEMBER: Thank you. I’m a teacher here. I have my class here, in fact, today. We are at the moment studying systems that produce structural conflicts. It makes me want to ask you, when you talk about premature deindustrialization, we’re in the middle of looking at Rosa Luxemburg’s work.
I wondered what your explanation is for whether there are structural causes for premature deindustrialization. If Luxemburg were here she would be talking about the effects of imperialism. I wonder how you would explain it.
RODRIK: Of course, in the 19th century, it was formal and informal empire. The so-called unequal trade treaties and so forth. You had India and China and the Ottoman Empire, all these nascent textile industries being decimated by imports from Britain.
But, of course, we also have cases like Japan, which in the late 19th century, despite having very low tariffs, being able to develop its own domestic industry. We have at least one exception, even back then, of a country that could industrialize despite those circumstances.
The late 20th and 21st century analogue of that imperialism, if you will, is China because it’s been China that has been essentially swamping the world with manufactured goods. You go to a country like Ethiopia today in Africa and basically everything is imported from China.
Fifty years ago, a country like Ethiopia would be manufacturing very simple things, from footwear to tables and chairs to cardboard boxes. But now, everything is coming from China.
The fact that we moved to a stage of the world where a country like China is able to exert such strong effect on world markets in manufacturing means that the opportunities for import substitution in manufacturing is significantly less today in the low income countries that have opened themselves up.
It’s not, obviously, imperialism but it’s sort of like, if you will, the imperialism of free trade might be one way of putting it for our current experience.
That’s clearly one. It’s also, in terms of the fact that earlier I was saying that traditionally manufacturing has had the ability to absorb a lot of unskilled labor. Manufacturing has become more and more capital-intensive over time. That means that now even garments or textiles, footwear, they’ve become fairly skill-intensive activities.
The Chinese entrepreneur I mentioned, when she goes to Ethiopia and opens up a footwear plant, she’s using a very different kind of labor. University graduates and many, many fewer of them compared to what the Chinese experience was.
I think changes in technology and globalization have been, I think, the two structural factors behind pushing for premature deindustrialization.
AUDIENCE MEMBER: Thank you.
COWEN: On this side.
AUDIENCE MEMBER: When referring to the past political situation in Lebanon, you characterized it as preferable to the current, more autocratic, situation of today inasmuch as a large number of crosscutting cleavages and the mutual understanding among them to the effect that once in power it’s not necessarily guaranteed in the future, or something like the mutual fear of what the other will do, effectively necessitated deal-making and compromise.
Given this, what would be your position on nuclear proliferation? Aren’t you, by virtue of this, beholden to the position that the more countries with nukes, the more crosscutting there would be and the more effective, better functioning democracy?
COWEN: And when will Turkey have nuclear weapons? Want to discuss that?
RODRIK: You’re really pushing me to my areas of incompetency. I have no idea for that question. I have no inside knowledge of that to share.
I think the question you were asking is extending the notion that more crosscutting cleavages imply greater political stability and tolerance and moderation. Can we take that idea to the international sphere, in particular apply it to nuclear proliferation? If more states have nuclear weapons, would that make the world safer?
I’m not quite sure about the analogy, the way that you’ve taken that idea and extended it to the global sphere because the notion of crosscutting cleavages has to do with when you’re operating not in a state of anarchy, so to speak, but when you’re operating in a well-ordered polity.
I’m not sure that that analogy carries to what is effectively the state of anarchy at the global level, where there is no global government so the nature of competition is very different.
The idea of nuclear proliferation globally greatly worries me. Not because I think that the marginal country is going to be less responsible than the countries that already have nuclear weapons, but just because the more countries that have them, the greater the chance that at least one of them will be irresponsible rises.
I think just probabilistically that makes me very, very nervous. The analogy, I don’t think really quite applies.
AUDIENCE MEMBER: That’s fair.
COWEN: Next question.
AUDIENCE MEMBER: Thank you. I’m Brazilian. I have developing country experience that is more than enough, probably. Thank you for your words of hope on what’s going on down there.
Still, beside your words of hope, crony capitalism and draconian regulations are more the rule than the exception in Brazil. I would like to know if you believe that Brazil — is there a way of Brazil ever overcoming that in those five, six years that you said?
Or, putting it in another way, do those issues actually matter?
RODRIK: Maybe it’s easier to say — look, I come to Brazil as a Turk. I watch what’s happening in Brazil. I compare it to what is happening to Turkey.
It’s not like Turkey has had an easy time economically but the way that the financial markets have treated Turkey is incomparable to how badly Brazil has been treated.
I look at crony capitalism. I see at least that in Brazil, we have a system that’s actually dealing with it, and they’re dealing with it in a way that’s as clean as one could hope for.
What’s happening in Turkey? What’s happening in Turkey is that the extent of corruption and crony capitalism, the part of it that we have already seen, is vastly superior than anything that has come out in Brazil. We know that the president and his immediate family have been greatly implicated in vast amounts of corruption. We know that.
It’s the kind of thing that Dilma could be guilty of pales in comparison. The fact that anything in Turkey, in terms of trying to delete the judiciary when it went into trying to clean this system up, it did it in a way that was explicitly politically motivated. Therefore, it made it much easier for Erdoğan to clamp down on it because it was clear that it was a politically motivated attack on him, which makes neither side really right.
This essentially means that in a country like Turkey, basically you’re postponing all these problems into the future. They’re going to hamper your development, hamper your politics for decades to come.
At least in Brazil, you’re dealing with these things. You’re trying to overcome them. Maybe it won’t be five years. Maybe you’ll find other things that are happening.
My recommendation to you is at least take pride that you have a system that is actually trying to clean it up. That’s really rare. It’s not happening in Turkey. It’s not happening in Thailand. It’s not happening in most developing countries that I know of.
I think, in that way, Brazil is exemplary.
AUDIENCE MEMBER: Thank you very much.
RODRIK: Next question.
AUDIENCE MEMBER: I read a small excerpt about your new book, and I know that it’s about economic models. I was wondering how do you factor in best practice institutions when you consider economic models. Is there room to factor in, say, in your own words, second best institutions, and how effective would that be in the ultimate analysis of a country or a model?
RODRIK: I’ve said this before. I hate the notion of best practice. I think this is probably a very harmful notion. I was a student of Avinash Dixit, who was a great economist at Princeton. He likes to say, “The world is second best at best.”