In Defense of Globalization

By Jagdish Bhagwati | Go to book overview

18
Managing Transitions: Optimal,
Not Maximal, Speed

Even though globalization is beneficial, an important question remains: how quickly should an economy move toward increased integration into the world economy? It is tempting to argue, as some influential reformers proposed in Russia, that a program aimed at extremely rapid transition is the answer. The consequences in that case were severe and it took Russia years, and much dislocation and anguish, to get back on track. Since such “shock therapy” had presumably worked in Poland, and was being tried in Russia because of that success, with encouragement from the same foreign advisers, led by the economist Jeffrey Sachs, who advocated its use in Poland, I wryly remarked at the time that Poland, courtesy of Sachs, had finally managed to repay Russia for all the trouble that Russia had visited upon Poland in the past!

The debate over the speed of economic reform often becomes an angry exchange of analogies. One side claims that you cannot cross a chasm in two leaps. The other side retorts that you cannot cross it in one leap either unless you are Indiana Jones, so you should instead drop a bridge. 1 Then again, shock therapists argue, if you want to cut a dog's tail, you do it with one slash of the knife, not bit by bit. The gradualists reply that you train a dog by setting incrementally escalating heights for him to jump. Or yet again, when the shock therapists say that you have to kick a door open, the gradualists retort that if you do, the door is likely to rebound shut, whereas a gentle pressure on the door is certain to succeed in opening it wide.

Today, the shock therapists have retreated, given the havoc that many feel that they wreaked in Russia. Few now share the enthusiastic, almost technocratic belief that equates full speed ahead with sensibly paced reform policies. In fact, if one looks back at the great economists in the

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