Home-Grown Growth: Problems and Solutions to Economic Growth

Harvard International Review, Winter 2006 | Go to article overview

Home-Grown Growth: Problems and Solutions to Economic Growth


DANI RODRIK is professor of international political economy at the John F. Kennedy School of Government, Harvard University, and teaches in the School's MPA/ID Program. He has published widely in the areas of international economics, economic development, and political economy.

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The alleviation of poverty has become a seemingly sacred goal for the international community. How should policymakers weigh moral considerations such as human rights in their judgments about economic policies that increase wealth in poor countries?

I do not think most poor countries in the world face a real tradeoff between improving human rights and improving the material condition of the poor. On the one hand, improving human rights does not necessarily cost any money; it is just a function of treating individuals with the dignity that they require and enforcing certain universal standards like freedom of speech and freedom of association. On the other hand, economic policy is fundamentally about improving the material conditions of the poor, once again something that does not at all conflict with enforcement of human rights.

Many globalization proponents point to the economic success of China, India, and South Korea as evidence in favor of the trade liberalization rules set by the International Monetary Fund (IMF) and Washington Consensus. Do you draw the same conclusion?

Anyone who has looked at the evidence would argue that none of the three countries liberalized its trade in the early stages of economic growth. So it is very difficult to argue that economic growth in those countries was spurred by trade liberalization. In all three countries, trade liberalization followed rapid economic growth rather than preceded it. South Korea did not seriously liberalize its trade regime until the 1980s; India did not seriously liberalize its trade regime until the 1990s, about 15 years after growth had picked up; and China did not seriously improve its trade regime until the 1990s, about 15 to 20 years after its growth rate had started to pick up significantly. This does not mean these countries did not do things such as promote foreign investment, as in China, or promote exports, as in South Korea. But these were not at all the standard trade liberalization policies that multinational institutions promote.

What do you think is principally wrong with the current approach toward globalization of the IMF-Washington Consensus, particularly regarding the poorest developing nations?

I do not think anybody seriously believes in the Washington Consensus anymore. Now there is much greater appreciation for policies and economic strategies that are context specific, grounded in the realities of individual countries, whereas by the Washington Consensus, countries are given a list of 10 to 15 general things that countries ought to be doing as best as they can. So, I think that particular misperception is largely in the process of being corrected.

I also think that one consequence of the Washington Consensus was a glorification of integration of markets as an objective in itself. However, what we have found out is that we need to focus on economic growth over integration. Countries that grow integrate into the world economy, but countries that try to integrate into the world economy at all costs do not necessarily always get growth.

To what extent do you think such context-specific economic policies are being employed or advocated today? Are "home-grown" policies now the dominant approach toward economic growth strategies?

I think we are in a period of more or less muddling through. A lot of countries and international and financial institutions are groping for a different way of doing business. There is a lot of paying lip service to the idea that there ought to be different strokes for different folks. But in practice, when you look at the operational work that is done, say, at the World Bank or IMF with respect to different countries, you find the vast majority of economists practically replicating the same old habit of working from an accepted blueprint. …

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