Book Reviews

Globalization on a Diet

Dani Rodrik

The Globalization Paradox

Democracy and the Future of the World Economy

W.W. Norton & Company, New York and London, 2011, 288 pp., $26.95 (cloth).

Dani Rodrik is a long-standing critic of the existing international order. His excellent new book is a sequel to an earlier book about the often disruptive impact of international trade on national labor markets and social policies. The new book develops and extends this theme to include financial globalization. There is also a discussion about the democratic legitimacy of the existing international order. Rodrik concludes by considering how the world economy might be reformed.

The author’s target is not globalization as such. He robustly defends both capitalism and globalization, because they have the potential to generate rapid economic development if properly harnessed. His target is “hyper-globalization,” which involves the comprehensive elimination of barriers to trade and finance, together with severe constraints on the freedom of national governments to intervene in their domestic economies. This is the program promoted for several decades by “market fundamentalists” in the economics profession and within certain international institutions.

Rodrik objects to the fundamentalist approach on two levels. First, such a program rests on a crude version of economic theory that rarely applies in practice and runs counter to historical experience. During their take-off phase, the majority of today’s developed economies actively promoted industrialization through the use of measures such as capital controls, subsidies, and restrictions on imports and foreign direct investment. The same is true of China and India in the recent past and even to some extent today. Such policies do not guarantee success, but few poor countries have taken off without them.

There is also national sovereignty to consider. Even if the program advocated by the fundamentalists is correct, there is no justification for imposing it on supposedly sovereign governments. Every country has the right to be wrong, so long as it does not cause serious harm to others. The international system needs rules, but these should be flexible and give national governments extensive freedom to experiment. This was the case under the old Bretton Woods system, which in its heyday was a stunning success in promoting economic growth and reconciling national autonomy with international order.

Market fundamentalism often accompanies the view that nation states are outmoded—that they are being undermined by global communications and market forces, and their role will be progressively supplanted by supranational institutions. The logical end of this process is world government. Rodrik is skeptical that world government is feasible. He is even more skeptical about its desirability:

“There is simply too much diversity in the world for nations to be shoehorned into common rules, even if those rules are somehow the product of democratic processes. Global standards and regulations are not just impractical; they are undesirable. The democratic legitimacy constraint ensures that global governance will result in...