Less Globalization, More Growth Finance & Development, December 2017, Vol. 54, No. 4
Straight Talk on Trade
Princeton University Press, Princeton, NJ, 2017, 336 pp., $29.95
Straight Talk on Trade is the latest book in Dani Rodrik’s globalization series. The first—Has Globalization Gone Too Far?—raised concerns about social cohesion when large groups of people are left behind by trade and technology. He took his thesis further in challenging the global order in his 2011 book The Global Paradox. The first book was highly controversial when it was published two decades ago, and many economists dismissed it as stoking protectionism.
But time has proved Rodrik right, at least as a political prognosticator. The blowback he warned about has come true. The Brexit vote and the election of Donald Trump set the stage for this powerful and provocative sequel exploring the survival of democracy and globalization as nationalism rises.
Rodrik stresses ideas in shaping policy and accuses economists of overreaching when translating economic models into policy, especially on trade. Theory implies that unskilled labor will lose from open trade policies in advanced economies. But when economists talk publicly about trade, it is always the aggregate gains they emphasize.
Rodrik does not endorse protectionism or embrace deeper economic integration. Instead, he thinks domestic policy space is needed to manage existing globalization. Developing economies need scope to pursue industrial policies, while advanced economies should protect workers from unfair trade practices, he contends. These goals can be achieved without pitting the global poor against low-skilled workers in advanced economies he says.
The stick of trade remedies is better equipped to manage globalization than the carrot of trade agreements, says Rodrik, and countries that protect workers’ rights should be entitled to restrict imports from countries that don’t. The alternate strategy of using trade agreements to prod developing economies into adopting higher social standards is ineffective and gives corporations too much influence over public policy and development, Rodrik argues.
While Rodrik is right about tensions in the global system, blaming economists for the backlash against trade seems excessive. Technology, trade, and demand shifts all reduced...