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Reflections How to Create More Inclusive Economies

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Reflections How to Create More Inclusive Economies Reflections How to Create More Inclusive Economies: An Interview with Dani Rodrik Fikret Adaman Dani Rodrik (1957) is a Turkish-American political economist and Ford Foundation Professor of International Political Economy at Harvard’s John F. Kennedy School of Government.1 Published widely in the areas of in- ternational economics, economic growth and development, and political economy, Rodrik is currently Co-Director of the Economics for Inclusive Prosperity Network and, among others, affiliated with International Eco- nomic Association, National Bureau of Economic Research and Center for Economic Policy Research. After graduating from Robert College in Istan- bul, he earned an AB (Summa cum Laude) from Harvard College. He then acquired an MPA in public affairs from Princeton University and a PhD in economics, with a thesis titled ‘Studies on the Welfare Theory of Trade and Exchange-rate Policy’. He has been the recipient of grants from presti- gious foundations, such as the Carnegie Corporation, Ford Foundation and Rockefeller Foundation. Among other honours, he was presented the Leon- tief Prize for Advancing the Frontiers of Economic Thought from the Global Development and Environment Institute, the inaugural Albert O. Hirschman Prize of the Social Science Research Council and the Princess of Asturias Award for Social Sciences. On 21 January 2020, Pope Francis named him a member of the Pontifical Academy of Social Sciences. His monthly columns on global affairs are published by Project Syndicate. FA: Let me start with a personal question. We know that after spending your childhood and youth in Istanbul, you came to Harvard to study engi- neering, but you changed your mind. What made you change your mind?2 DR: I can’t say I had a very strong idea about my professional future. In high school in Turkey, the social sciences and history were taught in rote 1. A full CV can also be accessed at: https://drodrik.scholar.harvard.edu 2. For a wonderful interview with Rodrik on his personal career, from Istanbul to Boston, see www.harvardmagazine.com/2019/07/rodrik-trilemma-trade-globalization Development and Change 0(0): 1–13. DOI: 10.1111/dech.12649 © 2021 International Institute of Social Studies. 2 Fikret Adaman fashion and did not seem interesting at all. Science and engineering were much more stimulating. The big transition occurred through the discov- ery of the Widener Library at Harvard, with its endless stacks of books on Turkish history. I gradually came to understand that the social sciences were an open field of inquiry rather than a closed set of questions with pre- determined answers. Why Turkey and other similar countries had failed to prosper economically and develop accountable political institutions became my major preoccupation. This was a question for the social sciences, and not the physical sciences or engineering. So, I quickly changed course, and started studying political science and economics. FA: The coronavirus pandemic adds to existing global problems, rang- ing from poverty to inequality, violence to economic crises and increased debt to ecological degradation — the combination of which threaten hu- man civilization and planet Earth alike. Consequently, there is a general sense that returning to ‘normal’ is not desirable as a solution. Similarly, you have recently asked if COVID-19 would ‘remake the world’ (Rodrik, 2020a). I have three (related) questions on this puzzle. Let us start with your ‘trilemma’. You have argued that we cannot pursue democracy, national self- determination and economic globalization simultaneously, famously ask- ing ‘Has Globalization Gone too Far?’ (Rodrik, 2011). Building on this, you recently argued for the need to acknowledge the impacts of market failures (as a likely reason why COVID-19 got out of control) (Rodrik, 2020b). How, from a political economy perspective, do you see the future of neoliberal regimes/ideology dealing with global problems like the pan- demic? DR: I don’t really see a major transformation, but mostly a continuation of ongoing trends. I think different nations are likely to take different paths. As I have written elsewhere (see Rodrik, 2020a), perhaps the most likely out- come is that countries turn into exaggerated versions of themselves. Particu- larly authoritarian countries become more so. Trump’s incompetence and proclivity to undermine scientific and democratic institutions could not have come as a surprise. That leaders such as Prime Minister Viktor Orban or President Tayyip Erdogan˘ would use the crisis to strengthen their hold on power was also predictable. Nor is it surprising that governments have re- sponded faster and more effectively in countries in which they still enjoy significant public trust, such as in South Korea, Singapore, or Kerala State in India. The crisis may turn out to be less of a watershed in global pol- itics and economics than many have argued. It will perhaps intensify and entrench ongoing trends rather than put us on a significantly different tra- jectory. If we want positive change, this will require both good ideas and a suitable political strategy. If I wanted to be optimistic, I would say that both are also Reflections: Interview with Dani Rodrik 3 a bit more likely today, after the pandemic. I am generally heartened by the evolution of my own discipline, economics, which I think is much more open to new ideas these days. Ideas such as the wealth tax, job guarantees, industrial policies, stronger labour unions and tougher regulations all have become mainstream. There is good ferment in the field, and very few are upholding market fundamentalism anymore. On the political front, I view progressives and the Left as having made some gains. Elizabeth Warren and Bernie Sanders could not go the full way, but Joe Biden’s programme is far more progressive than what was considered acceptable until recently. FA: You have made the point that the time has come to think seriously about how improvements in official global governance, coupled with and reinforced by rising activism of ‘global citizens’, can lead to more equi- table and welfare-enhancing outcomes for global citizens through better national and international policies (Allen et al., 2014). In the present day of COVID-19, what is your vision? DR: We need better global governance for sure — particularly in key areas such as global public health and climate change — but we need mostly good governance at the national level. Problems of economic inequality, in- security and exclusion are problems that arise largely from domestic policy failures and domestic political configurations. So, I am not one of those who look to greater global cooperation or greater global civic-mindedness as the solution to our contemporary problems. (As indicated, health pandemics and climate change are the two key exceptions.) At the national level, there is the universal challenge all countries face. Globalization and technological advancement have made good jobs scarce and have resulted in a polarization of labour markets. The overarching ques- tion we therefore face is where the good jobs will come from. My recent writings (Rodrik and Sabel, forthcoming; Rodrik and Stantcheva, 2020), emphasize the need for a new type of approach that goes beyond the tradi- tional welfare state. The focus is on getting governments to engage in col- laborative, iterative relationships with business and other non-governmental actors to increase the supply of goods jobs. It is a kind of industrial pol- icy insofar as it aims to alter the structure of jobs in the economy — but it is much less top-down and not focused on manufacturing industries per se. It encompasses training, regional, industrial and innovation policies that lean on firms to internalize what I have called ‘good job externalities’: when good jobs disappear in a district or regions, the social and political costs can be immense. FA: Before we take on the issue of inequality, I would like to ask how the pandemic affected you as an academic and researcher. Some of us quickly and easily adapted to the virtual education/meeting system, but others did not! What was your experience? 4 Fikret Adaman DR: I was among the lucky ones, not having to worry about losing a job or experiencing a substantial loss of income. Being unable to travel and being forced to stay at home was even a good thing — at least for a while! My main concern was whether we would be able to deliver the same quality of education to students in our master’s programme in inter- national development at Harvard Kennedy School (the MA in Public Ad- ministration in International Development). My colleagues and I worked hard over the summer to overhaul our courses for an online environment. We are three weeks into the term, and while the students report that they are overwhelmed by spending so much time in front of their screens, we have been able to build a sense of community and things are going well academically. FA: We know that inequality has become one of your top concerns lately (e.g. Blanchard and Rodrik, 2021). You propose a 3×3 matrix, with one dimension dealing with the question ‘what kind of inequality — bottom vs middle vs top — do we care about?’, and the other one dealing with the question ‘at what stage of the economy does policy intervene — pre- production vs production vs post-production’. I think it is a very useful tool for analysing redistributive policies. So, we basically know what needs to be done to deal with the inequality problem. But to what extent is a rad- ical redistribution politically feasible with so many power asymmetries at hand? We have preliminary evidence that the gap between the rich and poor has widened during the pandemic (with some variance among coun- tries, of course).
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