Dani Rodrik has a great INET interview where he looks at the post-pandemic world. Very few scholars can pack in so much texture on important things that affect all of us into just an interview.
He points to three trends which have accelerated and have been clarified by the pandemic - rebalancing of state and market; rebalancing of nation state and globalisation; and the end of the current growth model for developing countries.
On developing countries,
their underlying growth model is also very much under threat and I think they’ll have to change their growth strategies. They have to adjust to the reality of much lower growth rates going forward with everything that that entails in terms of the difficulties of creating jobs for young population and so forth... Growth in the developing world was coming down as many of the previous growth engines such as increases in domestic demand or increases in public investment or commodity prices which were your typical drivers of growth in low income and middle income countries in the last couple of decades, those were already losing their potency. Again, it’s an acceleration of pre-existing trends.
On immediate responses, he says,
We need a much larger scale standstill on debt service to the creditors of developing nations that should cover all sovereign debt service and that should be sanctioned by the G20 and multilateral institutions... The idea is to use those resources that would otherwise go to creditors in the developed world to make those resources available for urgent public health and economic needs in the developing world... There has not been, despite some proposals, there has not been an expanded SDR allocation, special drawing rights, to increase multilateral liquidity for developing countries. I think some people also have recommended, and I agree with them, that there should be multilaterally sanctioned capital controls, which is to say give developing countries the option of preventing capital outflows, panic outflows in a way that would not stigmatize them because if the IMF or the G20 sanctions to use those capital controls it would be a way of avoiding stigma.
On globalisation,
The only question is about getting the right level of globalization and different policy domain calls for different levels of globalization and in some areas we have gone too far. I would say that in the context of many of the WTO agreements on subsidies, on investment related measures and many aspects of trade agreements on intellectual property rights, rules with respect to capital account liberalization, we’ve gone way too far. Even within economic globalization there are areas where I don’t think we’ve gone nearly far enough in trying to construct a global order, so one glaring area that we have been missing is addressing tax havens. That’s another area where, I think, it’s a very good economic argument for why we should have some common rules that prevent essentially beggar thy neighbor policies by very small jurisdictions being able to shift paper profits from paper headquarters for their jurisdictions at the expense of very large tax losses for other larger countries.
On global citizen hood,
... if you have large corporations and the super rich and the professional classes, once they start viewing themselves as part of this global network with neither the need nor the necessity to be part of their own local communities or to invest in those communities, on the one hand you’re drawing them away because they become these mythical global citizens. I say mythical because there’s obviously no true global citizenship. Global citizenship is just a way of saying that I’m part of this broader community, even though, of course, you are not paying any taxes to a global government. There are really no true obligations. On the one hand you draw these classes and groups of individuals and corporations that are globally networked away from their societies and then left behind the middle and lower middle classes who don’t have access to those networks or the assets to prosper in a global economy. They’re also being left to withdraw into their own shell. That’s when you get, I think, a very ripe environment for a right wing populist movement to leverage that by drawing distinctions between a globalist elite and to true people and blaming foreigners, the immigrants and ethnic minorities for the problems of the lower and middle class.
This on the missing left wing movement is instructive,
Why has the left not been able to develop a program to respond to these economic and social ills and to these problems of despair, economic insecurity, lack of good jobs in the non major metropolitans of the countries that were not benefiting or falling behind. I think part of the answer at least, I think, has been quite nicely identified by Thomas Piketty, who shows that essentially the center left parties, the Democratic Party in the United States and social democratic parties with Labor in the UK, increasingly became parties of the more educated elite and, as they became… They took on the policy agendas of the educated elite, which was maybe emphasize issues having to do with social liberalism but also take on the educated elite’s views that we live in this global economy and everybody has to adjust and essentially, as you say, blamed the victim so if jobs were going scarce the answer was for these people just to get a better education or to behave more responsibly, but that none of the problem was with the global economic regime that we had set up and very little of it was with the existing arrangements of government economic policy which was really falling behind in terms of responding to these problems.
On the US-China relations he draws parallels from the peaceful co-existence detente between the US and USSR during the Cold War,
I think the analogy in the economic sphere for US and China is something similar and you might call it a model of peaceful economic coexistence, which is that the United States understands that China has its own model and therefore stops pushing China to change its policies towards its state enterprises, intellectual property rights, its subsidies, its regulations in a way that could conform to the US expectations about what an open economy is. By the same token, China understands that it does not have this permanent right to access the US market on hyper-globalist terms that the United States might also pursue its own social objectives with respect to protecting some labor markets or some communities. It might want to protect the integrity of its own education system and technologies and therefore have appropriate regulations that limits access to China when it is needed.
I slightly disagree with Rodrik here. This approach is only a lighter version of the appeasement that the likes of Robert Zoellick spearheaded when they thought that the best strategy against China was to integrate it into the global economic and political system and that would create the conditions for weakening of the Communist Party's hold and usher in political liberalisation in China. That approach, as former National Security Advisor H R McMaster, recently acknowledged has failed.
To be fair, Rodrik acknowledges it
I think clearly one of the ongoing trends is the dissipation of these narratives of how more trade and more economic integration would necessarily push countries in a growth and economic liberal direction. Also, the expectation that it would push China to be more democratic, that was also the political side of the story that China was supposed to become more like “us” in terms of its political system as it became an export powerhouse and became part of the global economy.
In fact, many of the things that Rodrik describes about the Democratic Party's compromise with elites applies just as well to the interviewer Rob Johnson's sympathy with China.
This about the hegemony of the elite narrative is critical,
Actually I think a bigger capture is what I might call a narrative or cognitive capture which is capturing the story, being able to tell the story and that will make governments act in a way that furthers the interest of those groups. By and large the reason that we’ve reduced corporate taxes, and by and large the reason that the only way that governments can imagine how to bring jobs to certain depressed regions is by creating these opportunity zones where you’re providing huge tax breaks to corporations to benefit in terms of producing very few benefits in terms of jobs. The reason that happens is not necessarily because these corporations are buying those policies in terms of low taxes or these incentive programs, it’s because governments, along with the rest of society, have bought into a particular narrative that that’s what good policy is. Good policy is lower taxation which is perfectly okay for corporations to be run for the benefit of their shareholders and if you want some corporation to act any differently, to create employment, you have to give them a whole lot of money to change their incentives.
This is an important framing about how we look at businesses,
Corporation is a legal construct. It’s a privilege that the state provides an investor to protect those investment rights and historically it’s always been that that privilege is provided in return for some good that the corporation provides to society. Early on it used to be that the corporation that the crown would create would generate wealth that it would share with the sovereign, with the crown. Later we developed this idea that the public interest went beyond the crown. It was society at large. The last few decades we completely forgot the quid pro quo and we just give corporations these privileges, not simply these legal protections and legal privileges, but also all the public infrastructure that they need access to, a trained workforce, access to a wide range of legal services, access to infrastructure, access to courts, access to innovation system and R&D spending on the part of the public sector. This is a natural thing but in return, corporations really don’t have to act as responsible citizens, don’t have to invest in local communities, invest in their suppliers, provide basic labor protections and treat their workers well.
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