In This Review

The New Global Economy and Developing Countries: Making Openness Work
The New Global Economy and Developing Countries: Making Openness Work
By Dani Rodrik
Overseas Development Council, 1999, 100 pp
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Newton's law of physical action and reaction was transmuted by Hegel and Marx into a law governing philosophical and social movements. Rodrik offers a carefully reasoned and empirically supported counterreaction to the "Washington consensus" on the free-market policies that developing countries should adopt in order to grow. He does not disagree strongly with the consensus but rejects its "one size fits all" approach. Certain political components, he argues, are at least as important as economic ones; effective democratic institutions, an independent judiciary, an honest bureaucracy, and institutionalized social insurance are all critical in ensuring a smooth adjustment to the inevitable external shocks that come with opening markets. Rodrik also places greater emphasis on investment-enhancing policies and less on export promotion. Good government plays a central role in putting a country on the right path. There is much food for thought here, but not for the numerically faint-hearted. Rodrik relies heavily on econometric analysis to support his findings but nevertheless explains the results well for those willing to accept his analysis.