In Biography of a Subject: An Evolution of Development Economics, Gerald M. Meier describes the history of that policy-oriented branch from its birth during the years of decolonization in the years after World War II to the serious rethinking of its premises that began in the 1970s and finally swept the field in the 1990s. Nobody is better qualified to write that history first hand than Meier. When he was young, the profession scarcely existed. By the mid-1950s, it was a flourishing community of thinkers propounding a welter of conflicting ideas — neoclassical economic, Marxist and institutional. Meier truly was present at the creation: he first imbibed the topic as a Rhodes Scholar at Oxford in 1949, and taught it for forty years at Stanford University’s Graduate School of Business, before retiring at 80 in 2003.
Meier divides the history of the field into two broad periods, a first generation of students of development, holding forth roughly from 1950 until 1975; and a second generation, which took over from the founders towards the end of the 1970s. About the identity of that first generation there can be little argument. The cast of characters included Colin Clark, Paul Rosenstein-Rodan, Ragnar Nurske, Gunnar Myrdal. Albert Hirschman, Hans Singer, Celso Furtado, Raul Prebisch, Hla Myint, W.W. Rostow, Alexander Gerschenkron, names that today seem as burnished by fame and as remote in time as those of the sea-faring adventurers who discovered, named, and misnamed the New World four hundred years before. The fads and fashions they debated — planning vs. markets, autarky vs. international trade, import substitution vs. tariff reduction, big pushes vs. balanced growth, unvarying stages of growth vs. the advantages of historical backwardness — mainly seem quaint today, relics of a time when nations seemed permanently divided into three worlds: “first” (meaning industrial democracies); “second” (meaning communist); and “third” (meaning poor and backwards).
That’s because a second generation of specialists in “globalization” took over in the late 1970s and overshadowed the cacophony of analytics with themes so reliably harmonious as to have been described in 1990 by economist John Williamson as the “Washington Consensus.” To Meier, these authorities weren’t really development economists at all. Rather they were defenders of orthodox mainstream economics against the heresies of all the various special approaches — believers in “monoeconomics,” in Albert Hirschman’s phrase.
Sometimes known as “country doctors,” these counselors emphasized a handful of policies as being suitable at all times to all nations: collect taxes to cover public spending, exercise fiscal restraint, control inflation, deregulate financial markets, liberalize trade policy, permit foreign direct investment, privatize government enterprises, and strengthen property rights. Among the best known were Anne Krueger, of the World Bank (Turkey); Jagdish Bhagwati, of Columbia University (the World Trade Organization); the late Rudiger Dornbusch, of Massachusetts Institute of Technology (Brazil and Mexico); Jeffrey Sachs, of Harvard University and now Columbia (Bolivia and Poland); and Anders Aslund, of the Carnegie Endowment for International Peace (Russia).
But in the last few years, a third generation has emerged, more like the first but with the benefit of having gone to school under professors of the second in order to sharpen their arguments. For the most part, these are economists who entered graduate school in the 1980s and 1990s, though Joseph Stiglitz, who had his training in the 1960s, became an eloquent critic of the Washington Consensus while serving as chief economist of the World Bank. Stiglitz, a Nobel laureate, now of Columbia, afterwards wrote a couple of best-sellers: The Roaring Nineties and Globalization and its Discontents. Meanwhile, not just Japan and the Asia Tigers — Korea, Taiwan, Hong Kong, Singapore — but China, India, Brazil and Russia demonstrated that policies that were no part of the Washington Consensus could produce sustained growth.
Now, with the appearance of One Economics, Many Recipes, by Dani Rodrik, of Harvard University’s Kennedy School of Government, the new development economics has acquired a rallying point, and a new leader.
One way to describe Rodrik is as the man who replaced Jeff Sachs. His program in international development occupies the physical space at the Kennedy School that Sachs vacated when he moved to Columbia five years ago to become the world’s foremost advocate of directed investment in public health measures. In recent months, though, since reading Rodrik’s book, I have begun to think of him as the man who has replaced Albert Hirschman as the exemplary critic of monoeconomics. The US Social Science Research Council made it much easier to think in these terms by creating an Albert O. Hirschman Prize and, earlier this month, giving the first one to Rodrik.
“Hirschman’s central insights on development have held up extremely well,” he said in his acceptance speech. “The key lesson of the last half-century is that policy makers have to be strategic, rather than comprehensive. They have to do the best with what they have instead of wishing they can transform their society wholesale. They have to identify priorities and opportunities and work off them. They have to seek sequential, cumulative change over time rather than comprehensive change at the outset.”
One Economics, Many Recipes has been receiving increasing attention, thanks in part to a symposium organized by Henry Farrell, of George Washington University, on Crooked Timber, a widely-read collective blog he shares with a number of other authors (EP contributed a piece to the discussion.) For a quick overview, you can’t do better than to read in its entirety the brief version of the talk Rodrik gave last week in Princeton. Quickest of all is the summary he posted on his blog.
[I] have been spending some time with the great man’s writings. Somewhat ironically in light of my own research interests, I found that I was a lot more familiar with Hirschman’s generalist works — Exit, Voice and Loyalty and The Passions and the Interests are among my all-time favorite books — than his work on development proper.
Reading this work, I am awed once again by a mind which was as much at ease with the technical arcana of irrigation projects as it was with the rarified world of political philosophy.
Yet I can also see why he must have been such a source of frustration for his contemporaries. He was in many ways the ultimate contrarian–always looking for the unique and the exceptional, while not shying from building general theories from those cases. He was a critic of the reigning development theories of his time (the big push and balanced growth), arguing, quite correctly in my view, that the under-developed societies who had the capacity to implement these comprehensive programs would not have been under-developed in the first place. He argued instead for a strategic, opportunistic approach, based on making the best of what you have.
Successful countries do share some common elements. They all provide some degree of effective property rights protection and contract enforcement, maintain macroeconomic stability, seek to integrate in the world economy, and ensure an appropriate environment for productive diversification and innovation. What differs is the manner in which these ends are achieved. For example, greater integration with world markets can be achieved via export subsidies (South Korea), export-processing zones (Malaysia), investment incentives to multinational enterprises (Singapore), special economic zones (China), regional free trade agreements (Mexico), or straight import liberalization (Chile). Appropriate policy design is always contingent on local conditions: it takes advantage of pre-existing advantages and seeks to overcome domestic constraints. That is the reason why successful reform often does not travel well….
Hirschman would be aghast at the extent of intrusion into domestic policy making that the WTO or the IMF today engage in. As international bureaucracies with a penchant for “best practices” and common standards, these institutions are peculiarly unsuited to the task of seeking innovative, unique pathways suited to each countries’ own circumstances. He would no doubt chide developing country governments for not living up to their responsibilities and for passing on the buck so freely to these external agencies. For ultimately, it is up to each country to say, “thanks, but no thanks; I will do it my way.”
Long before he became known as an economist, Albert Hirschman made his name forging passports for refugees in Vichy Marseilles, conducting refugees over the Pyrenees (disguised as a shepherd, but with a copy of Montaigne in his pocket), being the last man out himself. It was only then that he began his career as a social scientist, on the research staff of the Board of Governors of the Federal Reserve System. Those months of continuing opposition to the threat of death — of resistance — gave a moral force to Exit, Voice and Loyalty that couldn’t have been gotten in any other way.
Rodrik doesn’t have that kind of resume. These days, who does? But there is another interesting resemblance. Hirschman came to the United States from Berlin; his long-time friend and colleague, Alexander Gerschenkron, of Harvard, from Russia. Neither man nursed much affection for the country he had fled. If, as was suggested here a couple of years ago, Daron Acemoglu, of MIT, is the man who best exemplifies economists’ (renewed) interest in institutions for which Gerschenkron once served as a rump symbol of economics’ inability to deal, Rodrik is the inheritor of Hirschman. How reassuring is it about the trend of things that both men not only come from Turkey, but retain their Turkish citizenship?