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Dani Rodrik

Dani Rodrik

I am an economist, and a professor at the Harvard Kennedy School. My most recent book is Economics Rules: The Rights and Wrongs of the Dismal Science (Norton, 2015). I was born and grew up in Istanbul, Turkey. I still follow Turkish politics very closely, as you will find out if you spend any time with this blog.

Articles by Dani Rodrik

Prudential regulation, capital controls, and second-best

5 days ago

A usual argument against the use of capital controls as a prudential measure is that it is always better to tackle problems at their source rather than trying to deal with symptoms.  This is called the principle of economic targeting in Economics, one of the discipline’s most powerful teachings. The problem with indirect remedies is that they create problems themselves, “by-product distortions” in Econ-speak. With capital controls, those would be corruption and the discouragement of trade and other flows that are not necessarily a problem.
Hyun Song Shin essentially relies on this principle when he argues against capital controls (in a speech yesterday in Washington, DC):

The lesson is to distinguish underlying causes from outward symptoms. Yes, the 2008 financial crisis was in large

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Trade, redistribution, and social dumping

7 days ago

I just saw this response from Joel Trachtman to my column "Too Late To Compensate Free Trade’s Losers." Trachtman argues that "the fundamental problem of winners and losers will not be solved by these changes."
I do not disagree. But the fundamental political problem with trade is not there are winners and losers — the domestic market generates much greater job churn and dislocation than trade does. It is that it generates unfair redistribution, or at least redistribution that can be legitimately perceived as unfair, when goods cross jurisdictional boundaries.
As I explain here:

It’s important to distinguish between two versions of an argument as to why trade may be problematic from a social or political perspective.

Some suggest trade is problematic because it redistributes

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Dismal thoughts about the Turkish referendum

8 days ago

I don’t write a lot on Turkey these days. (My latest piece was published last September. It was on Erdogan’s missed opportunities to enter history books as a truly great leader, rather than the corrupt tyrant he seems destined for.) It’s partly because the subject is too depressing: try hard as I might, I really cannot find a good scenario developing over the years ahead.
It’s also because conventional wisdom has so thoroughly converged on what I have been saying since I first began to write on Turkey’s politics in 2010. For a few years, I was a relatively lonely voice in a Western media landscape full of cheerleading for Erdogan and his then-allies, the Gulenists.  (Sorry pundits, I wrote my “Turkey’s Democracy is Dead” piece seven years ago, back in June 2010!) I don’t see much to be

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Too Late to Compensate Free Trade’s Losers

15 days ago

CAMBRIDGE – It appears that a new consensus has taken hold these days among the world’s business and policy elites about how to address the anti-globalization backlash that populists such as Donald Trump have so ably exploited. Gone are the confident assertions that globalization benefits everyone: we must, the elites now concede, accept that globalization produces both winners and losers. But the correct response is not to halt or reverse globalization; it is to ensure that the losers are compensated.

The new consensus is stated succinctly by Nouriel Roubini: the backlash against globalization “can be contained and managed through policies that compensate workers for its collateral damage and costs,” he argues. “Only by enacting such policies will globalization’s losers

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How Much Europe Can Europe Tolerate?

March 14, 2017

CAMBRIDGE – This month the European Union will celebrate the 60th anniversary of its founding treaty, the Treaty of Rome, which established the European Economic Community. There certainly is much to celebrate. After centuries of war, upheaval, and mass killings, Europe is peaceful and democratic. The EU has brought 11 former Soviet-bloc countries into its fold, successfully guiding their post-communist transitions. And, in an age of inequality, EU member countries exhibit the lowest income gaps anywhere in the world.

But these are past achievements. Today, the Union is mired in a deep existential crisis, and its future is very much in doubt. The symptoms are everywhere: Brexit, crushing levels of youth unemployment in Greece and Spain, debt and stagnation in Italy, the

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Ariel Rubinstein on Economics Rules

March 13, 2017

The great Ariel Rubinstein has a review of my book Economics Rules in the latest issue of the Journal of Economic Literature. It is a fun review – gratifying for me because Ariel agrees with many of my arguments – and it has a deeply personal, even emotional, feel to it. Ariel feels strongly about the turn the profession has taken, and agree or not, the essay makes for a very interesting read.
The review took me back to my graduate-student days at Princeton. The place had a very strong crop of theorists among the graduate students, and I used to hang out with them a lot. I am not sure quite why, since what I did was very different from what they did. But they were the most fun bunch in Princeton at the time. I have fun memories of many a drunken night at the Annex – the student bar

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A Foreword to Kari Polanyi Levitt

March 8, 2017

I was recently asked to write a foreword to the Mexican edition of Kari Polanyi Levitt’s From the Great Transformation to the Great Financialization. Kari is Karl Polanyi’s daughter, and the essays in her book — part memoir, part intellectual history, part analysis of the global economy — provide a wonderful Polanyi-esque perspective on our day. I happily accepted, and my Foreword is below.
****
I first encountered Karl Polanyi as an undergraduate, in a course on comparative politics. “The Great Transformation” was on the course syllabus, sitting somewhat awkwardly amidst more standard political science fare. The assigned reading, on the Speenhamland system and the reform of the Poor Laws in Britain made little impression on me at first. But over the years, I found myself coming back

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Global Citizens, National Shirkers

February 10, 2017

CAMBRIDGE – Last October, British Prime Minister Theresa May shocked many when she disparaged the idea of global citizenship. “If you believe you’re a citizen of the world,” she said, “you’re a citizen of nowhere.” Her statement was met with derision and alarm in the financial media and among liberal commentators. “The most useful form of citizenship these days,” one analyst lectured her, “is one dedicated not only to the wellbeing of a Berkshire parish, say, but to the planet.” The Economist called it an “illiberal” turn. A scholar accused her of repudiating Enlightenment values and warned of “echoes of 1933” in her speech.

I know what a “global citizen” looks like: I see a perfect specimen every time I pass a mirror. I grew up in one country, live in another,

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Thinking straight about fair trade

January 27, 2017

In the previous entry, I discussed the real-world distributional effects of trade agreements, in the specific case of NAFTA. Why should we care about such redistribution and how should we deal with it?
It is useful to distinguish between two different versions of an argument as to why trade may be problematic from a social or political perspective.
Trade is problematic because it redistributes income.
Trade is problematic because it violates norms and understandings embodied in our institutional arrangements – it undercuts domestic social bargains.
The first case is no different than a million other things in a market economy that can have distributional implications. It does not in general require that we target trade specifically.
But the second case is different, and may require

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What did NAFTA really do?

January 26, 2017

Brad De Long has written a lengthy essay that defends NAFTA (and other trade deals) from the charge that they are responsible for the loss of manufacturing jobs in the U.S. I agree with much that he says – in particular with the points that the decline in manufacturing employment has been a long-term process that predates NAFTA and the China shock and that it is driven mainly by the secular trend of labor-saving technological progress. There is no way you can hold NAFTA responsible for employment de-industrialization in the U.S. or expect that a “better” deal with Mexico will bring those jobs back.
At the same time, the essay leaves me frustrated and uneasy. It seems to gloss over the distributional pain of NAFTA and overstate the overall gains.  
So what does the evidence say on these

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New results on structural change during the recent growth boom in developing countries

January 23, 2017

The last two decades have been a rare period of rapid convergence for the world’s developing economies. Everyone is familiar with China and India’s experience, but growth went beyond these two large economies. Many countries in Sub-Saharan Africa and Latin America had their best performance in decades, if not ever.
In a new paper, my co-authors Xinshen Diao (IFPRI) and Margaret McMillan (Tufts and IFPRI) and I examine this experience. We ask what drove this growth and how sustainable is it. Looking at recent growth through the lens of structural change proves particularly insightful.
Here is our decomposition of recent growth accelerations into the within-sector and between-sector terms. The latter term captures the growth contribution of structural change — the reallocation of labor

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Is Global Equality the Enemy of National Equality?

January 22, 2017

The question in the title is perhaps the most important question we confront, and will continue to confront in the years ahead. I discuss my take in this paper.
Many economists tend to be global-egalitarians and believe borders have little significance in evaluations of justice and equity. From this perspective, policies must focus on enhancing income opportunities for the global poor. Political systems, however, are organized around nation states, and create a bias towards domestic-egalitarianism. 
How significant is the tension between these two perspectives? Consider the China "trade shock." Expanding trade with China has aggravated inequality in the United States, while ameliorating global inequality. This is the consequence of the fact that the bulk of global inequality is

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Trump’s Defective Industrial Policy

January 10, 2017

CAMBRIDGE – US President-elect Donald Trump has yet to take office, but his brand of flawed industrial policy has been on full display since his surprise win in November.

Within weeks of the election, Trump had already claimed a victory. Through a mix of inducements and intimidation, he prevailed on the heating and cooling firm Carrier to keep some of its operations in Indiana, “saving” around 1,000 American jobs. Touring the Carrier plant subsequently, he warned other US firms that he would impose stiff tariffs on them if they moved plants overseas and shipped products back home.

His Twitter account has produced a stream of commentary in the same vein. He has taken credit for Ford’s decision keep a Lincoln plant in Kentucky, rather than move it to Mexico. He

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Don’t Cry Over Dead Trade Agreements

December 8, 2016

CAMBRIDGE – The seven decades since the end of World War II were an era of trade agreements. The world’s major economies were in a perpetual state of trade negotiations, concluding two major global multilateral deals: the General Agreement on Tariffs and Trade (GATT) and the treaty establishing the World Trade Organization. In addition, more than 500 bilateral and regional trade agreements were signed – the vast majority of them since the WTO replaced the GATT in 1995.

The populist revolts of 2016 will almost certainly put an end to this hectic deal-making. While developing countries may pursue smaller trade agreements, the two major deals on the table, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), are as good as dead

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Straight Talk on Trade

November 15, 2016

CAMBRIDGE – Are economists partly responsible for Donald Trump’s shocking victory in the US presidential election? Even if they may not have stopped Trump, economists would have had a greater impact on the public debate had they stuck closer to their discipline’s teaching, instead of siding with globalization’s cheerleaders.

As my book Has Globalization Gone Too Far? went to press nearly two decades ago, I approached a well-known economist to ask him if he would provide an endorsement for the back cover. I claimed in the book that, in the absence of a more concerted government response, too much globalization would deepen societal cleavages, exacerbate distributional problems, and undermine domestic social bargains – arguments that have become conventional wisdom since.

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Scholars’ letter of support for Ricardo Hausmann

November 7, 2016

Here is a letter that I have prepared and signed with some colleagues in response to Venezuelan president Nicolás Maduro’s ugly attacks on Ricardo Hausmann.

“We the undersigned write to express our dismay at Venezuelan president Nicolás Maduro’s repeated targeting of our colleague Ricardo Hausmann and to express our support for Professor Hausmann.
Two years ago, President Maduro ordered Venezuela’s Attorney General to proceed against Professor Hausmann following an article in which Hausmann argued that the government consider defaulting on its external debt to spare the Venezuelan people further economic hardship. Last year, he aired the tape of a private conversation between Professor Hausmann and a Venezuelan businessman and ordered that Hausmann be prosecuted. And most recently,

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The Walloon mouse

October 22, 2016

It appears Belgium’s Wallonia has put a nail on the coffin of the EU-Canada trade agreement (CETA) by vetoing it. The reasons, The Economist puts it, "are hard to understand." 
Well, yes and no. Canada is one of the most progressive trade partners you could hope to have, and it is hard to believe that Walloon incomes or values are really being threatened. But clearly something larger than the specifics of this agreement is at stake here.
Instead of decrying people’s stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I’d put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people’s concerns with earlier trade agreements. 
The elites minimized distributional

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How to tell apart trade agreements that undermine democratic principles from those that don’t

October 22, 2016

I discussed in an earlier post on Brexit how to think about international agreements and the constraints on state action they entail in terms of democratic legitimacy. Since that discussion has relevance beyond Brexit, I’ve pasted the relevant part here below. The basic point is this: the fact that an international rule is negotiated and accepted by a democratically elected government does not inherently make that rule democratically legitimate.

The optimistic argument has been best formulated by the political scientists Bob Keohane, Steve Macedo and Andy Moravcsik. They point there are various ways in which global rules can enhance democracy — a process that they call “democracy enhancing multilateralism.” Democracies have various mechanisms for restricting the autonomy or the

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It’s a war of ideas, not of interests

October 19, 2016

Mike Konczal has an interesting piece on how the progressives are unlikely to win over Trump’s base of white, male, working class voters – even if they take their concerns to heart and propose policies that will help them.  He thinks progressives lack specificity and clarity on the “specific approaches and programs [that] would convince Trump’s voters to join liberals.” More fatally, he believes the progressive agenda, if successfully implemented, would actually fail to bring these voters along.
Here is the gist of the argument:

“Yet any sufficiently important left project going forward is going to involve at least four things: a more redistributive state, a more aggressive state intervention in the economy, a weakening of the centrality of waged labor, and a broadening,

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No Time for Trade Fundamentalism

October 14, 2016

CAMBRIDGE – “One of the crucial challenges” of our era “is to maintain an open and expanding international trade system.” Unfortunately, “the liberal principles” of the world trade system “are under increasing attack.” “Protectionism has become increasingly prevalent.” “There is great danger that the system will break down … or that it will collapse in a grim replay of the 1930s.”

You would be excused for thinking that these lines are culled from one of the recent outpourings of concern in the business and financial media about the current backlash against globalization. In fact, they were written 35 years ago, in 1981.
The problem then was stagflation in the advanced countries. And it was Japan, rather than China, that was the trade bogeyman, stalking – and taking over

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How Shimon Peres brought inflation down in 1985

September 28, 2016

I saw Shimon Peres, who passed away yesterday, only once and it was at a conference on inflation stabilization in Jerusalem in 1990. He had led the national unity government during 1984-86 which had successfully brought down the country’s triple-digit inflation. The conference organizer, the great Michael Bruno, had asked him to give an after-dinner speech.
When Peres took office, the budget deficit stood at more than 15% of GDP. Everyone at the conference wanted to know how he had managed to bring it down so quickly.
Peres said it was actually quite easy. He called a cabinet meeting — Labour and Likud had an equal number of cabinet seats — and announced that the meeting would not end until the requisite expenditure cuts had been agreed upon.
The meeting went on and on, with each

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From hyper-globalization back to sensible globalization

September 19, 2016

I had a piece in the New York Times over the weekend that tries to steer our globalization discussion in what I think is a more sensible direction. A brief excerpt:

We need to rescue globalization not just from populists, but also from its cheerleaders. Globalization evangelists have done great damage to their cause not just by underplaying the real fears and concerns on which the Trumps of this world thrive, but by overlooking the benefits of a more moderate form of globalization.
We must reassess the balance between national autonomy and economic globalization. Simply put, we have pushed economic globalization too far — toward an impractical version that we might call “hyperglobalization.”

The principles I discuss are taken largely from my book, The Globalization Paradox —  so

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Erdoğan’s Tragic Choice

September 12, 2016

CAMBRIDGE – Ever since Turkish President Recep Tayyip Erdoğan won his first general election in late 2002, he has been obsessed with the idea that power would be wrested from him through a coup. He had good reason to worry even then. Turkey’s ultra-secularist establishment, ensconced in the upper echelons of the judiciary and the military at the time, made no secret of its antipathy toward Erdoğan and his political allies.

Erdoğan himself had been jailed for reciting religion-laced poetry, which prevented him from taking office immediately when his Justice and Development Party (AKP) assumed office in November 2002. In 2007, the military issued a statement opposing the AKP’s candidate for president – then largely a figurehead. And in 2008, the party narrowly escaped

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The False Economic Promise of Global Governance

August 11, 2016

CAMBRIDGE – Global governance is the mantra of our era’s elite. The surge in cross-border flows of goods, services, capital, and information produced by technological innovation and market liberalization has made the world’s countries too interconnec…

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Turkey’s Baffling Coup

July 17, 2016

GRANADA – Military coups – successful or otherwise – follow a predictable pattern in Turkey. Political groups – typically Islamists – deemed by soldiers to be antagonistic to Kemal Atatürk’s vision of a secular Turkey gain increasing power. Tensions …

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The Abdication of the Left

July 11, 2016

RONDA, SPAIN – As the world reels from the Brexit shock, it is dawning on economists and policymakers that they severely underestimated the political fragility of the current form of globalization. The popular revolt that appears to be underway is ta…

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Innovation Is Not Enough

June 9, 2016

CAMBRIDGE – We seem to be living in an accelerated age of revolutionary technological breakthroughs. Barely a day passes without the announcement of some major new development in artificial intelligence, biotechnology, digitization, or automation. Ye…

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A Progressive Logic of Trade

April 13, 2016

CAMBRIDGE – The global trade regime has never been very popular in the United States. Neither the World Trade Organization nor the multitudes of regional trade deals such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partne…

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The Politics of Anger

March 9, 2016

CAMBRIDGE – Perhaps the only surprising thing about the populist backlash that has overwhelmed the politics of many advanced democracies is that it has taken so long. Even two decades ago, it was easy to predict that mainstream politicians’ unwilling…

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The Trade Numbers Game

February 10, 2016

CAMBRIDGE – The Trans-Pacific Partnership (TPP) – a mega trade deal covering 12 countries that together account for more than one-third of global GDP and a quarter of world exports – is the latest battleground in the decades-long confrontation betwee…

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