Reviews
domestic policy-making institutions” and so forth. Each chapter in this part is devoted
Unorthodox Economics
to one myth that is first stated, then elabo-
Reclaiming Development: An Alternative Economic Policy Manual
by Ha-Joon Chang and Ilene Grabel; Published in India by Books for Change, Bangalore. Distributed by Madhyam International, Delhi, 2004; pp 224, Rs 350 (paperback) .
ASHWINI DESHPANDE
B
Viable Alternatives
This mainstream thinking has great ideological appeal since there is widespread support for the view that there is no alternative to this set of policies (liberalisation, privatisation, withdrawal of the state from economic decisions and so forth) that is advocated by the international bodies (International Monetary Fund, World Bank, World Trade Organisation, supported amply by developed country governments). Thus, several would admit to some problems inherent in the mainstream approach yet support it simply because there seem to be no viable alternatives in sight. The most important contribution of the volume under review is that it considers each tenet of orthodox thinking and demonstrates, first, how individual developed countries deviated from it, and second, what the alternatives might be. Contrary to the one-size-fits-all thinking, there could be several alternatives depending on the socio-economic situation of the country in question. The alternatives that Chang and Grabel advocate are very much within the framework of the market economy and thus do not require fundamental overhaul of the socio-economic system (easy to dismiss as utopian or untenable) and indeed, many of them have been practised by individual countries at different points in time.
Myths and Realities of Development
Several critiques of the mainstream approach end up becoming inaccessible since they are too theoretical, with scant empirical evidence in support of their arguments. This volume is refreshingly different, as it is written for the non-specialist, is very easy to comprehend and is laced with simple, yet powerful, facts and figures. Thus, it does not speak to the already converted. It is divided into two parts. Part one deals with the myths and realities of development: “today’s wealthy countries achieved success through a steadfast commitment to the free market”; “neoliberal globalisation cannot and should not be stopped”; “the east Asian model is idiosyncratic and the Anglo-American model is universal”; “developing countries need the discipline provided by international institutions and by politically independent rated, and finally rejected.
The second part of the book outlines the economic policy alternatives and each chapter in this section deals with alternatives in specific areas: trade and industry; privatisation and intellectual property rights; international private capital flows; domestic financial regulation and macroeconomic policies and institutions. Since all these are fairly complex and technical issues, several of the chapters begin with simple explanations of terms such as convertibility, capital account, portfolio investment and so forth. While each of the chapters is important, I believe two of the most powerful chapters in the book are on international capital flows and domestic financial regulation. Certainly in India, both of these are topical issues.
Topical Issues
On international capital flows, the conventional wisdom is that the ultimate goal should be complete capital account liberalisation, even if we might have to exercise a certain caution when it comes to highly liquid international capital flows. A more nuanced argument might advocate sequencing; however, first, the benefits of sequencing are disputed and second, even advocates of sequencing maintain that complete liberalisation remains the ultimate goal for all developing countries. Chang and Grabel point out that the case for liberalisation of international capital flows is not supported by evidence; on the contrary, there is evidence from a variety of countries to suggest that well-designed capital controls have played an important role during crucial periods in the development process. Grabel in her earlier writings has advocated the use of vulnerability-activated controls – capital controls that are utilised only when economic indicators reveal that they are warranted
– called “trip wires and speed bumps”. The former are measures that warn policymakers and investors that a country is approaching high levels of risk in various domains and speed bumps – targeted, graduated capital controls – are activated
Economic and Political Weekly August 12, 2006 once a trip wire predicts the emergence of a particular vulnerability.
The real challenge to all these alternative measures is what Chang has elsewhere termed the “shrinking of policy space”. Thus, often even with the full knowledge of feasible alternatives, countries find themselves unable to execute them as their degrees of freedom over domestic policy are shrinking due to the constraints imposed by the global international regime. Equally, the challenge lies within – class coalitions and vested interests within developing countries that benefit from neoliberal globalisation and would prevent the implementation of alternatives. Chang and Grabel are cognisant of these challenges, but armed with the arguments in this volume, political forces opposed to the mainstream orthodoxy can effectively garner strength to counter these multiple challenges.
Addendum
Last month, I read a hilarious piece in the Guardian by a best-selling author who describes the woes of her book being promoted by a leading bookstore. Her book had a beautiful painting on the cover but the promotional stickers (announcing price reduction and the book being on a bestseller list) were so placed that the figure on the cover was completely hidden, not to mention her own name that was partially covered. She wondered at the end of the piece if the stickers ended up promoting the sale of the book or otherwise. The volume under review is distributed in India by Madhyam Books and they have placed two large stickers to the effect: one on the inside first page that is stuck just under the line “critical praise for the book”, and completely covers the following paragraph; and the second on the back cover that is stuck over one of the advance praise paragraphs. Hopefully, Indian readers will read the book in large numbers and endorse it wholeheartedly by their own judgment, making the critical/advance praise redundant.
EPWEmail: ashwini@econdse.org
Economic and Political Weekly August 12, 2006
