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09/29/2019

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Maggie Kidder

Dani Rodrik’s “Growth Strategies” is encouraging in the sense that he argues there is a wide-range of diversely-packaged principles that can lead to economic growth and it does not require a lot of reform to ignite growth. It is also discouraging in the sense that there is no clear-cut path between implementing a standardized set of good institutions and sustaining economic growth, so it can be difficult to determine what the binding constraints and promising opportunities are for a particular country.

One of the most important takeaways from Rodrik’s article for me is that growth accelerations in the short-run are common and frequent, and Rodrik lists 64 cases of growth transitions since the 1950s. These growth transitions were rarely trigged by reform and they exemplify that relatively small changes in the background environment can cause significant spikes in the economy. India in particular has experienced genuine gradualism by slowly deregulating its policy regime while undertaking very little privatization. China has boomed since the late 1970s because they experimented with a series of unorthodox institutional innovations that deviated from Western norms. These led to orthodox results that Western economists would have hope for: market-oriented incentives, property rights, and macroeconomic stability.

Additionally. I found the Martian thought experiment and the criticisms of the assumptions for growth in neoclassical economic analysis very intriguing, as they clearly portrayed how diverse and context-specific the successful growth strategies are for different countries. However, very little explanation was devoted to sub-Saharan African countries. I understand that this document was written in 2003 and sub-Saharan Africa’s growth rate dropped 0.8% from 1980 to 2000, but I am curious about the early-on initiatives in sub-Saharan Africa that have now sub-Saharan Africa to have an average growth rate from 2000- 2018 that is higher than both the world’s and the OECD countries’ growth rates.

Julia Moody

Rodrik’s “Growth Strategies” discusses how traditional or neoclassical economic theory influences policy decisions and whether or not these policies are effective at igniting growth. He argues that policy-makers perceive neoclassical theory too stringently and lack flexibility when applying it to real-world situations. Neoclassical ideas about development certainly parallel the paths that many economically successful nations have followed and are a good basis to start thinking about the relationship between growth and policy decisions. These ideas, which were originally included in the Washington Consensus, include fiscal discipline, tax reform, and trade liberalization. I liked how in the appendix of Rodrik’s paper, he included many tables and graphs to illustrate the models and documents he refers to throughout the paper. The policies in the Washington Consensus mostly have shown success in Western nations, and because of this many policy-makers think they should apply to every developing nation. Rodrik does a good job of explaining that many countries benefit from untraditional growth strategies and lists numerous examples, such as China and India.
I thought this part of the paper tied in nicely with our conversation in class on Tuesday about behavioral economics. We discussed how economic theory suggests that if the marginal cost of completing an action is next to nothing (such as checking a box on a drivers license to become an organ donor), individuals should always complete that action. However, in reality, individuals are much more likely to become organ donors if it requires absolutely zero action on their part, even if the action requires minimal effort. The discipline of behavioral economics studies and tries to explain these anomalies. Rodrik’s writing about countries following untraditional paths to growth or adhering to traditional policies but not experiencing growth made me think about how in every realm of economics, there are exceptions to the rule and unusual or untraditional ideas should not be discredited.

drewwoodfolk

I found "Growth Strategies" by Dani Rodrik to be a very thought provoking article that really changed preconceived ideas about how emerging economies start and hopefully maintain steady growth.

Perhaps because of the American political system or perhaps for some other reason, I've always been under the impression that the fastest amount of growth always comes when goverment intervention is at its lowest. Furthermore, I've always believe that in the cases of developing economies, its best to lure in outside investment to provide a metaphorical kick start to economic growth that could lead to domestic investment later down the road. I think part of the reason I felt this way due to the time I've spent in Hong Kong. While there, I was taken aback by the sheer number of skyscrapers and infrastructure that had been developed. Along with well known international banking names, it seemed like some domestic Hong Kong ventures were thriving and that the special administrative region was certainly benifiting on the whole by the vast amount of foreign investment and the adoption of true hands off policy. After reading this article however, it has become clear to me that Hong Kong appears to be the exception rather than the rule when it come to effective and sustainable development strategies.

The article makes it clear that development strategies may be considerably more nuanced than I originally anticipated. Furthermore, and much to my surprise, there appears to be more than one path to building a sustainable economy. On one hand, nearly all of the developing economies seem to have the so called "higher order" economic principles like rule of law, property rights, or appropriate incentives. While these higher order economic principle are quite important, it appear that the rest of the development strategy is best left up to government where in many cases, some intervention is better than none at all.

Jack_curtis25

Rodrik’s paper offers interesting insights into how we should think not only about development economics but also about the discipline in general as well. Too often economists from far away lands prescribe plans that may have worked in one area of the world at a certain period of time but many not work in the current country being studied. Local conditions and institutions matter. While economics seemingly prioritizes the big and bold ideas incentives and other market driven forces, it is important to understand how they might apple to a specific locale. China, India, and Peru will all have differing political and social constructs that will affect overarching economic tenets applied to them. Overall, there cannot be a cure all solution that can be indefinitely applied to all nations at all time period which will guarantee the desired outcome of robust growth.

An interesting case study can be identified in Argentina which from a tradition lens was set up for a 20th century boom. At the turn of the century Argentina was one of the richest countries in the world thanks to successful development of nature resource extraction as well as agricultural and industrial sectors. However, problems began to immerge as a result of severe fiscal and monetary mismanagement. As a result they have run constant deficits and have persistent issues with managing to pay back their debt. The lack of a politically independent monetary authority has also given them trouble, especially when it come to their currency and inflation. As noted in the article the formation of a currency board was a growth strategy which only failed because of external factors. Of course, such a belief is fundamentally flawed as it fails to consider the economic picture at large. Another example can be drawn from the policy of import substitution industrialization which worked in some countries but failed in Argentina.

Adrian Lam

Overall, I enjoyed reading Rodrick’s “Growth Strategies” because I thought the paper was especially successful at connecting many of our class discussions and readings up to this point. To begin, the paper provided evidence and support for several of my main discussion points made in previous blog posts. After reading “The Fall and Rise of Development Economics” and “The Economic Lives of the Poor”, I concluded that nearly every country requires its own unique analysis and strategy for growth and development. Rodrick’s paper is very successful at demonstrating how using similar growth strategies in different countries does not always necessarily lead to the same outcomes. Vice versa, using different reform policies, including unorthodox ones, can lead to similar orthodox results for different countries. Ultimately, local conditions matter.

The first several sections of his paper made me think of our readings from chapter 4. Just like how multiple equilibria can result from coordination failures, there exists multiple ways for which a country is able to move from a lower equilibrium point to a higher one, albeit some ways are more effective than others.

An example to illustrate this point is China and its rapidly-growing economy versus a Latin American country that has been less successful, such as Bolivia. Even though Bolivia made attempts following the "good behaviors" outlined in the Washington Consensus, China’s dual-track reform and unorthodox policies (like assigning land under the Household Responsibility System) resulted in significantly greater economic success. Realizing that principles on paper do not always translate well into specific policy recommendations is key here.

In addition, the two-pronged strategy approach that was outlined in the paper provided hints at why certain growth strategies were more effective than others. Essentially, the two-pronged effort represents a short-term focus on simulating growth (can draw upon Rosentein’s Big-Push here) and a long-term focus on sustaining growth. It was interesting to see how Rodrick concluded that acquiring high-quality institutions is the ultimately the main point that will lead to the convergence of living standards between countries. Reading the subsections about market failures versus government failures reminded me of Amartya Sen and how a balance between market and state is essential.

Lastly, a final takeaway I gained from reading this paper is how a country who is very far below its potential steady-state level of income can experience very large growth with even “moderate movements in the right direction.” This is promising because it demonstrates that those in the worst positions can better themselves greatly even with minor change. This is a hopeful idea that makes me smile.

Travis_Dover

I found this piece to be refreshing in the sense that Rodrik admits that development economists do not have all the answers, and in the past when they thought they did, they’ve often been proven wrong. This has been evident in our class discussion of the history of development economics as it seems like every time there is a decade where we think we figure things out, the next decade proves that hypothesis wrong (Harrod-Domar growth model limitations in 1940’s among others). I brought up the topic of education last week in class, and it seemed to me that this article proved its importance further. Institutions (to use Rodrik’s language) that promote the education of development economics in low GDP per capita countries is imperative to successful future growth models.
The principles of the Washington Consensus were developed by economists that had a “western” perspective, with emphases on subjects like land privatization, price liberalization, corporatization, etc. These factors are characteristic of the American economic model, and some of them are in line with the cultural concepts present in our constitution. The Washington Consensus ideals certainly haven’t been perfect for American development as our economy still faces high inequality and other difficulties, but it has worked well to grow American GDP because it fits inside most of our cultural identity. Those same ideals have not translated to most foreign countries because the cultural identity of other countries is different in most cases and extremely intricate. That is why institutions in developing countries that teach development economics to their citizens is so important as they will understand the intricate cultural identity of their home country. Again, this takes me back to my ECON 280 Lakota class. Very little of the economic and political reform put in place by the American government has worked on the Pine Ridge Reservation and many of the Lakota’s blamed discrepancies in American and Lakota cultural ideals (among other things) for the horrible economic state on the Pine Ridge Reservation. If the Lakota’s and any other members of developing countries could create their own economic reform with their knowledge of the culture they come from, I think the rate of success on economic reform could be higher. However, it is difficult to start these learning institutions as they require experts to teach the material and hope that reform can create lasting change in the economic environment. The lack of these things can lead to a coordination failure as it is hard for individuals living in countries with very low education rates to acquire the education needed to be an expert in development economics. Moreover, as is the case on the Pine Ridge Reservation, legacy of failed government leads to low hope in the reality of pushing forward meaningful growth legislation. With that said, I know Rodrik would agree that working with locals to understand their beliefs and customs and using possibly unconventional economic growth styles that align with their culture is a better idea than generalizing from success in other countries and implanting a process that is not in alignment with what is on the ground in the country in question.

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