Author Archives: jdingel

A sneak peak at the Growth Commission’s report

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

A sneak peak at the Growth Commission's report

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

A sneak peak at the Growth Commission's report

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

Why do we need trade promotion authority?

Fred Bergsten’s concise explanation of why the US invented TPA, formerly “fast track”:

Our unique constitutional system – under which Congress is responsible for “foreign commerce” but the president has authority to negotiate with other governments – has required the creation of special procedures to mesh with the parliamentary systems of other countries where executive and legislative branches almost always work together. Without arrangements that assure reasonably prompt congressional action on agreements negotiated by the president, other countries legitimately fear that Congress will simply let deals languish, or insist on further concessions…

Current and former chief trade officials of three of the world’s largest trading entities have told me that, since the House action, the U.S. has lost all credibility. In other words, the “time out” proposed for trade policy by one of the major presidential candidates – a central goal of the opponents of globalization – has already been called.

Bhagwati on globalization skeptics

Jagdish Bhagwati recently offered a harsh rebuke (.doc) to those worried about economic losses from globalization, going so far as to say that “the quality of [Krugman’s] work on this subject [trade and inequality] hardly deserves any attention” and “Stiglitz perpetrates other fallacies such as that unemployment means you cannot have gains from trade — that issue was examined by trade theorists in the 1950s and even a Nobel Prize cannot shield you from ignorance and folly.”

Classic child labor controversy

Sabrina provided a link to a 1997 New Internationalist article discussing the well-known episode in which threatening Bangladeshi garment manufacturers with an import ban resulted in thousands of child laborers losing their jobs and turning to even worse sources of income such as prostitution. Though the case is frequently mentioned in pro-globalization books and articles, the presentation in NI is much richer:

No photographs. Saleha is scared. Many a time she has hidden under tables, been locked up in the toilet, or been sent to the roof in the scorching sun for two or three hours. It happens whenever foreign buyers enter the factory. She knows she is under-age, and doesn’t want photographers messing things up – she needs the job. The whole industry has suddenly become sensitive. Owners want their factories open. The workers want their jobs. The special schools for former child labourers want aid money. No photographs…

The child workers themselves find it particularly hard to interpret the US approach as one of ‘humanitarian concern’. When asked why the buyers have been exerting such pressure against child labour, Moyna, a ten-year-old orphan who has just lost her job, comments: ‘They loathe us, don’t they? We are poor and not well educated, so they simply despise us. That is why they shut the factories down.’ Moyna’s job had supported her and her grandmother but now they must both depend on relatives…

The notion that a garment employer might be helping children by allowing them to work may seem very strange to people in the West. But in a country where the majority of people live in villages where children work in the home and the fields as part of growing up, there are no romantic notions of childhood as an age of innocence. Though children are cared for, childhood is seen as a period for learning employable skills. Children have always helped out with family duties. When this evolves into a paid job in the city neither children nor their families see it as anything unusual. In poor families it is simply understood that everyone has to work.

English cloth and Portuguese wine

David Ricardo:

Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole… It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England…

If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity.

The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal.

England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth.

John Nye:

Prior to the late 1600s, the British drank plenty of wine, mostly French, a little Spanish, but virtually nothing from Portugal. The wars of 1689-1713 gave the Portuguese allies the opportunity of ten lifetimes. Beginning in 1703 a treaty was signed granting Portugal access to British markets for their wines—generally of a much lower quality than those of France, and often needing to be fortified with brandy or spirits in order to keep from going bad. The Methuen Treaty (as it was known) promised that Portuguese tariffs would always be at least a third lower than those of other nations, most especially France.

Of course, most of the Portuguese wine trade was dominated by British ships, merchants, and even vintners working in Iberia. The end of hostilities between Britain and France was seen as a grave threat to all these British interests, and vigorous lobbying by brewers, distillers, and the Anglo-Portuguese merchants stopped attempts to return to the period of open trade with the French.

Trade theorists have learned their lesson: use Greek letters rather than real world examples!

Hat tip: EconTalk.