In this book, Professor Srinivasan sets out to explore why poor countries have failed to grow and to reap more benefits from the recent era of globalization. As I expected when I first opened the book and began reading, the author does a wonderful job identifying the major issues at play and organizing the discussion in a neat – and witty – way. The analysis is thorough and the narrative unravels coherently and convincingly. Along the way, the reader is bound to find various illuminating statements – jewels of thought, actually – that Srinivasan carefully delivers to clarify the analysis.
The book had four mandates:
(a) to assess the impact of the failure of the Doha Round negotiations on Least Developed Countries (LDCs) and small vulnerable states and the prospects for achieving their enhanced and beneficial participation in world trade;
(b) to discuss the scope of cooperation between developed and developing (including least-developed) countries, apart from multilateral trade talks and regional trading arrangements, in order to strengthen the link between trade, growth, and poverty reduction in the developing world;
(c) to identify the scope for and measures that may be adopted by developed and the more advanced developing countries for playing a fuller and more effective role to advance growth and development in the rest of the world (particularly in the poorer world), that is beyond their national borders and regional economic groupings;
(d) and, based on the above, to formulate recommendations for making the global partnership for development more effective.
The author covers these mandates in six chapters. In the Introduction, Chapter 1, Srinivasan characterizes the target countries, namely the LDCs, Landlocked Developing Countries, and Small States. In Chapter 2, he describes an analytical framework needed to discuss the link between growth, globalization, and poverty. Chapter 3 examines the institutional and other relevant contextual features of the target countries. Chapter 4 addresses the second and third mandates, the scope of cooperation between developed and developing countries as well as measures to foster growth in less developed countries. Chapter 5 returns to the first mandate and assesses the consequence of the (failure of the) Doha Round. Finally, Chapter 6 concludes with a series of recommendations and general advice.
The analytical framework focuses on the links between trade, growth, and poverty reduction. Globalization affects growth (via factor accumulation, technological efficiency, and innovation) and growth affects poverty (via higher demand for the goods and services produced by the poor – directly or through employment). The channels are plentiful as there are direct effects, indirect effects, and bidirectional effects (say from globalization to growth and from growth to globalization). The channels are most likely heterogeneous across countries and may depend on both country- and time-specific characteristics (such as local infrastructure, institutions, or the level of key variables like international commodity prices). In this context, I strongly agree with Srinivasan that an analytical framework is required to think coherently about all these channels. The argument goes beyond the usual advocacy in favor of modeling to guide analysis and policies. One of the major roles of the framework in Chapter 2 is to summarize which channels matter, how they matter, and how they are affected by various factors (such as domestic and international policies) to make them explicit to the policymakers and negotiators that engage in multilateral discussions about glo–balization. More often than not, the arguments used to hinder the negotiations are based on a wrong or partial reading of the evidence. This, of course, affects the scope for cooperation between developing and developed countries. As the author points out, a discussion between the two sides will only be fruitful if it is well informed and based on a coherent and rigorous analytical framework.
I also agree with Srinivasan's conclusion that domestic factors, and in particular how they are affected by political economy considerations, are likely to be more important than international policies in preventing growth and reducing poverty. However, I believe that the process of globalization, defined broadly, is unstoppable (perhaps driven by technological change) and that it is not possible to envision a world economy where countries hide in autarky. In other words, the view of protectionist policies as a way to recover the way people lived a few decades ago is just a manifestation of nostalgia. This has two implications. First, it is crucial to level the playing field in the world economy for all countries, and thus a discussion of international policies cannot be neglected (and this should include not only what a given developing country does to itself in terms of trade policy but also what other countries do to it, especially rich countries' policies of market access or agricultural protection). Second, the interaction between international and domestic policies should become a priority in those discussions. It is one thing to examine domestic distortions and political economy when countries can embrace autarky; however, it is another matter when the process of globalization makes autarky infeasible. I think of the Integrated Framework (IF), the Programme of Action (POA) of UNCTAD, and especially the Aid For Trade (AFT) of the WTO as platforms to understand and discuss the ‘complementary agenda’, its component policies, and its most effective implementation. I believe future discussions of trade, growth, and poverty will rely very heavily on the complementary agenda and am convinced of the enormous gains from trade and its benefits that can accrue to all countries in the world. But I am also convinced that the realization of these gains, as well as the distribution of those gains among the population, and especially the poor, depend to a large extent on complementary policies and factors. A poor country with poor infrastructure may not gain at all from trade, and may even lose; a developing country with decent roads, say, could do relatively well, and a developing country with good infrastructure and institutions will fare even better. A word of caution: the complementary agenda is often times defined with little precision and when that happens the discussion can be misleading and confusing. In all likelihood, the complementary agenda is country-specific (and probably time-specific as well). I concur with the author that a ‘one-size-fits-all’ approach would be inappropriate and is probably damaging.
Some of the conclusions that stem from the analysis, though valid, may be disappointing. If the globalization–growth–poverty link depends on many factors and policies – both domestic and international – if this link is country-specific and time-specific, if a ‘one-size-fits-all' will not work, and if some of the things that work for one country may actually hurt others, then how can we hope to achieve any consensus from multilateral efforts at cooperation? The ongoing failure of the Doha Round attests to this concern, which is, in turn, exacerbated by the ‘inadequate capacity’ of many developing countries to successfully participate in the negotiations. The fact that many of these countries still believe they can rely on trade policy (barriers) to surmount domestic issues such as redistribution does not help either. There is a role for capacity building on these two fronts in the developing world. Finally, since domestic political economy considerations abound, how can we hope to implement any of the desired policies (if any) coming out of the IFs, the AFTs, and the POAs? Wouldn't these policies crash into the political web that dominates how things are done in many developing countries? Srinivasan argues, and I agree, that this is one of the major reasons behind the little success of the IF, despite all the effort put into it.
The book ends with a series of recommendations. Srinivasan explores the scope for a global partnership for development, but he is a pessimist about such partnership, at least at present. He suggests some global institutional reforms that could be helpful, including reforms of the World Bank, the IMF, and some regional development banks as well as of some issues related to how the WTO works (dismissing, for instance, the ‘democratic deficit’ in WTO, and suggesting changes to the WTO Council and the dispute settlement mechanism). Srinivasan does not delve into domestic policy reforms, although he strongly suggests they should be prioritized. One reason is the inappropriateness of the ‘one-size-fits-all’ approach. Interestingly, he lists a couple of ‘international' policy recommendations. One opposes preferential trade agreements (PTAs) and economic partnership agreements (EPAs) in favor of multilateral agreements. The other objects to the Generalize System of Preference (GPS) and suggests instead targeting domestic constraints and costs via, for example, the complementary agenda and the building of capacity in the developing world.
