The Globalization Paradox by Dany Rodrick - Book Report/Review Example

The Globalization Paradox by Dany Rodrick The Globalization Paradox is written by Dani Rodrick with the central theme being, as the title reflects; Why Global Markets, States and Democracy can`t co-exist. Dani Rodrik is a professor at Harvard University with expertise in Global Political Economy. Rodrick has been an aggressive critic on the Globalization in context to the contemporary world for over a decade now. Prior to ‘The Globalization Paradox’, he had also published another one titled, ‘Has Globalization Gone too Far?’ which was also a critique on the global financial institutions and the book also won the title of the best book on the subject by the Business Week. The central theme of the book focuses on the financial crisis and its implications on the global economy, not to mention the domino effect of the crisis around the world (Rodrick 1997). Throughout the rhetoric, Rodrick stresses on the point that the entire academia as well as the economists were too adamant to accept the fact that market can also be inefficient, and there may be pitfalls in the institution developed by the Washington Consensus. The entire intelligentsia was too confident on the narrative that markets are always efficient and self-regulated where the government intervention must be minimal as it would be deterrence for the market forces. In this context, Rodrick points out the paradox that where globalization is the only way to take millions out of poverty line and stabilize the global political economy, yet currently globalization is only leading towards financial crisis. In other words, Rodrick is advocating for a free market in the real sense where the flow of market must be irrespective of the status in the global political economy. Rather currently, the International Financial Institutions are being used by the developed world to manipulate the economy in their advantage, and to the disadvantage of the developing world. Moreover, Rodrick is of the view that the triangular context to globalization is rather harmful for the economy being a recipe for disaster. In other words, a state cannot be purely democratic and at the same time pursue nation interests as well as globalization. One of these must be compromised in order to achieve stability and balance. Rodrick begins his first chapter by narrating the historic perspective to the issue. He goes back to 1997 when the Asian Financial Crisis first took place, and the popular perspective at that point was that the value of currency must be modified in order to facilitate the free flow of capital in the global world. Thus, once the Bretton Woods System dominated the global political economy, the Standard rate of Gold collapsed and the markets were opened up for free trade. Also, the Washington Consensus ensured the propagation of rules of business to be implemented by the International Financial Institutions, i.e. the IMF, World Bank and also the WTO. The subject matter of the second chapter i.e. ‘The Rise and Fall of the First Great Globalization’ is the fact that the collapse of the standard Gold era poses a threat to the global economy as the base of the entire system is quite shaky and prone to collapse. The third chapter, i.e. ‘Why Doesn’t Everyone get the case of Free Trade’ present another important case in this context implying that free trade is not the natural order of business and thus, applying a systematic trade policy globally isn’t quite a pragmatic idea. Since there are limited resources and capital in the world, it is natural to believe that if one state gets better off, the other will naturally get worse off, being a potential flaw in the concept of free trade which is often ignored by the economists. Thus, Rodrick stresses on the idea that the democracies tend to protect their natural interests which is an inherent flaw in context to the free trade, and thus, markets should work in such a way that they must not over-expand themselves, or else they may implode. The fourth and the fifth Chapter talks about the post World War II period i.e. the period Bretton Woods consensus was proposed, since the roots of the financial crisis can be traced back to that time. The market efficiency being the dominant school of thought at that time, the other implausible assumptions associated to the system were ignored and thus, global regularizations were quite biased and ineffective. The sixth Chapter i.e. ‘The foxes and hedgehogs of Finance’ is another very interesting chapter which refers to the essay by Isaiah Berlin published in 1953 which explains two kinds of intellectuals. The former being those who are aware of many little things and are skeptical of the big macro-level theories, while the latter being those who believe and advocate for the Grand theories. With context to economics, hedgehogs are the ones talking about free market while the foxes take a more critical yet sensitive approach. Moving forward the preceding chapters discuss that there must be a balance between governance, financial institutions and the markets to achieve stability in the world. He stresses that a unified global economic infrastructure may not suit the needs of the entire world, as a few states especially those still underdeveloped may not be able to cope and rather negate the global economic standards. Thus, the global financial institutions must be designed in such a way that individual stated can relate to them and adapt accordingly. Furthermore, the chapter ‘Is Global Governance Feasible & Desirable’ exemplified the EU experiment and implying that there are limits to the global governance. In other words, the IFI`s tend to advocate for banking regulations and uniform codes, yet it may not achieve a win-win status for all. ‘Designing Capitalism 3.0’ is another chapter of the book which proposes a transition from the Capitalism 2.0 because global governance is a dead end with flawed perceptions. This new system would offer immense freedom to individual states to practice their economic ideals and democratic decision making, which all states would be working on a fair economic interface which would be ensuring global cooperation fairly. The last Chapter of the book i.e. ‘A sane Globalization’ proposes a set of ideals to be adopted by the international framework implying that international trade regimen must be reformed in such a way that the national democracies must be re-empowered to an open global economy. Also, the global financial network must also be regulated but in such a way that the standards must be minimal and the developing states must have a larger share while the financial tax globally must be minimal. In other world global finances must be democratized. Also, he says that the labor must also be globalized as the rich countries could utilize foreign labor thereby increasing global income as a whole. Most importantly, he proposes that China must also be incorporated in the global economy and it must be left free to chose how it responds to the growth policies and deal with the currency issues, and eventually it will also get stabilized. Thus, conclusively, Rodrick has critiqued on the contemporary global political economy in his book, “The Globalization Paradox” where he proposes that the market, democracy and national interest can`t go hand in hand and yet prove to be effective. Also, the current global economic standards are biased and are a recipe for disaster. Thus, the system must be transformed in such a way that the states must be free to choose how they respond to the global economy and there must be a greater economic democracy, especially in context to the developing world. Only then can we avoid the domino effect taking place with reference to the global financial crisis. The author has proved his point using a strong, effective voice, and an interesting yet a commanding way of delivery. Thus, the book is a must-read for everyone in general and for the students of economics in particular. References: Rodrik, Dani. Has Globalization Gone Too Far?Washington, D.C: Institute for International Economics, 1997. 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