Podcast appearances and mentions of Dani Rodrik

When we talked to former Donald Trump lawyer and confidant Michael Cohen last week, he spoke to us in a way few people can about how he's dealing — very personally — with life under this regime. You'll want to see the entire conversation, but what really struck us was his ability to look back on his own experience of misplaced loyalty (he went to prison on campaign finance charges stemming from the Stormy Daniels payoff scandal) to find lessons for us all about living bravely through this moment.We know some of you prefer reading to watching, so we're publishing text excerpts of the conversation below. If you missed our live conversation, we encourage you to watch the video above.In the public interest, we are opening this video and transcript to all. But we're also asking candidly that folks support the half dozen or so people who now write for and edit and otherwise support the work of The Ink by becoming a paying subscriber today.Take a moment to support fearless, independent reporting, and to help us keep bringing you conversations like this one. Or give a gift or group subscription.Your support allows us to open these ideas to as many people as possible, with no paywall.How do you, given what you're holding… you've held what you've dealt with what you've gone through to fight this administration what you're holding now in terms of all the knowledge and of what's happening and the same way everybody else in this stream and everybody on the stream has not gone to prison the way you have but are experiencing the blizzard of of insanity the way you are. How do you attempt to keep healthy, keep your mind, you know, working?Like, what do you, at a very practical level, because I think a lot of people are dealing with this just when they open up the news on their phone. What are you trying to do to stay sane, given all of this?The busier that I keep myself, the less I have time to think. The more time that I have to think, the worse the PTSD gets. Sleeping is a disaster because that's when your mind works overtime. I haven't had a good night's sleep in probably seven years.Remember, as of yesterday, yesterday was the seven-year anniversary of the raid on my home, the hotel room I was staying at, and my law office by the FBI that sparked this entire chaos.My journey is not a journey that is anti-Trump. I don't care if the last name was Trump, if it was Jones, if it was Smith, if it was Cohen. It makes no difference to me what the last name of the president is. My concern is for what he is doing. So I tried to take my past affection and my loyalty to him. And I have pushed that way off to the side. I don't think of this as a Trump policy. I think of it as a President Trump policy.And it may be hard for people to understand, but you know, I was incredibly close with him, 15 years basically sitting shoulder to shoulder with him, protecting him from basically everything,providing him with advice and guidance that would only benefit him, not harm him. And sometimes, as I'm watching and I can't discern the difference between yesterday and then today.And I'm wondering, where is the Michael Cohen in this inner circle? Where is the Michael Cohen in this administration? To say to him, before he announces this willy-nilly, self-inflicted tariff policy stupidity, “Mr. President, you can't do this. Let me just give you my prediction on how this is going to end up. You, of course, you're gonna do whatever you want, but let me give you my prediction.”I did that in 2017 after Steve Miller, the immigration ban, which was really a Muslim ban. And I was in the office shortly thereafter, like a day or so, and he asked me what I thought because they were intending on doing a second round of it. And I said, “Mr. President, can I speak freely?”He goes, yeah.I said, “You're f*****g crazy.” Just like that, in his office.Are you f*****g kidding me? You know I have hundreds of friends who are Muslim, right? Some of whom are my best friends since 1984.So I said, “You're basically telling them they have to leave the country. How is it possible that you think it's OK to ban an entire religion from the country if it has to do with just Somalia? OK, I understand that. But you can't make it this broad.” And he took my advice to heart. And that's why you didn't see a 2.0.There is no Michael Cohen there. And sometimes based upon my loyalty that I had in my relationship that I had to him going back to like 2005, I sometimes I almost feel like I want to pick up the phone, call him and say, “What the f**k are you doing? Why? Knock it off. Do something that will give you a legacy that future generations with the last name Trump will be proud of. Not wrecking the global economy. Who gives a s**t if Xi Jinping comes on his f*****g knees begging to you, begging you for forgiveness? How does that benefit Trump? Your legacy, how does that benefit the American people? How does it benefit future generations?”It does not. And that's the problem. This entire group of enablers — they're only worried about themselves. This is all.Do you think you could break through to him in some way because of that history of loyalty in spite of everything that's happened? If you made that call, do you think it would go anywhere?Today?Today?No, I don't think he would even take the call. I don't think he would even take the call.If the two of us were sitting in a room, just us, and we both were able to lower the fences that we have built around us to protect ourselves from each other. Yeah, I'm certain he would have listened. It wouldn't have taken a Bill Ackman or a Jamie Dimon to get him to reverse what he was doing here.Because somebody breathed into his ear this notion that these tariffs are going to be great for him. It's gonna be a major win. And ultimately, America will be better off for it. It's gonna bring back manufacturing. No, it's not.We're never going back to being a manufacturing country. Too expensive in this country to manufacture. Other countries do it better and much cheaper.And so these are the struggles that I live with. I live with anger. I live with sadness. I live with confusion. I live with yesterday being in solitary confinement with no food, no ability to shower, no change of clothing for 51 days, or my 13 months in Otisville, the unconstitutional remand, when they first took me, because I refused to sign a counterfeit document. Imagine how far Bill Barr's administration, his Department of Justice, went in order to unconstitutionally remand me.They gave me a document that doesn't exist, that they wrote specifically for me. And when the very first paragraph is a massive First Amendment constitutional violation because I refuse to sign that document, I was handcuffed, shackled, stripped out, put into a paper jumpsuit, put into a freezer for three hours to the point I thought my teeth were gonna fall out of my jaw because I was so cold and my jaw was rattling so hard, I thought my teeth were gonna break. I've never felt cold like that before.And then to be transported back to Otisville to be put back into solitary until, thank God, a million times for Judge Alvin K. Hellerstein and my attorney, Danya Perry, who filed that habeas corpus, and the judge determined it was retaliatory and a violation of my First Amendment, constitutional rights. A federal court judge had to enjoin the United States government, the DOJ, the Attorney General, from continuing to violate my constitutional rights?How does something like this even happen? So for me, this is what unfortunately is on the loop that exists in my brain all the time.It's what I wrote in my whole book. Revenge talks about this. And that's why I think it's important for me to continue to speak up so that it never happens to anyone else ever again.That's almost the journey that unfortunately my life has taken me into. And I'm willing to accept it.Well, I know everybody watching this joins me in feeling immensely grateful for your truth-telling voice now and sorry for what you have to go through every day, not just in the limelight, but just in your own life and the quiet of your own life to do that.We are seeing in real time the opposite, generally in this society, a society with no bravery, no courage, people capitulating left and right. So it almost is like an alien phenomenon when you see someone who's willing to tell the truth, willing to stand up.As you can see from all the hearts there, a lot of people are very grateful. So thank you. Always appreciate talking to you, and always appreciate your voice, and take care of yourself.Watch the entire show, with philosopher Olufemi O. Taiwo joining Anand and Michael Cohen, at the link below.And you'll also want to see the powerful town hall Cohen hosted last night with Jim Acosta. It's not to be missed.A programming note: More Live conversations next weekWe're on the road this week, so we'll be taking a break from our regularly scheduled Live conversations. We'll be back next week with some very special guests. On Tuesday, April 22, at 12:30 p.m. Eastern, we'll talk with the economist Dani Rodrik. And on Wednesday, April 23, at 1:00 p.m. Eastern, we'll be speaking with the writer, lawyer, and former Secretary of Labor Robert Reich. You won't want to miss either one, so mark your calendars now!To join and watch, download the Substack app (click on the button below) and turn on notifications — you'll get an alert that we're live, and you can watch from your iOS or Android mobile device. And if you haven't already, subscribe to The Ink to access full videos of past conversations and to join the chat during our live events.Readers like you make The Ink possible and keep it independent. 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With President Trump's tariffs on Canada, Mexico, China, and other countries now in full swing, what consequences from an economic standpoint could the U.S. be facing? And what was the path that led us here? Hosts and finance professors Jonathan Berk and Jules van Binsbergen put the tariffs question to economist and author Dani Rodrik. Rodrik is  the Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University, and the author of the book Straight Talk on Trade: Ideas for a Sane World Economy. Beginning with the historical context and purpose of tariffs, the conversation covers how the political and social dissatisfaction with hyperglobalization opened the door for these extreme tariffs, whether or not they're an effective tool in modern trade policy, and what alternative strategies exist to rebuild America's middle class.  Find All Else Equal on the web:  https://lauder.wharton.upenn.edu/allelse/All Else Equal: Making Better Decisions Podcast is a production of the UPenn Wharton Lauder Institute through University FM.

In the face of what is inarguably bad governance and fake—but spectacular!—technocracy (the list goes on and on, but we'll stop at AI-generated tariffs), we thought we'd take a moment to join the conversation about what good governance looks like. A couple of weeks ago, one of us reviewed Ezra Klein and Derek Thompson's new book, Abundance, for the New York Times, and then the other one of us reviewed the review. So we figured: let's work it out on the pod? No guests on this episode, just the two of us in a brass-tacks, brass-knuckles discussion of the abundance agenda and the goals of twenty-first century economic policy.We dive right into what the abundance agenda is and who its enemies are: innovators and builders against NIMBYs and environmentalists on David's account; techno-utopians who discount the environment and politics on Sam's. We agree that housing policy, at least, has helped the better-off create a cycle of entrenching their position through stymieing construction and production. We find another point of agreement on how Klein and Thomson's abundance agenda attempts to harness the power of the state to build, and that certain left-wing critiques are off base, but disagree about whether their proposal is a break from the neoliberal era of governance and what that even was. In some ways, we end up right where we started, disagreeing about whether the abundance agenda seeks to unleash a dammed-up tide that can lift all boats, or whether the abundance agenda leaves behind everyone but a vanguard of “innovators” in the technology and finance sectors. Let us know if you've got a convincing answer.This podcast is generously supported by Themis Bar Review.Referenced ReadingsWhy Nothing Works: Who Killed Progress―and How to Bring It Back by Marc DunkelmanStuck: How the Privileged and the Propertied Broke the Engine of American Opportunity by Yoni AppelbaumOn the Housing Crisis: Land, Development, Democracy by Jerusalem DemsasOne Billion Americans: The Case for Thinking Bigger by Matthew Yglesias“Kludgeocracy: The American Way of Policy” by Steven TelesThe Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War by Robert GordonThe Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary GerstlePublic Citizens: The Attack on Big Government and the Remaking of American Liberalism by Paul Sabin“The State Capacity Crisis” by Nicholas Bagley and David SchleicherRed State Blues: How the Conservative Revolution Stalled in the States by Matt GrossmannThe Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey and Steven Teles“Why has Regional Income Convergence in the U.S. Declined?” by Peter Ganong and Daniel Shoag“Exclusionary Zoning's Confused Defenders” by David Schleicher“Cost Disease Socialism: How Subsidizing Costs While Restricting Supply Drives America's Fiscal Imbalance” by Steven Teles, Samuel Hammond, and Daniel Takash”On Productivism” by Dani Rodrik 

The Annual Meeting in Davos this year coincided with the inauguration of Donald Trump for his second term, and many of the conversations there were about what the world should expect from a newly emboldened Trump 2.0. In interviews conducted at the World Economic Forum's Annual Meeting in Davos in January, three experts help us understand America in 2025. Guests: Andrew Edgecliffe-Johnson, CEO Editor, Semafor David Rubenstein, co-chairman, The Carlyle Group Walter Mead, Ravenel B. Curry III Distinguished Fellow in Strategy and Statesmanship, Hudson Institute Catch up on all the action from the Annual Meeting 2025 at wef.ch/wef25 and across social media using the hashtag #WEF25. Related reports: Global Risks Report 2025: https://www.weforum.org/publications/global-risks-report-2025/ Related podcasts: Tariffs, globalization, and democracy, with Harvard economist Dani Rodrik: https://www.weforum.org/podcasts/radio-davos/episodes/dani-rodrik-economics-globalization-tariffs/ What just happened in Davos, and how is the world different now?: https://www.weforum.org/podcasts/radio-davos/episodes/davos-2025-what-just-happened/ The global economy 'at a crossroads' ahead of Davos: Chief Economists Outlook: https://www.weforum.org/podcasts/radio-davos/episodes/chief-economists-outlook-ralph-ossa-wto/ Global Risks Report: the big issues facing the world at Davos 2025: https://www.weforum.org/podcasts/radio-davos/episodes/global-risks-report-2025/ Check out all our podcasts on wef.ch/podcasts:  YouTube: - https://www.youtube.com/@wef/podcasts Radio Davos - subscribe: https://pod.link/1504682164 Meet the Leader - subscribe: https://pod.link/1534915560 Agenda Dialogues - subscribe: https://pod.link/1574956552 Join the World Economic Forum Podcast Club: https://www.facebook.com/groups/wefpodcastclub  

Tariffs have historically been an important tool of industrial policy. They were used in the last century by east Asian nations to promote infant industries, and are being used today by the EU to help spur the energy transition. But do Donald Trump's threats to impose a 25% across-the-board tariff on imports from Canada and Mexico, or his actual 10% tax rise on all imports from China, have any kind of thought-out policy rationale behind them? And should other countries respond in kind? To find out, the FT's European economics commentator Martin Sandbu speaks to Dani Rodrik, professor of international political economy at Harvard. Rodrik is one of the world's most acclaimed experts on industrial policy, and someone Martin first got to know as a PhD student in the 1990s.Martin Sandbu writes a regular column for the Financial Times. You can find it hereSubscribe on Apple, Spotify, Pocket Casts or wherever you listen.Presented by Martin Sandbu. Produced by Laurence Knight and Edith Rousselot. Manuela Saragosa is the executive producer. Audio mix and original music by Breen Turner. The FT's head of audio is Cheryl Brumley.Read a transcript of this episode on FT.com Hosted on Acast. See acast.com/privacy for more information.

Dani Rodrik has long argued against unfettered globalization and supports countries' use of industrial policy to pursue economic development. The Harvard economist joins us to talk about the usefulness and limitations of trade tariffs, economic nationalism, and the impact of global economics on democracy. Catch up on all the action from the Annual Meeting 2025 at  and across social media using the hashtag #WEF25. Links: World Economic Forum : From Blind Spots to Insights: Enhancing Geopolitical Radar to Guide Global Business: Related podcasts: Check out all our podcasts on :  - - : - : - : Join the :  

Dani Rodrik has long argued against unfettered globalization and supports countries' use of industrial policy to pursue economic development. The Harvard economist joins us to talk about the usefulness and limitations of trade tariffs, economic nationalism, and the impact of global economics on democracy. Catch up on all the action from the Annual Meeting 2025 at wef.ch/wef25 and across social media using the hashtag #WEF25. Links: World Economic Forum Centre for Regions, Trade and Geopolitics: https://centres.weforum.org/centre-for-regions-trade-and-geopolitics/home From Blind Spots to Insights: Enhancing Geopolitical Radar to Guide Global Business: https://www.weforum.org/publications/from-blind-spots-to-insights-enhancing-geopolitical-radar-to-guide-global-business/ Related podcasts: What just happened in Davos, and how is the world different now? The global economy 'at a crossroads' ahead of Davos: Chief Economists Outlook Global Risks Report: the big issues facing the world at Davos 2025 IMF's Gita Gopinath: What's ahead for economic growth in 2025 Check out all our podcasts on wef.ch/podcasts:  YouTube: - https://www.youtube.com/@wef/podcasts Radio Davos - subscribe: https://pod.link/1504682164 Meet the Leader - subscribe: https://pod.link/1534915560 Agenda Dialogues - subscribe: https://pod.link/1574956552 Join the World Economic Forum Podcast Club: https://www.facebook.com/groups/wefpodcastclub  

Much like national economies, countries that economically interact with each other need rules to help ensure markets work well, and that economic outcomes accord with some understanding of fairness and equity. While such rules can constrain what a country does, for much of the post-war era, nations have recognized the benefits of international cooperation and the importance of a stable set of rules. Yet, as populism and disdain towards globalization grows, global governance will likely retreat in scope. Could a more circumscribed understanding of global governance help domestic economies do better than if they faced no constraints from global governance rules? Dani Rodrik joins EconoFact Chats to discuss. Dani is the Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University.

Çerçeve'nin yeni bölümünde Mert Söyler ve İlkan Dalkuç; Alp Buğdaycı ile Daron Acemoğlu'na Nobel getiren kurumlar üzerine çalışmalarını, politik ekonomiye katkılarını, Trump'ın ekonomi politikalarını konuşuyorlar.Alp Buğdaycı'nın Daktilo1984'teki yazıları

  I denne uges udgave taler Rune Lykkeberg med en økonom, der fik ret. Dani Rodrik, der er professor ved John F. Kennedy School of Government på Harvard University, var en af de første fremtrædende økonomer, der kritiserede globaliseringen, mens den stadig var dominerende.  I dag er mange stater begyndt at føre netop den slags offensiv industripolitik, som Rodrik længe har argumenteret for – bl.a. i den grønne omstillings navn. Men hvad sker der nu, når Rodrik har fået ret, og bevægelsen fra 'hyperglobalisering' til protektionisme er begyndt at tage fart?   Det er hovedemnet for denne uges Langsomme Samtale, hvor den amerikanske økonom blandt andet argumenterer for en industripolitik for servicearbejdet – for det er netop dén slags arbejde, de fleste europæere kan forvente at få i fremtiden, mener han.  Hvis vi ønsker at bevæge os fremad, er det for Rodrik afgørende, at vi fortsat evner at udfordre den herskende økonomiske opfattelse. Evner vi til gengæld at træffe de rigtige beslutninger, kan økonomien blive et værktøj for social retfærdighed.

Çerçeve'nin yeni bölümünde Mert Söyler ve İlkan Dalkuç; Levent Gültekin'in Kent Lokantaları eleştirisini, LGBTİ karşıtı “Büyük Aile Buluşması” mitingini ve Dani Rodrik'in makalesi üstünden dünya ekonomisinin önündeki yeni “üçlü açmazı” konuşuyorlar.Become a supporter of this podcast: https://www.spreaker.com/podcast/daktilo1984--5970640/support.

Harvard professor of international political economy Dani Rodrik has long been skeptical of what he calls "hyperglobalization," or an advanced level of interconnectedness between countries and their economies. He first introduced his theory of the "globalization trilemma" in the late 1990s, which states that no country can simultaneously support democracy, national sovereignty, and global economic integration.At the time when he proposed his trilemma, Rodrik was considered an outcast. However, economists and policymakers have come to accept his theory as governments seek to address populism, trade imbalances, and uneven growth through renewed interest in industrial policy, or government efforts to improve the performance of key business sectors. Rodrik joins co-hosts Bethany and Luigi to discuss changing attitudes towards globalization: its distributional effects, how it affects politics, and how it is still searching for a narrative consistent between academic circles and the media. Together, the three of them discuss what role corporate America should play in our world restructured by economic and political populism and if economics is getting too far away from the rest of the social sciences when it comes to shaping industrial policy and creating the jobs of tomorrow.Show Notes:Read Rodrik's co-authored December 2023 paper on the "New Economics of Industrial Policy"Read an ebook by ProMarket on cutting-edge contemporary debates around industrial policy

Gordon Hanson is the Peter Wertheim Professor in Urban Policy at Harvard Kennedy School (HKS). He is also chair of the Social and Urban Policy Area at HKS, a research associate at the National Bureau of Economic Research, and a member of the Council on Foreign Relations. Gordon's current research addresses the causes and consequences of regional job loss, effectiveness of place-based policies in alleviating regional economic distress, and the labour market consequences of the energy transition. This work is part of the Reimagining the Economy project at HKS, which Gordon co-directs with Dani Rodrik. In this podcast we discuss the rise of China and its impact on the US, whether WTO entry mattered and which sectors played by the rules, comparing the rise of Japan and Asia Tigers, and much more.    Follow us here for more amazing insights: https://macrohive.com/home-prime/ https://twitter.com/Macro_Hive https://www.linkedin.com/company/macro-hive

Recent events in economic security (or, geoeconomics) have been dizzying, but exciting for Darren given this is his primary academic field. In Australia, the new budget delivered by the government plans over $20b of industry policy funding for a “Future Made in Australia”. Meanwhile in the US, the Biden Administration has sharply increased tariffs on Chinese goods focused on green energy. The US wants to cultivate domestic manufacturing, in part because it sees PRC dominance of green technology as a national security risk. This means there is a lot to discuss! In this episode Darren talks with Hayley Channer. who is the Director of the Economic Security Program with the United States Studies Centre at the University of Sydney. Hayley has a diverse background having worked as an Australian Government official, Ministerial adviser, think tank analyst, and represented global non-profit organisations. Prior to her current role, Hayley was a Senior Policy Fellow with the Perth USAsia Centre and, amongst other accolades, was awarded a Fulbright Scholarship in 2022. This lengthy discussion covers the goals of economic security policy and the inherent trade-offs in this domain, particularly in the context of both Australia's and the US' emerging industrial policy efforts, as well as the problem of responding to economic coercion. Australia in the World is written, hosted, and produced by Darren Lim, with research and editing this episode by Walter Colnaghi and theme music composed by Rory Stenning. Relevant links Hayley Channer (bio): https://www.ussc.edu.au/hayley-channer Anthony Albanese, “A future made in Australia”, Speech, 11 April 2024: https://www.pm.gov.au/media/future-made-australia Jim Chalmers, “Economic security and the Australian opportunity in a world of churn and change”, Speech at Lowy Institute, 1 May 2024: https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/address-lowy-institute-sydney Hayley Channer and Georgia Edmonstone, “What does ‘economic security' mean to Australia in 2024?”, US Studies Centre Brief, 30 January 2024: https://www.ussc.edu.au/what-does-economic-security-mean-to-australia-in-2024 Lim, D. (2019). Economic statecraft and the revenge of the state. East Asia Forum Quarterly, 11(4), 31–32: https://eastasiaforum.org/2019/12/04/economic-statecraft-and-the-revenge-of-the-state/ Ferguson, Victor A., Darren J. Lim, and Benjamin Herscovitch. “Between Market and State: The Evolution of Australia's Economic Statecraft.” The Pacific Review 36, no. 5 (September 3, 2023): 1148–80. https://doi.org/10.1080/09512748.2023.2200026 Victor A. Ferguson, Scott Waldron and Darren J. Lim (2022), “Market Adjustments to Import Sanctions: Lessons from Chinese Restrictions on Australian Trade, 2020-21”, Review of International Political Economy”, http://doi.org/10.1080/09692290.2022.2090019 Darren J. Lim, Benjamin Herscovitch, and Victor A. Ferguson, “Australia's Reassessment of Economic Interdependence with China”, in Strategic Asia (2023): https://www.nbr.org/publication/australias-reassessment-of-economic-interdependence-with-china/ Leading (podcast), “Speaking Truth to Trump | Former Head of Trump's Communications, Anthony Scaramucci”, 21 February 2024: https://www.youtube.com/watch?v=juvfEZsZqUY&list=PL_6zDbB-zRef_M7eXuSLUlGnt7qk66hJq&index=9 Abhijit V. Banerjee, Esther Duflo, Good economics for hard times: Better answers to our biggest problems (2019): https://www.goodreads.com/book/show/51014619-good-economics-for-hard-times (Goodreads page) Dani Rodrik, “Don't Fret About Green Subsidies”, Project Syndicate, 10 May 2024: https://www.project-syndicate.org/commentary/green-subsidies-justified-on-economic-environmental-and-moral-grounds-by-dani-rodrik-2024-05

Dani Rodrik (Harvard Kennedy School Economics Professor) joins the podcast to discuss his career, the best case for industrial policy, the labor market effects of globalization, and his vision of an ideal economic policy paradigm. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. He was President of the International Economic Association during 2021-23 and helped found the IEA's Women in Leadership in Economics (IEA-WE) initiative. His most recent books are Combating Inequality: Rethinking Government's Role (2021, edited with Olivier Blanchard) and Straight Talk on Trade: Ideas for a Sane World Economy (2017). Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/new-books-network

Dani Rodrik (Harvard Kennedy School Economics Professor) joins the podcast to discuss his career, the best case for industrial policy, the labor market effects of globalization, and his vision of an ideal economic policy paradigm. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. He was President of the International Economic Association during 2021-23 and helped found the IEA's Women in Leadership in Economics (IEA-WE) initiative. His most recent books are Combating Inequality: Rethinking Government's Role (2021, edited with Olivier Blanchard) and Straight Talk on Trade: Ideas for a Sane World Economy (2017). Learn more about your ad choices. Visit megaphone.fm/adchoices

Dani Rodrik (Harvard Kennedy School Economics Professor) joins the podcast to discuss his career, the best case for industrial policy, the labor market effects of globalization, and his vision of an ideal economic policy paradigm. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. He was President of the International Economic Association during 2021-23 and helped found the IEA's Women in Leadership in Economics (IEA-WE) initiative. His most recent books are Combating Inequality: Rethinking Government's Role (2021, edited with Olivier Blanchard) and Straight Talk on Trade: Ideas for a Sane World Economy (2017). Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/world-affairs

Dani Rodrik (Harvard Kennedy School Economics Professor) joins the podcast to discuss his career, the best case for industrial policy, the labor market effects of globalization, and his vision of an ideal economic policy paradigm. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. He was President of the International Economic Association during 2021-23 and helped found the IEA's Women in Leadership in Economics (IEA-WE) initiative. His most recent books are Combating Inequality: Rethinking Government's Role (2021, edited with Olivier Blanchard) and Straight Talk on Trade: Ideas for a Sane World Economy (2017). Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/economics

Dani Rodrik (Harvard Kennedy School Economics Professor) joins the podcast to discuss his career, the best case for industrial policy, the labor market effects of globalization, and his vision of an ideal economic policy paradigm. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. He was President of the International Economic Association during 2021-23 and helped found the IEA's Women in Leadership in Economics (IEA-WE) initiative. His most recent books are Combating Inequality: Rethinking Government's Role (2021, edited with Olivier Blanchard) and Straight Talk on Trade: Ideas for a Sane World Economy (2017). Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

This week Noah Smith and Erik Torenberg sit down to deconstruct several economic theories dealing with developing nations, export oriented manufacturing, the roles of engineers across the world, and more. If you're looking for an ERP platform head to NetSuite http://netsuite.com/102 and download your own customized KPI checklist. He rebuttals arguments made by Turkish economist Dani Rodrik relating to on manufacturing, automation, employment, and more. _ Check out Erik's new show Request for Startups featuring a rotating cast of founders and investors (including Dan) sharing their requests for startups they want to exist in the world, and also their stories of navigating the idea maze in different sectors so founders don't have to reinvent the wheel anymore. The first episode is out now - we over better dating apps, references as a service, and WeWork for productivity * Watch and Subscribe on Substack: https://requestforstartups.substack.com/p/receipt-based-dating-reference-checks * Apple: https://podcasts.apple.com/us/podcast/request-for-startups-with-erik-torenberg/id1728659822 * Spotify:https://open.spotify.com/show/739L1LR32QI2XyoZlRh5nv _ ➕ We're hiring across the board at Turpentine and for Erik's personal team on other projects he's incubating. He's hiring a Chief of Staff, EA, Head of Special Projects, Investment Associate, and more. For a list of JDs, check out: eriktorenberg.com. Sponsors: NETSUITE

Research shows that policymakers have consistently endorsed the use of industrial policy. And now economists are increasingly talking about – and researching – the benefits of it too. Dani Rodrik talks to Tim Phillips about what we know about its effectiveness, and the evolving policy agenda that it represents.

Connaissez-vous notre site ? www.lenouvelespritpublic.fr Une émission de Philippe Meyer, enregistrée en public à la Fondation Jan Michalski le 12 octobre 2023. Avec cette semaine : David Djaïz, ancien secrétaire général du Conseil National de la Refondation. Françoise Fressoz, éditorialiste au journal Le Monde. Jean-Jacques Roth, ancien directeur du quotidien Le Temps. Notre temps semble caractérisé par une crise de la politique nationale qui se manifeste pour ainsi par le haut, avec la dilution du pouvoir des États-nations dans la mondialisation, et par le bas, avec la perte de confiance dans le personnel politique et les institutions. À mesure que la mondialisation progresse, les marges de manœuvre des États-nations, par définition localisées, semblent de plus en plus limitées. Contraints de répondre à des enjeux globaux comme le réchauffement climatique, les flux migratoires ou la régulation financière internationale, leurs leviers d'action nationaux paraissent impuissants. Le pouvoir des États-nations est concurrencé par des firmes qui ignorent les frontières ou par des entités supra-étatiques comme la Commission européenne. David Djaïz, vous avez ainsi écrit dans la Revue Esprit que l'État « ressemble de plus en plus à un « sujet passif », partiellement dépossédé de sa souveraineté. » De plus, la dette publique, les taux d'intérêt croissants et les déficits publics élevés limitent les politiques budgétaires. Ainsi cette impuissance manifeste se traduit-elle par un désenchantement, voire un rejet de la politique nationale, auquel s'ajoute une crise de confiance dans les institutions. Cette crise s'illustre par plusieurs types de comportements : l'abstention aux élections, la progression des partis politiques anti-systèmes, la demande de mécanismes de démocratie directe ou la participation à des mouvements de protestation non institutionnalisés. La dernière vague du baromètre de la confiance politique du Cevipof, réalisée entre le 27 janvier et le 17 février 2023, indique qu'en France, la confiance dans les institutions est à son plus bas niveau depuis la crise des Gilets jaunes. Près des deux tiers considèrent que la démocratie ne fonctionne pas bien – 10 points de plus qu'il y a deux ans –, 68 % d'entre eux demandent une plus grande implication de la société civile dans la vie politique et 70 % estiment que les hommes politiques sont principalement préoccupés par leurs intérêts personnels. Face à cette crise multidimensionnelle, diverses propositions émergent pour rééquilibrer la mondialisation et renouveler la confiance dans la politique nationale. L'économiste Dani Rodrik plaide depuis plusieurs années pour que les accords internationaux visent à améliorer le fonctionnement de l'État-nation plutôt qu'à l'affaiblir. Quant à l'adhésion des citoyens, plusieurs réformes institutionnelles sont envisagées en France : revenir au septennat, introduire une dose de proportionnelle aux élections législatives, supprimer l'article 49.3 et donner plus de pouvoir au Parlement, mettre en place des référendums d'initiative citoyenne ou encore une véritable démocratie participative en faisant entrer les citoyens au parlement, comme le proposent une note de Terra Nova. En contrepoint, beaucoup d'observateurs soulignent l'efficacité de la Constitution suisse. Ainsi Giuliano Da Empoli a-t-il loué dans le quotidien Le Temps les vertus d'un système permettant de désamorcer toute déstabilisation forte. Enfin, Dominique Schnapper a fait dans la revue Telos un éloge de la culture du compromis qu'elle nomme également conversation.Chaque semaine, Philippe Meyer anime une conversation d'analyse politique, argumentée et courtoise, sur des thèmes nationaux et internationaux liés à l'actualité. Pour en savoir plus : www.lenouvelespritpublic.fr

Advanced economies across the world have been buffeted by acute shocks crises like the Covid-19 pandemic and war in Ukraine, at the same time as they are grappling with longer-term challenges like deindustrialisation, the rise of AI and globalisation. Labour markets across a range of countries have experienced persistent wage stagnation, the rise of insecure work, and growing calls for ‘good jobs'. These shocks and challenges may be shared in nature but nations are developing different policy responses. Good jobs is a key pillar of Biden's economic strategy, underpinned by the Inflation Reduction Act. But the UK lacks a good jobs strategy of its own, or indeed a wider economic strategy to tackle its twin challenges of low growth and high inequality. What would a good jobs strategy in Britain look like? How would it stretch across trade, labour market, net zero, tax and benefit, and industrial policy? And what can we learn from current debates in the US about how to build a Good Jobs economy? These are key questions for The Economy 2030 Inquiry, and that one of the world's leading economists – Professor Dani Rodrik – will answer in a major lecture this autumn, hosted by the Resolution Foundation. Dani will set out his approach for a ‘good jobs' strategy, including where it has applied successfully in the US. View the event slides here: https://www.resolutionfoundation.org/events/creating-a-good-jobs-economy/ 

In this week's episode, host Kristin Hayes talks with Milan Elkerbout about how the European Union has responded to the Inflation Reduction Act. Elkerbout will join Resources for the Future as a fellow in October, transitioning from his role as head of the climate policy programme at the Centre for European Policy Studies. Elkerbout discusses the ongoing conversation about the Inflation Reduction Act among EU policymakers, climate policies that the European Union has proposed since the passage of the US law, and global trends in industrial and trade policy. This conversation with Hayes and Elkerbout comes on the heels of the one-year anniversary of the Inflation Reduction Act, which became law in August 2022. References and recommendations: “The New Economics of Industrial Policy” by Réka Juhász, Nathan Lane, and Dani Rodrik; https://drodrik.scholar.harvard.edu/publications/new-economics-industrial-policy

Key Insights:* Critics: Cato-style libertarians, including AEI's Michael Strain. The last die-hard classic Milton Friedman-style economic libertarians—and starting in 1975, Milton Friedman would say, every three years, that the Swedish social democratic model was going to collapse in the next three years.* Critics: Progressives—Biden is a tool of the neoliberals, and secretly Robert Rubin in disguise. People like David Dayen. They seem to be going through the motions—half-heartedly making their arguments to try to shift the Overton Window, but knowing deep down that Biden is about as good as they are going to get* Critics: Ezra Klein and the other supply-side progressives, worried that Bidenomics in danger of supporting too much procedural obstacles through “community engagement” and “consensus building”, and will wind up pissing its money away without boosting America's productive capacity.* Critics: The Economist magazine and some of the people at the Financial Times, writing about how the Biden administration's policies are “mismanaging the China relationship” and raising “troubling questions”—that decoupling will never work, that Chinese manufactured products are too good and too cheap to pass up; that you can't correct for for externalities; & c.* Critics: Macro policy was unwise, inflationary, and pissed away on income support resources that ought to have been used to boost industrial development. But Biden may skate through because he was undeservedly lucky.* The real critique: Implementation—the U.S. government does not have the state capacity to pick or subsidize “winners” in the sense of companies whose activities have large positive externalities.* To deal with (6), supporters of Bidenomics need to (a) figure out what the limits of U.S. state capacity are, and (b) shape CHIPS and IRA spending to stay within them; meanwhile, critics need to (c) come up with evidence of overreach on attempts to use state capacity to do things.* What is valid in the criticisms of Bidenomics is part of a more general critique—that we have a society in which there are limited sources of social power, namely, primarily money, secondarily a somewhat threadbare rule of law, tertiarily a somewhat shredded state administrative staff. We need other sources of social power—like unions, civic organizations, and so forth that aren't just politicians and NGOs that use direct-to-donor advertising to terrorize and guilt-trip their funders, and that take government money and use it to do nothing constructive at all.* Friendshoring rather than onshoring.* Japan is potentially an enormous productive asset for the U.S. to draw on.* And, of course: Hexapodia!References:* Libby Cantrill & al.: CHIPS & Science Act ‘The Closest We've Had to Industrial Policy' in Decades…* Economist: The lessons from America's astonishing economic record: ‘The more that Americans think their economy is a problem in need of fixing, the more likely their politicians are to mess up…. Subsidies… risk dulling market incentives to innovate… [and] will also entrench wasteful and distorting lobbying …* Economist: The world is in the grip of a manufacturing delusion: ‘How to waste trillions of dollars…. Governments… view… factories as a cure for the ills of the age—including climate change, the loss of middle-class jobs, geopolitical strife and weak economic growth—with an enthusiasm and munificence surpassing anything seen in decades…* Henry Farrell: Industrial policy and the new knowledge problem: ‘Modern industrial policy… [requires] investment and innovation decisions [that] involve tradeoffs that market actors are poorly equipped to resolve…. [Yet] we lack the kinds of expertise that we need…. This lack of knowledge is in large part a perverse by-product of the success of Chicago economists' rhetoric…. Elite US policy schools… have by and large converged on a framework derived from a watered down version of neoclassical economics…. New skills, including but not limited to network science, material science and engineering, and use of machine learning would be one useful contribution towards solving the new knowledge problem…* Rana Foroohar: New rules for business in a post-neoliberal world: ‘“Reimagining the Economy”… by economists Dani Rodrik and Gordon Hanson…. The Roosevelt Institute… progressive politicos (many from within the administration) gathered to discuss the details of America's industrial policy… the opposite of trickle-down…* Andy Haldane: The global industrial arms race is just what we need: ‘Manufacturing is undergoing a revival around the world…. An arms race to invest in decarbonising technologies is in fact exactly what the world needs to tackle two global externalities—the climate crisis and the investment drought…* Greg Ip: This Part of Bidenomics Needs More Economics: Massive sums are being spent on industrial policy with little guidance from economic theory or research…* Réka Juhász & al.: The Who, What, When, and How of Industrial Policy: A Text-Based Approach: ‘We create an automated classification algorithm and categorize policies from a global database…* Ezra Klein & Robinson Meyer: Biden's Anti-Global Warming Industrial Policy After One Year…* Anne O. Krueger: Why Is America Undercutting Japan?: ‘United States… wasteful, inefficient industrial policies…. The Inflation Reduction Act (IRA) and the CHIPS and Science Act… directly threaten the Japanese economy (and many other US “friends”)…* Paul Krugman: ‘I guess I shouldn't be surprised that there's pushback against the observation of a Biden manufacturing boom…. The usual suspects claimed that a green energy transition would require huge economic sacrifice. Seeing this much investment in response to subsidies that are still only a fraction of 1% of GDP suggests otherwise…* Nathaniel Lane & Rék Juhász: Economics Must Catch Up on Industrial Policy: ‘Industrial policy… is back in a big way…. Governments are trying to improve the performance of key business sectors. Can they manage to do so without subverting competition and subsidizing special interests?…* Dani Rodrik: An Industrial Policy for Good Jobs: ‘A modern approach to industrial policy must… target “good-jobs externalities,” in addition to the traditional learning, technological, and national security considerations…* Noah Smith: ‘David Dayen and Marshall Steinbaum completely misrepresented Ezra Klein's "supply-side liberal" position. This is not good faith debate at all…* Noah Smith: ‘Oh, and notice that this framing [from David Dayen]—“The claim made here is that the dumb U.S. workforce fell behind, and now TSMC has to make up for it with Taiwanese workers…”—treats job skills as a test of inborn IQ, rather than something that has to be learned and taught. Wild…* Noah Smith: ‘Neoliberalism: a thread…. Markets as the fundamental generators of prosperity, and government as the way to distribute that prosperity more equitably…. Government can't shoulder the entire burden…. We need additional, quasi-independent institutions, like unions…. Industrial policy is underrated, both at the national and the local level. Neoliberalism under-emphasizes science policy, for example. I want a Big Push for science-driven growth…. Can the government "pick winners"? Yes. The government *must* pick winners. Green energy and other zero-carbon technologies being chief among the things we must pick…* Michael Spence: In Defense of Industrial Policy: ‘The real question is not whether industrial policy is worth pursuing, but how to do it well…+, of course:* Vernor Vinge: A Fire Upon the Deep  Get full access to Brad DeLong's Grasping Reality at braddelong.substack.com/subscribe

Interview recorded - 1st of May, 2023On todays episode of the WTFinance podcast I had the pleasure of welcoming Sir Paul Tucker. Paul spent more than 3 decades in Central Banking, culminating in being the Deputy Governor of the Bank of England. He is also the author of the recently released book “Global Discord: Values and Power in a Fractured World Order”.During our conversation we spoke about the threat of a global fracturing, why China is unlikely to change, what a China/US split would look like and how Central Banking could change in the future. I hope you enjoy! 0:00 - Introduction 1:05 - Influence for writing the book?2:35 - What was the previous global order and why does China want to change it?6:35 - Why was China conflict on Paul's radar?8:55 - Were Western politicians naive about China?13:35 - Document 9 of the Chinese Communist Party18:40 - Russia Central Bank reserves frozen20:35 - Why is WTO and other international organisations brittle and how could China change these organisation?24:15 - What would a US/China split look like?29:05 - Best case scenario?31:40 - How have central banks changed in the last decade?39:45 - How should banks be saved?42:15 - How can central banks recover their trust?53:15 - Why Central Banks need to be tougher on shadow banks?57:50 - One message to takeaway from our conversation?Sir Paul Tucker is a Research Fellow of the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School.He is the author of Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State (2018). Described as “masterful” by Dani Rodrik and “profoundly important” by Larry Summers. His new book, GLOBAL DISCORD: VALUES AND POWER IN A FRACTURED WORLD ORDER, due out in FALL 2022, is about the geopolitics and legitimacy of the international economic and legal system. Both books are at the interface of political economy and political philosophy.Tucker spent more than three decades in central banking, occupying senior positions in the international policymaking world, and was knighted by Britain in 2014.From 2016 to 2021, he was the chair of the Systemic Risk Council, the independent body of former top central bankers, government officials and financial experts dedicated to a stable financial system.As Deputy Governor at the Bank of England from 2009 to October 2013, he was at the centre of efforts to contain the financial crisis and to reshape the international regulatory framework for financial stability. Former Governor of the Bank of England Mervyn King said, “Paul probably understands more about central banking than anyone else. He knows about every aspect of that arcane art and now he [is] free to tell the rest of the world what happens behind those high walls.”At the Bank of England, he was a member of the Monetary Policy Committee, Financial Policy Committee (vice chair), Prudential Regulatory Authority Board (vice chair), and Court of Directors. During his thirty-plus years there, he led staff teams on monetary policy strategy, market operations, and financial stability, as well as working as a bank supervisor. He had secondments to an investment bank and to Hong Kong, where he helped reform their securities markets and regulation following the 1987 stock market crash.Sir Paul Tucker: Website - http://paultucker.me/Book - https://www.amazon.co.uk/Global-Discord-Values-Power-Fractured/dp/0691229317/ref=nodl_?dplnkId=3426bdbe-6afd-42ab-8c93-2c0288832a5aWTFinance - Instagram - https://www.instagram.com/wtfinancee/Spotify - https://open.spotify.com/show/67rpmjG92PNBW0doLyPvfniTunes - https://podcasts.apple.com/us/podcast/wtfinance/id1554934665?uo=4Twitter - https://twitter.com/AnthonyFatseas

Welcome to another episode of Ideas Untrapped. My guest today is Charlie Robertson, who is the chief economist of Renaissance Capital - a global investment bank - and in this episode we talked about the subject of Charlie's new book, "The Time-Travelling Economist''. The book explores the connection between education, electricity, and fertility to economic development. The thrust of the book's argument is that no poor country can escape poverty without education, and that electricity is an important factor for investors looking to build businesses. It also explains that a low fertility rate helps to increase household savings. Charlie argues, with a lot of data and historical parallels, that countries need at least a 70-80% adult literacy rate (defined as being able to read and write four sentences in any language) and cheap electricity (an average of 300 - 500 kWh per capita) in order to industrialize and grow their economies rapidly. Small(er) families (3 children per woman) mean households are able to save more money, which can improve domestic investments by lowering interest rates - otherwise countries may repeatedly stumble into debt crises. We also discussed how increasing education can lead to higher domestic wages, but that this is usually offset by a large increase in the working-age population - and other interesting implications of Charlie's argument.TRANSCRIPTTobi;The usual place I would start with is what inspired you to write it. You mentioned in the book that it was an IMF paper that sort of started your curiosity about the relationship between education, electricity, fertility, and economic development. Generally. So, what was the Eureka moment?Charlie;Yeah, the eureka moment actually came in Kenya, um, because I'd already done a lot of work showing how important education was. It's the most important, no country escapes poverty without education. So I'd already made that clear and there wasn't much debate about that. Perhaps there was a debate about why some countries have gone faster than others, but there wasn't much debate about that. The second thing I was very clear on was electricity, which kept on coming up in meetings across Sub-Saharan Africa, Pakistan, [at] a number of countries, people kept on talking about the importance of electricity. But the eureka moment came when somebody pointed out to me that Kenya, where I was at the time, couldn't afford to build huge excess capacity of electricity, which I was arguing you need to have. You need to have too much electricity, so that it's cheap and it's reliable.And then investors come in and say, "great! I've got cheap educated labour, and I've got cheap reliable electricity. I've got the human capital and the power I need, that then enables me to invest and build a business here." And the question then was, well, why was it so expensive in Kenya but so cheap in China? Why was the cost of borrowing so high in Nigeria but so cheap in Morocco or Mauritius? And when I was trying to work out where did the savings come from in China, uh, well I was looking globally, but China's the best example of economic success and development success we've seen in the last 50 years. Over half the answer came from this IMF paper saying, actually it came from their low fertility rate. That's over half of the rise in household savings, which are massive in China, came about because the fertility rate had fallen so dramatically.And I then thought, could this possibly be true for other countries as well? Could this help explain why interest rates are so high in Nigeria or Kenya and so low elsewhere? And the answer is yes. So this book, The Time Travelling Economist is bringing all of these three things together - the fertility rate, the education rate, and electricity - to say not just how countries develop, cause I think I've answered that, but when they develop. Because once we know those three factors are key, we can then work out the when. Not just in the past [of] countries, but also in the future. Um, so that's where this came from.Tobi;I mean, we're going to be talking about each of those factors over the course of this conversation, but another question...some would say boring question, but I know how development economists and economists generally always try to defend their turf, you know, around issues like these. So, has anybody like taking you to task on the causal link between these three factors and development? And how would you defend yourself against that were it to be asked?Charlie;I haven't found anyone yet who's argued successfully against these points. Um, the closest criticism I get, and just to say, you know, this book came about off the back of three key reports I did in 2017 on education, 2018 on electricity, and 2019 on fertility and savings. So I've now been talking about these ideas for three to five years. The book only came out in July, 2022, bringing them all together. But in five years I haven't had pushback other than people ask, "is it not correlated?" You know, "is it not perhaps economic growth leads fertility declines or boosts savings?" And I think I show really clearly in the data that "no." Um, the fertility declines give us the growth. You don't get growth without adult literacy of at least 40%, you certainly don't get industrialization until literacy is at 70 to 80.So, you know, I'm looking at the data and I think it's pretty crystal clear that you've gotta get these other things right first before your economy can take off. And I can't find any counter-examples. Except, I mean there's the inevitable few, those countries like Qatar or Kuwait with huge amounts of energy exports per capita or diamonds in Botswana's case. And there you don't have to get everything right before you get wealthier because you just happen to be lucky to have huge amounts of energy exports per person and a very small population. But they are a bit of an exception. I think you could probably argue that they do grow first before they get everything else right. But for the vast majority of the planet and all countries in history, it's the other way around. You gotta get education, power, fertility rates in the right place to take off.Tobi;So I mean, getting into the weeds, let's look at education first. Before your book, personally for me, and I should say what I really like about your book is, it's well written, it's an interesting read. It comes across as a bit less analytical, which is what you get from the standard development literature, you know, and I think that's partly because you are writing about a lot of the countries that you have also worked in and interacted with a lot of these factors. So it really gives it a first-hand experience kind of narrative. So I like that very much. So prior to your book, if someone were to ask me about the relationship between education and economic development or catch-up growth, generally, the reference usually goes to Studwell's big claim, Joe Studwell, that: Yeah. You don't really need a super high level of education metrics for a country to industrialize because the standard explanation is that how a relatively poor country starts industrializing is from the low-skill, uh, labour-intensive, low-skill manufacturing jobs, that you don't need a high level of education and skill for you to be able to do that.So what I wanna work out here is what is the transmission mechanism between adult literacy and industrialization the way you've, like, clearly analyzed in your book?Charlie;Well, thank you very much for saying it was nicely written, I appreciate that. I wanted to try and make it as accessible as possible. Yeah, I think Joe Studwell's books are really good and I think he's right that you don't need a high level of education to do that first step out of rural poverty, subsistence farming into a textile mill. I think what's interesting is how many people writing about development forget how important just adult literacy actually is, because we've taken [it] so much for granted. So Adam Smith, who wrote The Wealth of Nations, the father of economics back in the 18th century in Scotland, he didn't make a big deal about adult literacy driving growth. And more recently, you know, people like Dani Rodrik have echoed exactly that saying you don't need any great education to work in a textile mill. You just need to be dextrous with your fingers. Which is almost exactly actually what Adam Smith said 250 years ago. And I was sympathetic to that, but I then kept on seeing in the data, well, first of all, I found this theory written in the sixties that said that no country has industrialized even to that first basic level of textiles without adult literacy being about 70 to 80% of the population. Which means basically all adults, all men, plus well over half the female population as well. And this was the theory written in the sixties and when I looked at the data, it was proven right and I couldn't quite understand why - if you just need dextrous fingers to work in a textile mill, why would there be that link? And I ended up talking to a guy who ran Levi's factories in Asia in the 1980s and he said, “Charlie, just think about it.”You've got this box of Levi's jeans coming down the conveyor belt. Do you put that box onto the truck labelled United States or that truck labelled Europe for export? And if you can't read and write, you won't even get that right. So the adult literacy thing I think is overlooked. People are focusing on secondary school, high school education, how much [many] university graduates a country needs and they do need graduates too. But until you get to that 70 to 80% adult literacy, textile mills don't go to a country. And we can see that they did go to China in the nineties when they got to adult literacy of 70%. They are in Southeast Asia. They're in Bangladesh since education hit about 70 to 80% in the last 10 to 15 years. But they're not big in sub-Saharan Africa, or at least in parts of Nigeria or the Sahel or West Africa because the education levels still aren't there yet. So, you know, I looked as far back as I could go to the 19th century and even the first non-European country to take off, Japan, had an adult literacy rate of about 70% by 1900 and 20 years later, they had a thriving textile industry. The education always comes first. And Korea copied that Japan model in the 1950s and sixties, Taiwan, Hong Kong, all the rest [of] Southeast Asia's followed. Now, South Asia's doing it and luckily it's spreading across Africa too. But the adult literacy is the first essential step.Tobi;One possible objection. And I haven't seen this anywhere, but I couldn't really get it out of my mind while I was reading that part of the book is that some will argue that increasing education also increases domestic wages and that is really a problem for industrializing. And, if I recall, one particular point that the anonymous economic historian on Twitter, Pseudoerasmus, made particularly about Asia, is they were able to combine a very high adult literacy rate - a measure which you use is completion of secondary education…Charlie;Yeah.Tobi;With very unusually low domestic wages. What role do wages play in your analysis?Charlie;I think that's the norm actually. It connects to the fertility thing. And I'm not sure if you want to jump there just yet, but what tends to happen when you've educated your population is that the fertility rate drops a lot. And when that happens, the number of people who have to stay at home looking after 5, 6, 7 children goes down a lot too. Women can go into the workforce and of course cause you've got the education, right? Those women are educated so they can join the industrial workforce as well. So very roughly, if we say there's a hundred people in Nigeria, 50 kids and 50 adults, let's say 25 of the adults have to be staying at home to look after 50 kids, you're talking 25% of the population can go out and work of the overall population. You go to Asia today and it's more like 70% adults, say 30% of kids.So you need maybe 15% of adults to stay at home. And you end up with something like 85% of the whole population can go out to work instead of 25%. Now, the consequence of that is a massive rise in the working-age population. And I think that that keeps industrial wages low for a few generations, in fact. Or at least three decades. Probably 40 years, where the education's come through, the fertility rates come down, you've got this huge excess supply of labour, which is then joining the industrial workforce and getting jobs. But because there keeps on being more people joining that workforce, it keeps wages relatively low. Now, what eventually happens then after a few decades is that that big increase in the workforce stops increasing as fast. We've seen this in China in the last 20 years. So, 20 years ago China's per capita GDP was about fifteen hundred dollars, $1,500.Whereas now, now the population has stopped growing. Working age population's shrinking. It's gone up to over $11,500. It's gone up tenfold. So the big reward for industrialization comes later. And we had this in Europe of course in the 19th century, you know, wages were pretty awful and industrial working was pretty awful experience in the 19th century. I mean it paid slightly better than rural subsistence farming, which is why people came to the cities. But London was a horrible place for the vast majority of people. And the industrial workhouses were terrible places as well. And that lasted for generations. It's only when that big population, kind of, boom stories started to shift that labour eventually got any bargaining power. Cause when there was too much labour coming into the market, they had no bargaining power with the factory owners. It wasn't until the 1870s that the trade unions became legal in, say, the United States. Because up till then, you know, "you join a union, I fire you," you know, could be what the factory owner would say in the United States, cause there's always gonna be another person I can employ. But once the workforce starts to gain a bit of bargaining power, cause it's not expanding quite so fast, then finally wages start to pick up. So I think what's happened in Asia is pretty normal and will probably be the experience that we've seen across Africa as well.Tobi;Inevitably this will take us into what it means to be educated, really. Because a lot of countries, I mean it's pretty much standard - they say, Oh yeah, we want invest in education. Um, we know it is important for human capital. We know how important it is to have an educated population and all that. You talked about some data challenges also for some countries in your book. So what I wanna ask here is what exactly does it mean to be educated in the sense that you are talking about in the book?Charlie;Yeah, this is a really fair question. Why am I talking about adult literacy? The definition is can you read and write four sentences in any language? Sentences like "farming is hard work." So it's not a very high threshold and I wouldn't argue, I don't think you would, that it's highly educated. It's just educated enough to put that box of jeans onto the right truck when it's going to America or Europe. But all that's doing then is taking your country's per capita GDP from your per person kind of wealth from say $500 a year, a thousand dollars a year to the kind of two, $3,000 a year level. It doesn't mean you've got the education levels you need to get to the $10,000 per capita GDP level growth or 20 or 50 or even a hundred. Um, to get to the 10,000 level, I think you probably need very good secondary school education as well.And to get to the $20,000 per capital GDP level, you're talking a lot of graduates coming out of university and you need to have that education then spreading throughout the population, both broadening and deeper education as well. And that is a process that takes decades. I mean I focused quite a bit on Korea because it was one of the most successful models and then China came along and did it even faster. But what Korea prioritized in the 1950s was getting that adult literacy rate from 35% or so, too low even to grow sustainably, to about 90% they said by 1960. So in about 10 or 15 years they got it from 35 to 90 and that was enough then to have textile mills do really well in the 1960s and they became a manufacturing country, an industrialized country by the early 1970s.But already then the government said, right, we need more engineers, we need graduates coming out of university to do heavy industry, to do cars, shipbuilding. But Korea had no cars or shipbuilding at the time, nothing significant. So they were changing the university focus from, kind of, the arts or law towards engineering and the sciences before they had the economic sectors that they were trying to promote. And then about 10 to 20 years later, all these graduates were then in the economy and ready to start up companies like Deawoo, Hyundai, Kia, Samsung. And they started small obviously in the 1980s and early nineties. But this kind of sequential thinking about it meant that Korea kept on having the right human capital at every stage of development. So my book's trying to focus on, you know, why hasn't Pakistan got all the textile factories?Why does Bangladesh have them? Why doesn't Nigeria have them? Why does Vietnam have them? And this is saying first you've gotta get that sequencing right of everybody ideally being literate, everybody having had school up to 11 years old and come out with a good standard of education. On the quality issue you just raised, the problem here is a couple of things. So I mean firstly people sometimes just make up the data and say, yes, my population is literate when it's not. But secondly, when you try and kind of shoehorn a hundred kids into one class to say, you know, they're all going to school now, but you've only got one teacher, you are not coming out with a good education at all. You might not even be coming out literate at all. So that, you know, I'm also trying to warn that governments can't do this on the cheap. Or not completely. They have to take it seriously and say, look, we actually need to make sure everyone really is coming out able to read and write. It's not just trying to tick a box to say everyone's at school.Tobi;Hopefully, we'll circle back to policy questions around this later. Let's talk briefly about electricity, which as you say, once you start investigating these factors, then you start teasing out what's what for each country. And the way you introduce that is [that] there are some countries with very high adult literacy rates but still weren't getting the benefits - like [the] Philippines, which was your example in the book. And it turns out what was missing in that particular case was electricity generation. But first I want you to make one distinction for me quite quickly. Cause it's funny, I was reading David Pilling's brief coverage of your book in the FT and he talked about the fertility part being controversial and I wonder that people miss the obvious controversy in electricity, but we'll get to that. So, now, is it really about investment in electricity that is often missing in countries that can't quite manage to get it right or the way their electricity market is structured? I know you are quite familiar with Nigeria and it's really a big, big, big debate that we've been having for, I don't know, like 20 years. So, some people will say you need very large upfront investment, possibly by the government, in generating capacity transmission, machinery and co. We argue, oh no, you really need to restructure the electricity market first. People have to pay for what they use. You need to restructure the tariff system, blah blah blah, blah, blah. What are your thoughts?Charlie;Um, big issues. And there is a debate. There're so many debates about this actually. There's the debate about whether you need a big national grid, big national generation and distribution companies or whether you can have localized electricity. Um, you are getting a couple of points though that I think it's easier to say some answers to. And one of them was to do with getting people to actually pay their bills. Certainly a problem in Nigeria, apparently, you know, discos will say that because there hasn't been good metering and despite privatization that those meters have not been rolled out. I know the government's promising to roll it out to all 10 million account holders now, but because there hasn't been metering, you can't charge necessarily the fair price for the amount of electricity people have used. So then people don't wanna pay. So then the discos are losing money, then they can't pay the generators and this then becomes a problem.And I think there is a case to say that if the generators can sell some power directly to some big companies, that could be one way around part of the problem. So in a place like Lagos, very similar to the Philippines in the 20th century, good educated population just held back by a lack of cheap reliable power. You know, I think if Lagos could have its own electricity story, it would be a phenomenally successful economy. It should be over the next three or four decades. So there is a case about how you structure this. But I found two or three things interesting when I was looking into this issue in 2018. And the first was just clarifying that it really is electricity that people need more than say transport infrastructure. You know, this is a survey the world bank had done and the only countries where they've said transport infrastructure was the bigger problem was countries where there wasn't an electricity problem because there's so much of it.So countries, where there's a load of electricity, say yes we need more transport infrastructure, but everybody else says we have to have the electricity first. So then it's a question of how do you roll that out in a way that makes money and supports development? And there is a... I think, a problem at the moment with well-meaning policies from people like the United Nations or the African Development Bank saying everybody should have access to electricity. But my point in the book is, and Adam Smith said the same thing in the 18th century, you want your infrastructure to be making money not losing money. You need to make sure that if you're going to supply people with a road or a bridge or electricity, that they can pay for it. And if you start building stuff that loses you money because people can't pay their bills, then you'll end up with an uneconomic electricity system which can't function properly and can't give industry what it needs.And what I try to emphasize in this is that every country from America and France in the 1920s to Turkey in the 1960s or seventies to Korea in the 1970s, every country has said, okay, let's make sure we've got electricity for industry first. Profitable, makes money, and then households over time? Yeah, okay, we'll connect them over time, but only when they can start affording to pay for electricity. It's not another subsidy that governments can't afford, we just can't do that. [This] is what every other country's done. But at the moment I do see this pressure for electricity systems to try and roll out universal access and so, in places like Kenya that's putting the whole electricity system under financial pressure because it's hurting their profits. And if you're trying to roll out cheap electricity to households, well how do you pay for that?Well, government subsidies partly, but the other way to pay for it is to make industry pay a high price. But if you're making industry pay a high price industry won't come. They'll go to Asia; where they get a low price for electricity. They're not going to go to somewhere that's got a high price. Cause no company's gonna say, I just wanna subsidize households getting electricity. Companies are coming to build stuff in countries because they'll make a good profit from doing so. So I think you've raised a number of issues there, you know, is localized electricity good, and so on? You know, what should you be prioritizing first - industry or households? And there's a whole host of issues. But I hope I've answered that.Tobi;Actually, that's the controversy I was referring to at the beginning of that question because the background that is, it'll be a very, very tough sell in the current political climate, for example in Nigeria, for any person aspiring to public office to make this argument that you have to power industry first. What it's going to sound like is: you are just trying to prioritize the rich and trying to exclude some people from what, like you said, has come to be framed as a universal basic right. You talk to a lot of small businesses, even individuals, like you mentioned with the World Bank Survey, the importance of electricity is so paramount on everybody's mind that if there's stable electricity, I can start X and Y businesses. I could make money and, I mean, no one needs the government for anything else. Just give us electricity.Charlie;Yeah.Tobi;So my point is practically… thinking about this practically, how do you think a sensible government that is not trying to bankrupt itself prematurely can manage this situation?Charlie;Well, I think it's hard work. Um, how did the Koreans do it in the sixties or the seventies or the eighties? They gave you no right to protest - military government. How did the communists do so well at getting this industry first, households later? How did they get it right in China or Russia? Same thing. You've got no rights to protest. "Your interests don't matter, we're thinking 10 to 20 years ahead how to make our country better off and how to make everyone better off. So you suffer now because we are gonna prioritize business." So that is one model. I'm not recommending it, I'm just saying it is a model that can be done. The other way is to allow it to be done by the private sector. And if you let the private sector roll out electricity, they will not supply electricity to people who won't pay their bills.And that is the story that you saw in western Europe, it's the story you saw in the States, and to some extent you're seeing actually in Kenya. There's quite an interesting company there called M-KOPA. And M-KOPA will sell you, well, they'll lend you, they'll lease you, a solar panel, a little one that you can put on your - actually, a friend of mine was showing it to me the other day in Uganda...they put it on the straw roof of the mud hut and that solar panel, you pay a monthly fee and after about 18 months you've paid for the panel, you've also got energy during that time enough to supply a mobile phone and so on, lights a little bit, and then it's yours and that's effectively privatizing that rural distribution story. But I think the difficulty is that politicians find it really hard to do this.And part of what I'm writing about in the book is how really hard it is for governments in a country with no savings, big population growth, to constantly meet all of the different demands. With huge population growth you're having to build new schools all the time, you have to hire even more teachers all the time. You've got population pressure, maybe, causing clashes over agricultural land like the Fulani herdsman in Central Nigeria, Northern Nigeria as well. And all of these pressures are on you all of the time. And there's constant demand to spend more on bridges, on hospitals, on education, on security. And what you can't afford to be doing is making a loss. And so I think what politicians need to do is say, we've gotta sequence this right. The same thing as with education. It's no good having a million university graduates if a country isn't literate enough to have an industrial base, you've gotta have the literacy first.And equally, it's no good having electricity rolled out to every household when there are no factories for people to go and get the jobs they need to be able to pay the electricity bill. And it's not easy. I, I totally understand it's not an easy situation for anyone to be in. The difficulty is [that] because it's not easy, too many political leaders will take what appears to be the easy option of saying, "I tell you what, let's just go and borrow a load of dollars offshore. Nigeria's going to go and issue a lot of dollar debt and we'll use that to try and sort these problems out." Kenya's done the same, Ghana's done the same, Pakistan's done the same. And the risk then is that you end up in default situations. So that feeds into one of the other chapters in the book as well.But I think it's very difficult. I think realistically governments need to say, what can we do here? And this is how long it's going to take. And it's going to be not a five-year story, it's going be a 20-year story, a 30-year story to get it right. And people, sadly, need to be patient, which is hard; when for generations people have been waiting for things to get much, much better and little progress has been made, relatively little progress has been made compared to Asia and that causes a lot of political frustration. I think.Tobi;I mean, speaking about Asia and I mean your point about taking away the right to protest, I think Africa and Nigeria sort of missed that window when we had military governments everywhere. So, uh, let me give you one experience I've had in trying to discuss your book with friends. So I get two reactions to the fertility section.It's almost automatic, you know, when you discuss fertility being at a certain level and I try to, you know, successfully argue your point, you get two strands of reactions in my experience, one goes immediately to the China issue - the one-child policy; that, "oh, so are you trying to say we should do what China did?" The other slightly more technical objection I get goes to the relationship between population growth and economic growth that is quite pervasive in the growth literature. Did you also experience that while writing the book and debating with colleagues?Charlie;Now I'll take each point in turn. Um, the China one-child policy story helps explain this massive rise in Chinese savings and then their very strong growth. What I'm trying to show in the book, of course, is that every rich country has seen a fertility decline. And what I'm arguing is probably the right sort of level for countries to aim for is about two to three kids on average. I don't care if people have five kids or one kid, it's just as a country the average of two to three kids is consistent with a very high, well, a big jump in the level of sayings. And with those savings, you can then industrialize and grow, and grow fast. Um, China I think actually made a mistake. I think China got it wrong by going for the one-child policy because they kind of turbocharged that story, that story that every rich country has got, of lower fertility, it took a really long time in Europe. I mean it took a really, really long time in Europe and that's why Europe had the slowest growth of any industrial revolution. It was done faster by the communism [they had] in Russia and they did faster growth and we've done even faster in China. But the consequence of this one-child policy and what the Chinese have discovered is it's bloody hard to get the fertility rate back up again once you've had one kid. I was talking to a Chinese professor on a plane back from Asia once and she was saying all of her friends, they can't get married, they can't stay married. They get married and they can't stay married because they're all used to being a one-child kind of princess or prince in the family who gets everything they want and then they try married life and they discover as you might well know, that you never get everything you want in a marriage, and you have to compromise.And it's certainly created a problem now that China can't get the kids, they can't raise the fertility level and it's not just China that's discovered that once you've got a low fertility rate, too low, I think of one, you have a problem raising it. Again, Italy's had the same problem, Iran, uh, Russia. So I think China did it too fast. And you certainly don't need to do it and loads of other countries show you that just aiming for that two to three kids figure really helps your economy and gets you onto the path to being middle-income and then a rich country. So I don't think you need to do the China one child. No. Um, the second issue, the population growth versus economic growth. What I show, what we did in this was we looked back at every country's growth rate since 1960 and I compared the per capita GDP growth, the per personal growth of an economy, it's the best way to measure how well an economy itself is really doing. And I compared that growth rate against the share of adults to kids that I was talking to you about a little earlier.Tobi;Yeah.Charlie;And where it's 50-50 roughly, between adults and kids, per capita GDP grows at 1% and that was the story of Asia in the sixties and seventies. It's still the story for a good number of countries including Nigeria today. So per capita GDP growth is about 1% when half your population can't work because they're kids. But once you get two-thirds of the population being adults, your average per capita growth in lower-income countries by half of America's wealth level, so not even lower-income, lower or middle-income countries, your per capita growth, and it averages three to 5% a year. So the structure of your population tells you what your per capita GDP growth is. So it's just... I can't see that there's any other way to explain this than you've gotta get that fertility rate down first before you can start to get the high per capita GDP growth. Um, and it's connected to the savings, of course; cause once you've got two kids instead of six, you're saving money in the bank, the bank starts to have more cash to lend out. There's more money for lending for investment. The government can borrow more cheaply so it can build infrastructure, roads and rail, electricity and cheap electricity cause interest rates are low cause the savings are high because most families are able to put some money aside at the end of the week. But that doesn't happen when 50% of the population are kids. They're not earning any money, they're not saving anything and the poor parents are trying to manage to feed five, six kids on average. You know, they've got nothing left at the end of the week to put into a bank.So the bank's got no cash. So interest rates are really high cause there's no money in the bank. Um, so money's really expensive. So the government can't afford to invest in infrastructure and if it does build electricity it has to charge a lot of money cause it's having to pay a lot of interest on the debt it's taken on. So to me, I've yet to find someone demolish the argument and uh, you know, it could happen.Tobi;Yeah.Charlie;But so far it seems you've got to get the fertility rate down first if you want to get fast growth. Now if you don't want to grow at three, four, 5% a year, you could do it really slowly like Europe did and you grow at say, one and a half, two, eventually, you get from European farming in 1800 to factories that are producing not great stuff by 1900, a hundred years later. But when I'm looking at Nigeria today, I don't want Nigeria to be waiting a hundred years to be doing what Europe took a hundred years to do. I also don't think the Chinese model of it taking 30 years, 20, 30 years but then having a population problem of being too old, I don't think that's the right solution either. But there's somewhere in between. At the moment though, Nigeria's on that long growth story, it's not yet ready for the faster growth storyTobi;On the China question, um, thinking about your answer there, is extremely low fertility or what they say "fertility below the replacement rate" a feature of the kind of explosive growth 30, 35, 40-year trajectory that we've seen in Asia. Because if you look at Korea, Korea even have worse demographic numbers than China and there was no draconian population policy, but it's kind of gone through this explosive growth phase that is even faster and bigger than China's.Charlie;Well, it's been going on for longer. So what the Koreans got right was they raised their adult literacy rate to, you know, they said about 90% by 1960. China, despite being communist and communists tend to say they really appreciate education, didn't get to over 70% literacy until 1990, sometime in the early 1990s, which is 25, 35 years later than Korea. Uh, so Korea was already booming in 1970 at a time when China was having the catastrophic mistakes of the cultural revolution and really bad growth and people feared mass famine. Well many, many did die in China in the sixties. So what I would argue is that Korea had a slower fertility decline and the growth rates were not as fast as China's but they've been growing for 50, 60 years already. So Korea's two to three times richer than China is today. But as you say, they're so ageing that they're gonna be the oldest country in the world by 2030.And what's gonna get interesting then, and I can't really answer this in the book cause we haven't seen it yet, but what's interesting about Korea and we're going to have to watch it carefully, is that you are going to end up with, not 70% adults and 30% kids, it'll be less and less working-age adults, maybe 60%, I dunno maybe eventually 50% and it'll be 50% kids and old age pensioners who can't work. And my guess is that Korean growth is going to slow back to about the 1% per capita growth that Nigeria's got at the moment because Korea's going to be too old. You know, and that's not something that I think people should be thinking about or worrying about. [People should be thinking about] Pakistan, East Africa, Southern Africa, West Africa at the moment. It's [Korea is] just not a...you know, that's a problem to worry about in 50, 60 years. But it is going to be interesting to watch what does happen to growth in really old countries. Um, can pensioners actually still do work? You know, maybe they end up retiring at 70 or 75 or 80, I dunno. It's gonna be quite interesting to see.Tobi;So I mean the question then is, uh, for countries that have fertility rates that are higher than what you described in the book.Charlie;Yeah.Tobi;It then becomes how do we get it to the point where domestic savings start going up, interest rate for the domestic investment environment then benefits from that virtuous cycle. You talked about access to uh, reproductive interventions like contraception, also education, which takes us to where we started this conversation from, especially the education of women and girls, generally. I was taking a look at David Le Bris recently where he was talking about equality between siblings and inequality between siblings and how it affects the overall capital formation, whether it's physical capital or human capital in the society. So my question then is, do you see individual sort of personalized household decision-making affecting this more or it is sort of a national policy thing?Charlie;When it's something as important as family, you know, the individual decisions matter a huge amount. And as I said earlier, I've got no issues with anyone doing what they choose to do. But that big family story, I was just talking to a former minister, actually, of a... former finance minister of a country and he's got five kids, he's saying that he's been able to help fund them go to university, but he can't afford to help them buy a house cause he just hasn't got the cash. And I thought that was a really interesting example of even in a wealthier country, you know, it still matters how big that family is. You know, when I looked into this on how do you get the fertility rate down and there's been quite a lot written about it. I don't have a magic or a single answer, but the theories are first: girls if they're staying at school until they're 18, versus girls who leave school at 13. If you leave school at 13, perhaps you have your first kid at 14, maybe a second kid at 17, third kid at 20. But if you stay at school until you're 18, perhaps the first kid's at 20. So already you've reduced the fertility rate by two just by keeping girls at school. And the key figure, but just kind of remind, well tell people is the key figure is at about three to four kids per woman on average, the banking system has got deposits cash in it of about 35% of GDP, at four to five kids, it's around 30, 25 to 30. At five to six kids, which is where Nigeria is, it's about 20% of GDP. Um, so 20, 30, you know, these sort of levels. If you get to two to three kids though, if you get it below three kids, it more than doubles to about 60% of GDP.That's when banks suddenly have loads of cash. When banks have got loads of cash, there's loads of lending, suddenly access to finance isn't a problem anymore. So how do you get it below three kids? So you educate girls, there's an incentive when women are educated for them to work cause they can start to make decent money in a textile factory that you can't do unless you've got that literacy. Um, the government just telling people that low fertility is a good thing is shown to have some success. From Indonesia to India, these kinds of government campaigns suggesting lower fertility rates have made a difference. The third thing, which really surprised me cause it's such a strong correlation, is [to] stop kids [from] dying. And I was pretty upset, actually, to see the numbers where, for Nigeria, you've got a 10% chance, just over a 10% chance of dying before the age of five because you're born in Nigeria. And when I was comparing that to Covid - which the world spent, what, trillions trying to fight - with a fatality rate of about one or 2%, you think of those with more than a 10% chance of dying just before the age of five in Nigeria. Anyway, it's kind of shockingly high, but when you have such a high chance of losing a child, you tend to have more children and the correlation is really quite strong. So, if you can try and address infant, [and] young child mortality rates, which doesn't cost that much, you can see countries with Nigeria's wealth level that have a mortality rate of not over 10%, but five or even 3%. And usually, countries with such a low mortality rate then have a much lower fertility rate as well. So, people tend to have less kids when they are more confident that all their kids are going to survive childhood. So, some investment in basic healthcare for children, education of girls, contraception availability, yes it does help, and government information campaigns. You put those things together and then you get a country like Bangladesh. Bangladesh which had the same population as Nigeria about 15 years ago. But today Nigeria's got tens of millions more. But Bangladesh is growing as fast as India. Bangladesh's per capita GDP is over $2,000. And it keeps on growing at six, seven, 8% every year. Because they have on average two kids per woman, they've got savings, they don't have much foreign debt because they don't need to borrow dollars from abroad to fund their growth, because they've got their own savings, because the fertility rate is low. Muslim Bangladesh: tremendous success story over the last two or three decades.Tobi;You sort of made allowances for countries that can't quite get their savings right up to the levels where they can get the desired domestic savings and really positively affect their investment environment in a big way. And you talked about debt in the book, which would be familiar to anybody that's been in the new cycle about Nigeria currently, which is that government revenue has collapsed. Debt servicing is rapidly approaching a hundred percent of what the government can collect. And it's only a matter of time before we are talking about a debt crisis. But, like you said, a debt crisis is, like, unavoidable if you're trying to grow and you don't have to requisite domestic savings to sort of mitigate that. But this inevitably brings in the question of debt restructuring which, again, some would also argue does not help you grow. So, in terms of just the sheer macroeconomics management of this, how do you go about it?Charlie;It's tough. The book's arguing, obviously, that a whole chunk of this stuff is really long term. You got to get the education right. So, you've got to have enough teachers and that takes, well, at best Korea did it in 15, 20 years. But even if you've got the education, then you've got to get the fertility rate down. And that takes at best 10 years to get it down by about two kids per woman. Nigeria's at 5.3 kids or so at the moment. It needs to be below three to have the local savings. So, we're talking at least 15 years, even if every priority was made today to try and improve education, do all this reproductive education and so on. So, the governments then have the choice of what do you do? I mean, if you're going to wait 15 years, you can grow at 1% a year per person. But you'll find the population is getting pretty cross because you've got all these other countries in the world growing at three, four, 5% per person every year. You know, why is my country growing at one [percent]? So, the politicians then...[it] becomes so attractive to go out and borrow and, you know, every country, not every single one, but the vast majority of debt defaults in the second half of the 20th century were in high fertility countries. The fertility rate I think was around, on average, five - five kids per woman was the average fertility rate in countries that defaulted in the second half of the 20th century. Wherever they were in the world. A lot of them were in Latin America in the debt crisis of 1980s. So firstly, debt crises are really common in high fertility countries because governments say I want to speed up my growth and they borrow when the markets let them.And we've certainly seen that in Africa in the last 10 years too. And then they borrow too much and then they go into default and then they can lose maybe a decade. And that is what happened in Latin America in the 1980s. But the alternative is to only grow at 1% a year. And yeah, you can avoid debt default. I'm not saying every high fertility country defaults. I'm saying almost all the countries that have defaulted are high fertility. So, you can settle for the low growth but if you don't want to settle for the low growth, the debt becomes a very attractive way to try and get faster growth. But it causes a problem. I end up finding roughly two other ways that you can try.Tobi;Okay.Charlie;And grow faster. Is it okay to jump on to those?Tobi;Yeah, go ahead please.Charlie;Yeah. First is to try and bring in as much foreign investment as you can. Cause you haven't got enough local savings, you don't want to take on too much debt cause eventually you'll default. So, you can try and make yourself very attractive for foreign investors. Foreign direct investors. The only problem with that model is that those foreign direct investors do also want their cheap electricity and the good infrastructure that unfortunately high fertility countries haven't got the money to pay for. So, it's difficult to get in a lot of foreign direct investment. Foreign direct investment in China, I was just reading a really good book by David Lubin, who's the chief economist of Citi for Emerging Markets and he did a book called Dance of the Trillions. Highly recommend, it's brilliant on emerging markets. And he says FDI suddenly started in China in the 1990s. Now, I know why. My book is explaining why I think, which is you finally had a literate population, 70% literacy and you also had the low fertility rate. So, you had the high savings, you had the good infrastructure. But the FDI didn't come 10 years before into China. It only really picked up in the 1990s. So, the point of then is, I mean yeah, try and get some [FDI] if you can, but the last option that I can see other than to just, perhaps, try to go full Stalinist, kind of communist, take control of every part of the economy. But even that still education and low fertility really helps... Um, the last option which any country can do is to run a current account surplus, I think. Have a currency level that's so cheap that you are running a trade surplus. A current account surplus, which is obviously trade plus services and remittances and so on.If you've got a surplus on that current account, you are bringing dollars into the economy and those dollars help reduce interest rates. And Nigeria saw that actually in 2005, six, seven and eight when the oil price was booming. Nigeria had that flood of dollars coming into the economy. Interest rates were really low below inflation and investment was relatively cheap and easy to finance. Now it's a problem to manage when it's a commodity-driven boom because commodities then bust. So, all that flood of money that came in suddenly disappeared again, you know, once the oil price collapsed there wasn't that current account surplus anymore. But if you run a cheap currency policy to make sure you always run a current account surplus, then that helps give you that supply of savings that you can then use to start investing. So that seems to me one of the few ways that a low-income country that's got not enough local savings, doesn't want to wait forever until its fertility rate's down [and] low enough to build the domestic savings, this is one way that looks sustainable that can bring in some foreign cash to help support growth.Tobi;But one minor aside on FDI and you can really correct me here if I'm wrong, wouldn't that really be a bit unstable? Because if you have loads of FDI, if other indicators are really working in your favour and at the slightest hint of a crisis, all that money then flows out.Charlie;Yeah. Well, I'll just differentiate between foreign direct investment and foreign portfolio investment. And, again, David Lubin's book is very good on this because the Washington consensus, which is this set of policies that were drawn up by policy makers around 1989, 1990, it said countries should welcome foreign direct investment. Building factories that it's pretty hard to move out of the country, that that should be welcomed. But when the original guys who drew up the Washington Consensus wrote down the kind of 10 principles, they weren't that keen on foreign portfolio investment. This is the hot money that will include a lot of my investors who will come in and buy shares in companies in the Nigerian Stock Exchange and might come in and buy bonds. And I think it's fair to say that that money can leave in times of trouble and doesn't really support...isn't necessarily as supportive [of growth] and that money we count on the capital account because it is foreign capital.What I was talking about on the current account surplus was obviously the trade surplus, the remittances, the services and so on. So, I think it's more debatable. I think a number of countries have restricted foreign portfolio flows into equity market or the bond market. And if they've got other things going for them, like a low fertility rate, they can kind of get away with that. Um, what I'm highlighting is that for some countries they just don't have that choice. And when America was short of capital in the 19th century, it was British capital that went over and built their railways, that bought all the shares in their infrastructure companies. The Brits owned America for much of the 19th century and then the French actually owned most of Russia. Uh, the railways and the ports and some of the industry, the coal mines [were] very significantly owned by French investors, portfolio funds, and portfolio guys are there to make money as well. You know, they're there to make profit and if you're making good profit, five, 10% a year or whatever sitting in Nigerian equity market, people will stay, and it won't leave. They'll be happy to stay there for many, many years as people are and have been doing in India, actually, since India's education fertility and electricity numbers have all come together in the last 10 years in a really good way. Foreign portfolio guys are saying, "Hey, we wanna put our money into the Indian stock market too." And Indian shares are pretty expensive right now because of that. But the money doesn't want to leave. It'll leave when policy mistakes are made but fundamentally doesn't want to leave. However, I don't deny that there is a reasonable argument you can make to say we're going to choose foreign direct investment, we're going to be more restrictive on foreign portfolio investment. Because that can be more volatile. It can leave quicker. And I wouldn't argue with that. Well, I mean we could debate it, but I think it's harder to prove that you must have foreign portfolio investments to thrive. I think the current account surplus is a better policy choice because it's in your control. Foreign portfolio investors and what they do, that's not in your control.Tobi;One question that stayed with me throughout your book, which is a bit silent in the book itself, maybe it's implied, you can tell me, is that it's really difficult to find a country at any particular point where all these three factors align at the same time. Where you have the requisite adult literacy rate, electricity and fertility, they rarely align at the same point in time in the history of any one country. Because your book did not really distinguish between any particular political preference or institutional arrangements, which I like that, but what institutional arrangement favours the consistency for all these factors to sort of come together, uh, in the economic history basically of a country. Because we know that political leaders tend to favour what benefits their ambition at any particular point in time, you know? And a lot of these things are investments that do pay off in the long run, you know? Like we talked about on savings, a lot of political leaders would want to borrow a lot of money and then leave the debt crisis to the next administration.Charlie;Yeah. Yeah. Happens a lot.Tobi;Yeah. You know, and so many other things, whether you are investing in electricity or education or whatever, they don't really want to do the hard work. They want to do the easy stuff and just leave it to the next guy.So, what institutional arrangements have you found in your observation and study of this that favours the patient consistent build-up to the alignment of these three factors?Charlie;I think it's really, um, it's kind of interesting actually because in each chapter I try and say which countries are at the right place for industrialization, education, which countries are at the right place for electricity, and which countries are at the right place for fertility. Perhaps I didn't properly bring that together in one chapter at the end to say, "so, who's the fast growth story?" But right now, the countries that have brought them together are Vietnam, India, Philippines, Indonesia, Bangladesh, and I think those five countries, Morocco actually six, um, those six countries should be the countries that will show the really good growth for the next 30 to 40 years. Um it's going to be great. And I'm then trying to highlight who's closest to joining them on a 10 year view. Um, Pakistan and Egypt both got big debt problems right now, but five to 10 years they could be joining that group as well and Ghana and actually Kenya and I would argue southern Nigeria could be, could be there in the 2030s.Um, so I am trying to say when they come together. The question you are asking, though, about institutions or perhaps leadership and so on, I think is a really important one because I guess this book in lots of ways is an argument against Why Nations Fail, which was a really interesting book; and [it] said it is all about institutions and the right institutions and that's why if you walk a kilometre across the US border into Mexico, things are run so very differently. It's got to be the institutions, that book argues, that makes the difference between a country succeeding or not. And what I'm arguing is that I don't think that's true. I think you appear to have the good institutions when everything else is running well and you appear to have the terrible institutions when you don't have the education or you don't have the electricity or you don't have the low fertility or worst of all, you haven't got any of them.So, a country that hasn't got any of them, like Niger, Chad, Somalia, you know, these are countries in a terrible place. But I'm saying that they can't have good institutions cause there's no money in the economy, there are not enough educated people in the economy. There's just no way that you're going to get a good setup in those countries. And actually, even at the beginning when, at the first 10 years or so, when you've got these things all coming together, you still don't think the institutions are good. You know, you go to India today, people don't think, "wow, this is a brilliantly run civil service. It's so uncorrupt[ed]." Such wonderful institutions everywhere. They don't say that. They don't say that about Philippines' Duterte, the president who's been just recently retired, by people who were worried the institutions found it difficult to control his populism. And yet Philippines boomed under Duterte, and India's boomed under Modi and countries like Korea boomed even with a level of corruption that means in the last 10 years we've seen four presidents go to jail for corruption.Um, so I argue that the better institutions come afterwards and that's why four presidents have gone to jail in Korea because they're now getting the institutions better. And I read a really good book about why democracies die by some American academics about three or four years ago now. I recommend it. And they pointed out that Latin America, across Latin America, they just copied the American institutions. They said, look, what's working in the Americas is North America. It's United States, they've got it right. Let's copy their institutions, we'll put them into my country, be it Venezuela, Brazil, Argentina, whoever. And then they discovered that actually if the human capital is not as advanced, people will undermine the institutions. And you arguably saw Trump try it in the United States itself, but the human capital and the rest of the place was good enough to stop him from going too far.This is all debatable stuff, but you know, this is... So, I think the institutions do work when everything else has been working for some time and before then it's very hard to argue that the institutions work or can make a huge difference. I think the fundamental economic reality of are you growing at 1% a year or three to 5% a year per capita? That isn't about the institutions. Having said all of that? I think there's no doubt that you can have, if you're lucky, very lucky, really good leadership. A leader like Lee Kuan Yew in Singapore, who has got vision, understands or is lucky, but he prioritized education and all the rest, who gets it right and takes the country onto a new path. When I think of some of the most obvious successes, a lot of them are small Singapore, Hong Kong, even Taiwan really.And maybe it's just tougher to do it in a country the size of Nigeria with over 200 million people or, or uh, India with over a billion, which is why it took India so long or Brazil. But I remember even the French president, Charles de Gaulle, I think in the sixties or seventies said, "how is it possible to govern a country with 350 types of cheese?".Um, and in India you'd say, "how can you govern a country of over a billion people with that many different dialects, different customs, different local cultures?" Um, and it is hard, but once you get these fundamentals of education, electricity and fertility right, suddenly, it looks like you can govern well. So, I want to think there is a role for good leadership, um, and it can make a difference and it does help. I just think history's telling us over the last 300 years that we can't count on luck and that lucky guy who happens to be the right leader to come in, sometimes woman who can come in, and push reform in the right way. What we can count on is that if you get the education, electricity and fertility numbers right, you will get out of poverty, you will get better off and your kids will have a much, much better future and your grandchildren even more so.So, I think that's probably one area [where] my book differs from many in the last 10, 15 years is saying, "I don't think it is so much about the things that we all like to pay attention to [like] who's going to win the next election and what are their different policies going to be?" And you know, most of the time I'm arguing it doesn't really make as much difference as we'd like to think.Tobi;Now, another point that came in the later chapters in the book, which I found interesting, and which is quite also a bit of a political issue right now, surrounds migration. Uh, a lot of Nigerians are leaving, I mean it's become even a social media trend and meme - "who is...Charlie;The Japa trend.Tobi;Who is leaving next, uh, yeah, yeah, Japa. So, like, who is leaving next, you know? Right. But you argued in the book that as countries grow richer, there will be more migration not less because what you often hear is that the reason why people are living is because the country is so bad and they're looking for a way to make better lives for themselves, which is true anyway. So, and that the way to really stop this migration wave is if you can improve the domestic economy and then suddenly you see a drop, but you are saying no, um, we are actually going to see more migration as countries grow richer. Now, how do you suppose that this can be resolved with the current, should I say, political environment in Europe and to some extent in America that is increasingly seeing migration from poorer countries as a problem, right? Is it a case of as countries grow richer, then the migration demographic just, sort of, changes to more educated people leaving and less tension and political rancour about migration?Charlie;Um, I doubt, I mean, I doubt that these political problems about immigration in Europe and The States are going to disappear. Cause we've seen election results just in the last two, three weeks in Italy with the far right becoming dominant, in Sweden as well. Where they took in a huge amount of, I think, it was Syrian refugees and before that Somalian refugees. Um, and you're trying to integrate people coming from a country with very low adult literacy into, particularly in Somalia's case, into a country like Sweden, which had a hundred percent, nearly a hundred percent adult literacy already by 1900. That's an integration process that takes generations. As America's still struggling 150 years after civil war, still struggling to manage integration. So, I think that political problem is going to carry on, but it is going to get more acute for Europe, um, and eventually United States because Europe is this aging old continent that hasn't got enough people.I was in Germany two weeks ago and there, there was a surprising number of industrialists saying "we must have a much more open border situation." I said, well, you know, that'll be really interesting to see if you do that because the backlash that we're seeing elsewhere says there is a limit to what countries politics seem ready to accept. And, I think, I even think the Brexit vote was about that. It was about the East European migration into the UK, which had the most open approach to east European countries from Poland and Hungary and Czech coming to the UK. Every other country in Europe kept in a border, well, restrictions, but the UK didn't. And I think that backfired on the UK when it had a Brexit vote that said, "oh, we have too many Polish people eating sausage in our supermarkets. And I, I, yeah, I mean really people cared.I don't understand it. I love the variety obviously, but while I don't understand, while I don't feel the same, [some] people do. So, I think that's the political problem. And even educated people who are needed by the economy might find it hard to integrate, say, beyond the bigger urban centres. I was really shocked when I was writing the book and I was looking at what happens when you've got an educated population but a high fertility rate. What happens across history is people leave. Cause there aren't enough jobs at home. Cause the fertility rate's so high, there's thousands, millions of people coming into the workforce. The savings aren't there to help create the jobs. So, they leave and it's the Philippines, you know, in the 20th century, it's Pakistanis now, where a number of people are well educated, not everyone sadly. But 150 years ago, it was Ireland, and it was Norway, and they were sending their excess population to America, and it caused huge controversy.There was, you know, rioting between, kind of, the Italian immigrants and the Irish immigrants in New York. T

We often speak of economic development as a phenomenon of sovereign national countries, but the process by which that happens is through what happens at individual firms in the economy. The decisions by firms to upgrade their products (services), export, and adopt new technology are the most important determinants of economic development. The incentives and conditions that shape these decisions are the subjects of my conversation with my guest on this episode. Eric Verhoogen is a professor of economics at Columbia University school of international and public affairs. He is one of the leading thinkers and researchers on industrial development.TRANSCRIPT (edited slightly for context and clarity)Tobi; Usually, in the development literature, I know things have changed quite a bit in the last few years. But there is a lot of emphasis on cross-country comparisons and looking at aggregate data, and a lot less focus, at least as represented in the popular media on firms. And we know that, really, the drivers of growth and employment and the source of prosperity usually are the firms. The firms in an economy, firms are the ones creating jobs, they are the ones investing in technology, and doing innovation. So firms are really important. One of the things you often hear a lot is that one of the reasons poor countries are poor is that the firms are not productive enough. So that's sort of my first question to you, how exactly do we define and also measure productivity, you know, for us to be able to distinguish why firms in the developed countries are more productive than the lower income countries?Eric; Yeah, this is a big important question. So I agree, in principle, that firm productivity is very key. So countries that are going to be doing well are countries that are populated by firms that are being very innovative, and their productivity is rising, they're learning how to do new stuff, they're producing new products, etc. And so there's a reason why people are very focused on this conversation about firm productivity. The sort of, I would say, dirty secret of economics is that it's very hard to measure productivity well, right? And so the productivity measures we have, I think, are very noisy, and most likely fairly biased. But basically, the way you estimate productivity is you run a regression of like sales on inputs, okay, so on how much you're spending on labour and how much you're spending on materials, and then the part that's left over, we call that productivity. So it's like unexplained sales, you know, sales that can't be explained by the fact that you're just purchasing inputs and purchasing workers. But that is actually a very noisy measure of productivity. And so I've been working on a review paper, and a separate research paper kind of pointing out some of the issues with productivity estimation. So in principle, it's exactly what we want to know; in practice, it's very hard to measure. So one argument I was making in that paper is we should go to things that we can actually directly observe. Okay, so sometimes like technology adoption, we can often directly observe whether the firm has adopted this particular new technology, or if they're producing new products, we can directly observe that. Sometimes we can observe the quality of products that can be measured. Now, the standard datasets that we have typically don't have those things. It is possible now, in many countries, to follow manufacturing firms or even other sorts of firms, [to] follow them over time, which is great, at a micro level. But those that have the technology, they don't have quality, they do it now increasingly have like what products they're producing, often they don't have the product people are producing and so it's harder, you have to go out and you have to talk to people, you have to access new sorts of data, there's a lot more work, a lot more shoe leather - we'd say you wear out your shoe is going to talk to people trying to get access to other datasets in order to have these measures that you can observe directly. But I think there's a big advantage to that. Just in terms of measurement. Like, can we measure these things, and record that technology quality and product innovation together? I'm not sure that's answering your question. But, you know, I mean, I totally agree that what firms are doing, that's crucial, right? So the big macro question is, why are some countries rich and some countries poor and how can we make poor ones richer? That's the big question. I think that's kind of too big to be able to say much about. The much more concrete thing, which we need to be focusing on is how can you make firms in countries more innovative and productive. That's the absolutely right question. But that's just hard. There are challenges and research about, you know, how you actually analyze that, and it has to do with these issues of measurement.Tobi; I understand the measurement problem, and of course, TFP, the residual, and so many things like that. But practically, I want to ask you, what can you say, maybe if you have a handy checklist or something? what distinguishes firms in rich countries from firms in poorer nations? Eric; Yeah. So let me say what I don't think first, and then I'll say what I think. So it's become increasingly common to say that firms in poor countries are just poorly managed. The firms in rich countries have better management, and the firms in poor countries have poor management, right? And partly that's coming from the influential paper by Nicholas - Nick Bloom - and others, and David McKenzie and John Roberts. You know, they had consultants go to some factories in India. In some they camped out for four months, some they were there for only one month, and the ones where they camped out for four months ended up doing better, right? And they say that that's because these consultants improve the management of the firms and management matters. And I do agree that sometimes these management practices matter, but I don't think... sort of, one kind of implication of that line of work is somehow, like, the firms in a developing country are just making mistakes. They haven't gone to business school in the United States, and so, therefore, they don't know what they're doing. And I think that's incorrect. I think that's incorrect. I think the problem is, firms in developing countries face many, many constraints that firms in rich countries don't face. Right. So often, for instance, gaining access to high-quality inputs can be very difficult, right? That you just don't have the supply chains domestically producing high-quality inputs. Often skilled workers are very expensive relative to unskilled workers, and even relative to the price that you might pay in rich countries. Having skilled workers, including skilled managers, is very expensive. In addition, you have all these frictions on trying to get your goods to market or trying to, you know, trying to access export markets, often there are, you know, their costs involved in that. In addition, being productive requires know-how and often firms lack that know-how, right and so the question is, how do you get that know-how, you know, like, the distinction I'm trying to make is, it's not that they're making mistakes, it's just that they're doing the best they can given know-how they have, and given the constraints that they face. And so in that sense, I would sort of point to those constraints, right, those constraints both in know-how and both in the input and output markets, rather than just failure of management. So now, one of the constraints I should say, actually, so is often, you know, legal and regulatory institutions are much weaker in many countries. It is true in Nigeria, and it's true in many places, right? And so then that does create a complicating factor also when you're trying to do business with somebody, but you don't have the legal recourse of going to court to enforce whatever contract you write down. And so that creates friction. So then you have to do things differently in part because of that. And so you're likely to be much more based on, like, networks of various types. It might be ethnic networks, or it might be people that you know or that you have long-term relationships with. But then that means you can't necessarily just find the best supplier of something, you actually have to find someone that you trust, and that can complicate your life, basically, if you're trying to do business and develop.Tobi; So one thing I want us to discuss is the issue of firm upgrading. I mean, one of the things that have helped me in reading your work and taking this firm-level view of development is that, okay, on the one hand, if you look at a country like Korea, we can say the average income, the income per capita for Korea 40 years ago versus now and compare with say Nigeria, but also we can look at Korean firms 40 years ago versus where they are today. Today, Korea have global firms that are at the very frontier of technology. Companies like Samsung are innovating and making chips and making electronics and making smartphones and you compare with firms in Nigeria who have not been able to upgrade their products over that same period. And now what I want to ask you is how important is a firm's ability to upgrade productivity. I take your point on the measurement but controlling for that, how important is a firm's ability to upgrade its output? Its products on its productivity?Eric; No, no, I think upgrading is crucial. And upgrading in various ways, you know, more specifically technology, producing higher quality products, producing new products, new innovative products, you know, you might be reducing costs, right, all those things. I do think that's crucial. I think that's crucial to the development process. I mean, much of the conversation in development economics has often been not about firms. It's about, you know, social policy, or it's about education. It's about human capital accumulation. But I'm with you on that, the firm-level upgrading is totally crucial. You know, the question of like, why isn't it happening? Or how could you promote upgrading? That's a very difficult question. There are lots of papers that are sort of speaking to that subject. And this review article I was trying to write was basically all about that. So Alexander Gerschenkron way back in 1962, is a historian writing about late industrialization had this phrase, not very politically correct phrase, but basically, advantages of backwardness. So in principle, if you're a developing country, you should benefit from the fact that technologies have been developed in rich countries, and you should be able to go and adopt them off the shelf. But for some reason, that's difficult, right? It's hard to do. Partly, it's difficult because of, you know, know-how reasons. So I'd say that often, much of the knowledge that you need in order to implement these technologies is not written down anywhere, it's not really in the manual, right? You have to kind of talk to people who know it, rather than just downloading the instruction sheet. That's one reason. It's also true that many times, machines or processes, actually, may be context specific. So like the picker machine, in a very humid environment, they operate differently than in a non-humid environment. And so, you know, there are things that you need to learn. So I'd say that kind of like gaining the know-how is an important kind of constraint on upgrading. And partly that happens through networks or through... there's a ... Juan Carlos Hallak, who's in Buenos Aires (who would be a good person for you to have on your show, actually, I think that he'd be an interesting person to interview) as a very interesting paper. It's basically on like Argentina, looking at industries that have done well, they've been able to upgrade essentially and looking at what was it about them that made it possible, and especially the leading firms, what were the leading firms doing? And what we're basically finding is that often the key person in the firm, like, had been embedded in markets in rich countries, maybe in the US or in Europe or someplace. So they understood very much how those markets work and what consumers want. So one was like making boats, sailboats, or motorboats right, that was one of the interesting things he focused on. But knowing sort of what the people who are buying those boats really want to see in their boats ended up being important for what they're doing. And so that's an important part of the know-how. It's like, yeah, understanding the customer understanding also how if there are firms that are producing there, understand what the competition is. And so that's know-how that often has to be sort of gained in person rather than, you know, just reading a book or talking to somebody on the phone. And so when I think about... I don't know Nigeria very well, but when I imagine, you know, Nigerian producers, I think, partly what might be holding back is, sort of, maybe not having the understanding of what are the requirements, what are the expectations of consumers in the export markets, right, in the rich countries that they may be selling to?We've talked about the barrier, we can talk about the driver of upgrading. So then, like, gaining know-how would be a driver. So that's one. I think, and part of a lot of my work has been about quality upgrading, you know, producing higher quality. And I think that's in part driven by who you're selling to, right? So Mexican firms, you know, if they're selling to Mexican consumers, they produce different products than if they're selling to us consumers, which is their main export market, right? And so, you know, and if you're selling to Mexican consumers who have a certain willingness to pay for quality, we would say, right, they have a certain level of, you know, demand for certain characteristics, the optimal thing to do is keep producing that kind of lower quality stuff, right, rather than producing the higher quality. So I had this famous example of a big Volkswagen factory in Puebla, Mexico, which for a long time, it stopped in 2003, but for a long time been producing the old beetle. The old beetle that had first been produced in 1940, or certainly the 1950s. But for a long time, in the Mexican market, that was the main car that people were buying, and they were happy with that because it was cheaper. It was like, you know, it's very reliable. But that same factory started producing the New Beetle, basically, for the US market, right, for the US and European market, which is much more sophisticated, but also much more expensive. So it depends a little bit on which market you're selling into and whether you're going to upgrade or not. And so accessing export market can, in some sense, like pull the upgrading process, you know, once they access these export markets, they'll start producing higher quality stuff for these consumers. And that I think, actually, generates some learning, and I can talk about one paper that shows that a bit. But it seems to be that by gaining access to markets and producing high quality, then firms learn how to do stuff better. And so that can be an important driver of upgrading. And conversely, not having access to export markets or having a hard time breaking into export [markets] can be a reason why firms failed to upgrade. Let me tell you about one paper that, you know, demand effects can drive learning. Tobi; Yeah. Go ahead.Eric; Okay. It's a paper by David Atkin, Amit Khandelwal and Adam Osman. It's in Egypt. Okay, it's an RCT experiment, a randomized controlled trial. And it's among rug producers, producing rugs. What they did is they randomly allocated initial export contracts, right? So if they work with an intermediary, like a buyer of rugs, you know, among several hundred rug producers, they say, Okay, some guys are gonna get an initial contract, and some guys not. And so that was a way, this is a way of investigating basically what's the effect of exporting on the decisions and in a very clean way, and they found a couple of things. So one is those guys who had the export contracts and started producing higher quality stuff. So that's sort of consistent with my Volkswagen story, too, right? So increasingly, export markets produce higher quality and they did lots of measures of, you know, how thickly packed the rugs were and how straight the edges were - the very dimensions of quality of rugs. That was one thing. And then the other thing that they found which is very interesting is that you know, these weavers of rugs got to be better at producing rugs, basically. So then, when they took them into a laboratory, and they say, okay, produce this identical rug to a whole bunch of producers, both in their treatment group, and in their control group to produce this identical rug, and they found that the guys who had gotten the export contracts were better at producing that rug, they produce sort of higher quality rugs than the other guys. This suggests that demand can drive upgrading, right, in the sense that it induces firms to produce higher quality, but there's also learning involved in that process. These Egyptian rug producers became more productive as a result of having access to these export countries. Tobi; Yeah, I mean, listening to you, I can think of a few things that click in place. When I look at, say, a country like Nigeria, I think about the way the central bank has been running the exchange rate policy, which is messing seriously with the way firms actually source inputs. Some firms actually don't have access to the foreign exchange quota to actually source quality inputs. I mean, from manufacturing firms to agribusinesses who want to buy high-quality seeds overseas, I see how that can be a constraint. But two things I want to get at. Also, if you look at Nigeria whose industrial policy is really about domestic self-sufficiency, you could see that there isn't really an incentive for upgrading, and therein lies my question. If we talk about upgrading and how important it is, even though it's not really discussed as it should, what role do you think industrial or state-directed policies can play in this? Why because industrial policy is back in fashion, you know, it's being discussed everywhere... but usually, at least in my experience and in my opinion, what most scholars and advocates are focused on are [things like] state investments, you know, how the state can put money in one sector or the other. There really isn't so much focus on this sort of micro-level detail and what happens at firms, which your work is about. So for practical purposes, do you see industrial policy as something that can really, really, play a role and incentivize domestic firms to upgrade? For example, something like export quotas, you know, for firms?Eric; I mean, in terms of your question, do I think industrial policy can be helpful? I do. I do think that industrial policy can be helpful. Basically, I think that learning generates spillovers that firms themselves can't fully capture. And so I think there is a role for government to promote learning, basically, in a way. To subsidise learning such that - the socially optimal, or - the best sort of amount of investment in learning for society is more than individual firms to do on their own. And so there's a role for industrial policy. But I agree that it's got to be smart industrial policy, it's not just any old industrial policy. And so many countries have this idea...it's a little bit of nostalgia for import substitute industrialization, or it's very much like inwardly focused industrial policy. We're going to try and guarantee a domestic market for our producers, something like that, right? I'm not a fan. I'm not a fan of imports substitute industrialization or these very inward-focused strategies because then you get to the point where there's just not a lot of pressure on domestic firms to be more productive. They become kind of in a comfortable situation where they have kind of protected markets, not very competitive, they have a lot of market power in that market, and so that is a recipe for stagnation over the long term. So I think the crucial thing is that the targets for industrial policy be export-oriented, you know, outwardly oriented. You want your firms to be successful in world markets, right? I think that should be the key, rather than domestic self-sufficiency. Or rather than just the government investing in well, okay, so I don't have a problem with the government investing in infrastructure, investing in things as long as the aim is always ''what's going to facilitate our firms being successful in world markets'', right, I think that's a good target. Because those world markets are competitive [and] for firms to be able to be successful there, they're going to have to up their game and be more productive and be more innovative, subject to the measurement constraints we talked about, right and to upgrade. And so I think that the smart industrial policies are going to be things that sort of push firms to learn and to be more innovative and to be successful as exporters. Now, the other thing we have to keep in mind in thinking about industrial policy, is that [for] the governments, it's just very hard to [know] in the future what are the sectors that are going to be successful. What are the activities that are likely to have a future? It's just very hard, it's very hard for people who are, you know, private equity firms embedded in the sector... it's very hard to know, it's gonna be even harder for a government official or someone making government policy to do that. So I think we need to think about policies that have this effect of promoting learning or subsidizing innovative activities, but that, you know, don't require too much knowledge and understanding of the future on the part of the people setting the policy. Right. So things like collaborations between universities and firms for, you know, how to train workers to have the skills that the higher tech firms in your country need. That's something that seems like a good idea that's probably going to promote upgrading without having to pick and say, I think this product or this sector is the future of the Nigerian economy and therefore we're going to subsidize that thing. And you also want policies that are somewhat flexible, right, so that if something happens... so I'm working on a project in Tunisia, where the Tunisian Government was trying to promote exports. But the issue that they've had, and it's a matching grant program where sort of half of the costs of exporting of a certain category of costs of exporting will be paid by the government. The problem with that program, though, has been that it was somewhat inflexible. So basically, if something happened, you know, there's a big shock, and in fact, COVID shock, you know, and that changes what firms want to do. And it's very hard for them to switch gears and say, now I want to spend money on something else, can you please subsidize this other thing, and there were a lot of frictions in the program. And so that's often the case for government programs. The government sets a policy and then the world changes, firms want to do something else, but the policy is still stuck, you know, in the old world. So we need to think about how to build in, you know, flexibility into the programs so that if firms decide, actually, the market is moving in this direction, rather than this direction that we were expecting, that the support that they receive could move in the same direction.Tobi; Yeah, I agree. And I don't mean export quotas as hard targets. So I'll give you an example. Nigeria has this policy that we've been running for about six to seven years now, where there are multiple exchange rate windows for different parts of the economy or sectors that the government deems should have priority, you know, to import. And I recall a paper where Korea had a similar arrangement, but it was focused on firms that export. Firms that export to world markets sort of get priorities so that they can source inputs at a very low cost and seamlessly, you know, but it's not just something that we really think about in Nigeria, because we are so focused on the domestic market and how large the population is not minding, you know, how much of that population is poor.Eric; Yes, no, absolutely. So, certainly, Korea did this. But the Korean model, a key part of it, and they definitely picked sectors in a way that, you know, it's, there's a little bit of tension with what I just said about, you know, the government officials are not going to be very knowledgeable, there they seem to have done a good job of picking sectors to advance. But the key part was it really was oriented towards success in export markets. And the industries that were not successful on the export markets, they pulled the plug, they removed the, you know, they removed the support, which is politically hard to do, you need a fairly insulated, like, secure government in order to be able to do that. Because, otherwise, you start providing support, and then the industry lobbies a lot to maintain that support, you know, and so then it becomes politically very difficult to remove it. But I think if the government is committed to ''if these industries are not successful, we're gonna pull the plug on the support'', then this can work. Right. But you're absolutely right, in the Korean model, the key thing is the export orientation rather than the import orientation. And what you mentioned about exchange rates, I didn't comment on that. But I think it is an issue, you know, especially for a resource-rich economy, that the exchange rate can be, you know, highly valued, arguably overvalued, which makes it hard to develop the domestic industry. And so I think that's a real issue that, you know, some countries seem to be able to handle that, you know, ''what do we do with the natural resource wealth a little better than others'', if you just let it accumulate and people are going to spend and that leads to devalues your currency to increase that's going to make it harder to achieve export success in export markets for manufacturing goods or other exporting services. And so that is something that needs to be a focus of thinking about how to upgrade.Tobi; Yeah, I want to talk about technology for a bit. You had this very, very, an interesting paper on the soccer ball, we call it football, the soccer ball producers in Pakistan. And in a bit, you're going to tell me some of the interesting things you learned about that study. But first, Dani Rodrik and Margaret McMillan had this interesting paper about industrialization in Africa, and how domestic manufacturing firms are now shifting more towards capital-intensive technology. So hence, manufacturing firms are not creating jobs as much as historical patterns should suggest, do you see this as sort of a problem? I know so many other people have this worry about automation and how this technology can be exported everywhere, which is really a concern for maybe a continent like Africa with a large, jobless, and young population. So do you see this as a trend that we should worry about, you know, more capital-intensive technologies, or are there opportunities?Eric; Yeah. So I do see it as a trend. I do think it is something to be worried about. You know, Dani Rodrik recently organized a panel with the International Economics Association I participated in, along with Daron Acemoglu and Fabrizio Zilibotti and Francis Stewart from Oxford. And I sort of had two points there. One point was, yes, I think this diagnosis is correct. Basically, economists refer to it as appropriate technology. But the idea is that many technologies are developed in rich countries, you know, given factor proportions, we would say in those rich countries, so basically, skilled workers are more abundant, unskilled workers are less abundant, and so people develop machines that kind of conserve on unskilled workers. That's, in part, the background to the story that Dani Rodrik and Margaret McMillan are saying that in Africa, many firms are using this technology that's been developed in rich countries, that's very skill intensive, but it's not generating a lot of them. Right. So I think the diagnosis there is correct that that happens, right? And so the technology often is inappropriate for poor countries given, you know, their supply of unskilled labour, given how many workers they have that could use employment. On the other hand, the other question, though, was, what do you do about it? And so I was less convinced. So my worry about that. There are two versions of that concern about what you do about it. One is, given the set of existing technologies, you could try to encourage firms to use more labour-intensive technologies. Okay. But the problem is that you may encourage them to be less productive. Maybe they might generate more employment, but they'll be less productive, right? There was an interesting paper that I cited in Brazil by Gustavo D'Souza, which was sort of saying the Brazilian government basically put a tax on international technology licensing. And he shows that sure enough, firms were less likely to use International Technology. They're more like to use domestic technology. They actually generated employment, but they were less productive. Right, and they overall did worse. So there's a worry that you're gonna make firms less productive in an immediate sense. The other worry is that, like, if the Nigerian government starts encouraging Nigerian firms to develop new technologies, which are more labour intensitive, you know, then they'll generate more employment, the worries that you're gonna get sort of fall behind the world technology trajectory, I'll call it that. Like, you can think about the world frontiers moving in whatever, pick an industry, and the world frontier is moving at a particular place, and then, you know, firms are competing with each other and they're, you know, someone gets a patent, someone comes up with a new idea and sort of technology moves in a certain direction. And then Nigeria says, no, no, we want to be on a different trajectory that generates more employment, right? The problem is, you're going to be permanently behind where the technology curve is, right? Where the world frontier is. And I feel like that's worrisome, right, you're likely to have less learning, right, there's gonna be a gap between where the Nigerian firms are and where, you know, the world frontier is that it's gonna be hard for them to catch up afterwards. So in the short term, you might generate more employment, but you're gonna have a less dynamic industry as a result. And so I think, my own view, and this is, it's a feeling rather than something that's very research based at this point. But my own view is, even though it means that firms are not going to generate that much employment, they have to try and stick as close to the technology frontier as possible, or, you know, catch up as quickly as possible to where the world technology frontier is.Tobi; And so talk to me a bit about lessons from your walk with the Pakistani soccer ball manufacturers. What did you learn from that particular experiment, especially on the role of appropriate technology and technology use and the incentives that surround it for firms and investors? Eric; Yeah, so it was a study of technology adoption, what are the factors that encourage technology adoption? And what made it possible was that the football producers, I'll use that word football instead of the soccer ball, these football producers, there are a lot of producers using the same simple technology, right? And this football design is, you know, 85 or 90% are just these hexagons and pentagons. If you can imagine a, you know, a football, it's got hexagons and pentagons. And so the simple technology involves cutting out hexagons and pentagons and then stitching them together. And there were a lot of those and what made the project possible is we came up with a new improved technology, which is basically a way of cutting pentagons from these sheets. The main costs, you know, 50% of the cost are the sheets, they call it rexine. It's like artificial leather, that's the exterior of the ball. But they were cutting pentagons in a way that was wasting some material. Wasting more than they need to and so the new technology is a way of cutting these pentagons so that you can fit more into a given sheet so that you can get basically 8% more pentagons which ended up being about a 1% reduction in total costs. Which wasn't enormous but on the other hand, it's a pretty competitive industry, profit margins are about 8% so we felt like they shouldn't have been paying the 1%. And actually, when we started out, we thought we were gonna be studying technology diffusion, right, which is, you know, one person adopts, then is that their neighbours who adopt or is it their cousins? Or is it the, you know, people who share suppliers, and what are the channels of diffusion, right, and we're trying to keep everything secret, and we thought, okay, when we let it out, it's obviously the people we give it to who are gonna adopt right away, and then it's gonna spread. And so then we gave out this technology, for free, we gave it to 135 firms. And then, you know, we had a few firms adopt, and they started using it, and including one big firm that was producing - I can tell you the name later, but basically had like 2000 employees and is producing for Nike, and as a big producer adopted this technology, and, you know, is basically cutting all of its pentagons using our design and our die for cutting rather than the old one. So after, you know, 15 months, there were six total firms that had adopted. And that was puzzling and thought, you know, why is that? So then we started asking firms, we started talking to people and basically, it was revealed that the reason was that the guys doing the cutting... so the cutters are basically paid piece rates, they're paid per pentagon or per hexagon, or essentially per ball like, which is, you know, 20 hexagons and 12 pentagons they're paid. That was what their salaries were based on. And they didn't have the incentive to reduce waste, like, they weren't penalized if they wasted the material, right? And so they just wanted to go fast. And our die was slowing them down, right, made them go more slowly because they had to be more careful how they placed it and also, it was a different design, it was the design that they were used to. Now, it turns out that within about a month, they could get back up to speed, to the speed they were at before but they didn't know that, and in any case, for that month, their salaries would be way down, they'd just be slower and knowing that if the firm didn't change the contracts, their salaries would be lower. And the workers were figuring this out, the cutters are figuring this out, they said, this is not good for me, right, that my salary is gonna go down if I use this thing, I have no incentive to use this new technology. And so then they started telling their firms, you know, this is bad, bad technology, it doesn't work, it's dangerous, it has all these issues. Okay, so then we realized that this was happening and we said that we were going to do a second experiment. So, you know, half of the people we originally gave the technology to who hadn't yet adopted, we did a second experiment where we said to workers, we're gonna give you a month's bonus, which is not very much it is about $150 US dollar. So these guys are not paid very much we said ''a month's bonus if you can demonstrate to us and the owner of the factory that the technology works.'' And actually, that was enough. The workers were excited about that, you know, they got paid for doing this. Everybody who did it then subsequently passed the tests. So they demonstrated that the technology is working, and then a statistically significant share of the firms that they worked at ended up adopting the technology as a result. So those were the two experiments, those were the facts. What are we learning from that? I think we're learning that, basically, the lack of information flow from workers to their owners, to their managers, was what was getting in the way of technology adoption in this case. Like, the workers knew that the technology was working, but the owners didn't know because they sort of delegated the process of cutting the pentagons to the workers, and given the contracts, the workers didn't have the incentive to share the information. Right. So I think those sorts of, like, information flows or barriers to information flows are actually very important in the learning process. And kind of what our second experiment did when we did this bonus of a month's pay, which induced the workers to share the information and that was sufficient to make the technology be adopted. And so I think the punch line or the one-sentence version of this is, workers need to see that they're going to benefit from the adoption of new technology or from upgrading generally in order for the process to work well. They have to buy into the process. And they have to see that they have the incentive to do so. One recommendation coming out of that would be some sort of profit sharing, or some sort of gain sharing between workers and firms would actually be very useful. And will it help there be more innovation?Tobi; It brings me in a way to another very interesting paper of yours which [they] also had a summary essay about, I think, in VOX or something, which is about wages in poor countries. And I mean, thinking about the soccer ball story and the lesson. One issue and this has generated quite a number of debates between I think Rodrik and a bunch of other scholars who are thinking about Africa, is that the reason Africa is not really industrializing, or firms are not creating jobs is because wages are too high relative to the level of income. But what I learned from your paper, and you can correct me if I'm wrong, is that paying higher wages in poorer countries is not really a disincentive to creating employment and even generating productivity and profit. Tell me a little bit about how that works. Because, usually, we've gotten familiar with this logic that for you to be able to industrialize, if you think about China, and so many other countries, you need to have access to low-wage workers, you know, you need to be able to do very cheaply, and labour is where you can really cut a lot of your costs. And then it becomes a problem if your domestic wages are too high for the level of your income or what firms and investors are willing to pay. So tell me this high-wage, low-wage dynamics, especially... I remember the famous Paul Krugman was it article defending sweatshops in Bangladesh, where if you force firms who are outsourcing to pay higher wages or impose certain conditions, poor people in those countries will lose jobs, and they will lose their livelihoods. And so you should not mess with that process. What are your thoughts on these [issues]?Eric; Yeah, very interesting. So I think the article you were thinking of, it's related to the specific case of the football producers and seal coats. In Pakistan. Tobi; Yeah. Eric; There was a very interesting thing that happened. I mentioned that one firm adopted this new technology. And you know, one very large firm and it was producing for Nike, it's called Silver Star. The interesting thing about that firm is that because they're producing for Nike, which had had sweatshop scandals in the past, Nike required them to do a bunch of things, basically, so that Nike wouldn't be vulnerable to a further scandal, right? And among the things that they had to do was make sure they were paying the minimum wage in Pakistan. And the only way this firm could guarantee that they were paying the minimum wage in Pakistan, which many firms were violating basically, the only way they could is to say, we're not going to pay a piece rate, we're going to pay a fixed wage. Right. So this firm was paying a fixed wage rather than a piece rate. And actually, we talked to them about when they first won the Nike contract. They said their labour costs went up 20 to 30%. So they did a bunch of things. They had this fixed wage, there was a medical clinic on the factory grounds. They had sickness pay, they had some retirement benefits. So a bunch of things, they did raise wages. But the advantage of that was that the workers were much less likely to block the adoption of this new technology. Because in a specific way, they did not have a disincentive, you know, their wage was going to be their wage no matter what happened, rather than in other firms [where] what was happening is that the worker can see if they adopt this technology, their wage would go down. And so we believe, and I wrote this in an article that you saw in the Harvard Business Review, I think that's where it was, that those wages, you know, higher wage payments and fixed wage payments, which were imposed by Nike actually contributed to the process of innovation. The title of the article is how labour standards can be good for growth, and also in the process of upgrading. So that's an example of how having higher wages can actually be good for this upgrading process. Now, there are factors going in both directions, right? On the one hand, you know, the 20 or 30% higher labour costs, I think they did contribute to innovation. On the other hand, 20 or 30% higher labour costs may mean that firms will hire fewer workers or that the industry will be less competitive. So it's not that, you know, this innovation effect is all powerful and it's going to overwhelm anything that's about labour costs. But I think it is something that we need to take into account. And so, you know, labour market institutions that, you know, maybe promote profit sharing with workers, that promote longer-term employment so you have people who are around for longer, that have some job security, the sorts of things that often labour unions want to negotiate, can actually be good for this innovation process. And that's one factor that should be weighed against this issue of, you know, how higher labour costs and how competitive is the sector going to be. You often hear, like, the World Bank or the USAID, the development agencies will often say, you just have to be cheap. Like, you know, the competitive advantage of Nigeria is cheap labour and therefore, you should be focusing on having low wages and producing, you know, garments and textiles and toys and low-end manufacturing. But I think that's kind of a low-road model. You know, and I think that there are viable high road models, which would involve somewhat higher wages, some sort of gain sharing or profit sharing, and being more innovative at the same time. I can't tell you I have it all worked out exactly what that model would look like, I think it's going to vary by country. But I think we need to try to think about and push in that direction of where you can have, it may not be high wage, but it's gonna be higher wage than the market by itself maybe would bring about. So I am optimistic that that can happen. But again, the devil's in the details, you know. So Nigeria needs to think about what are we relatively good at doing right now and let's think about how can we be more innovative and move up to the quality ladder, the technology ladder in those industries. And then how can we get our workers on board to the process of moving up that ladder? And that will probably involve paying those workers more, rather than just trying to cut wages to the extent possible.Tobi; Before I let you go, let me... I know you're a relatively quiet person so let me draw you in a little bit... yeah, I know you're not active on Twitter or anything like that. Let me draw you into a little bit of professional controversy. And one of the things that I admire most about your work, I should confess, is that it's methodologically diverse. You know, you do structural econometrics, you do RCT, you do regular modelling and so many things. So there's this huge debate currently that I think, a lot of my colleagues may not think so but I think has important consequences for the policymaking process on development, which is that - is development research right now focused on the right things? You know, RCTs are like the standard tool for the investigation of development questions. Empirics have sort of taken over the field. But on the other hand, you have folks like Lant Pritchett who are constantly pushing back that this is encouraging researchers to think too small, they are researching cash transfers, and so many other key interventions, whereas we really should be focused on the big questions. And in my experience, these have real-life implications, especially in poor countries where they have budgetary constraints. We might say this is due to corruption, and that will be true, but sometimes they have a real balance of payment crisis, because a lot of these countries are resource-dependent, and it's often cyclical. So a policymaker may really want to know where to spend the most resources to have the maximum benefit for the citizen. So I find these questions very important. What do you think about this debate? As someone who transverses the field very often in your work, how have you been able to navigate this debate? And what do you think is the, maybe right is not the right word here...what do you think is the useful approach going forward?Eric; Yeah, good question. Yeah, in my own work, I've been very question driven rather than methods driven. Right. So I've always thought, you know, I'm interested in this question of from upgrading, what are the barriers to upgrading? What drives upgrading? How can we, you know, learn about that, and if we can learn about that using an experiment, that's great. If we're in about that using other methods, that's great, too. So I, sort of, don't have a dog in the hunt, as Bill Clinton would say about, you know, the methodology. And I'm kind of in the middle of the road, I think, in terms of this debate between, you know, J-PAL and Esther Duflo and Abhijit Banerjee and Lant Pritchett or others on the other side. I think, you know, in situations where you can run an experiment, I think that is the most credible source of information. Okay, so I'd rather have a randomized experiment than do a correlation and put some causal interpretation on a correlation. At the same time, I do think that there are many questions, either that can't be answered with an experiment, or that are just very, very costly to answer with an experiment, right? And so it's very hard to run, you know, it's running experiments on firms. I've tried to do it, but it takes a long time. It can be very costly. You have to give much bigger shocks to firms to get them to react, etc. And so, I've heard Abhijit Banerjee articulate that, like, we should never do a policy that hasn't first been evaluated by random experiment, I think that's too strong. Because we're gonna be waiting years and years and years to get the experiments and with a huge investment of resources in order to get the experiments that would then inform the policy. So we're going to have to make policy and, you know, make decisions based on other sorts of information. And so there, I do think we need to be like small ''c'' Catholic, allow for lots of different types of methods, quasi-experimental methods, you know, even structural methods, and then also experiments. There's this famous joke about the drunk guy with a streetlight, you know, he's looking for his keys, and he's looking under the streetlight, because that's where the light is, maybe not where the keys have been lost. And so I take that point, like, maybe we really care about these big questions about, you know, what's going to drive growth, then in that sense, I'm sympathetic to the sort of the Lant Pritchett view. On the other hand, under the lamppost, we actually are learning stuff, right, I feel like we're more confident that we're making progress by looking under the lamppost. And so I think the, you know, the trick, the art here is to sort of stay near the edge of the lights and we're getting closer to the big questions, but in a way that's still credible, and that we're still, you know, we can believe the answers that we're actually given. To sort of counter the Lant Pritchett view, you can post these big questions, and you can, you know, think big thoughts. But at the end of the day, you have to be able to convince, you know, you have to show us the data, right, you have to show that this is really correct. And that's just very hard to do for many of these big questions. So we need to incrementally build up based on this work. That's why I kind of like this work on firms, we're getting towards these big questions about growth, but in a way that you can actually have some confidence that you understand what's going on.Tobi; In your experience doing this work, what are misconceptions that you have encountered in the field that either the professional development industry, so I'm talking about aid and the think-tank and all the other folks, or it may even be your academic colleagues, what are the common misconceptions that you have encountered? Eric; Yeah. I mean, so one big thought [is] I think that the of field development agencies, right, it's like, how are we going to spend aid dollars in a way that's going to have a positive effect? And I think there's value to that. All right. I'm all in favour of spending, you know, aid dollars, in the most effective way. But I think that you know, a set of questions does limit to some extent the impact of the field of development on the development process. So I actually think we could spend every aid dollar in an optimal way, and would it have a meaningful effect on the material standard of living of people in poor countries? I'm not sure. I mean, maybe a little bit, maybe marginal, right? I think what's really going to matter is, do these countries start getting industrialization happening? Are they getting upgrading? Are they growing? And so in that sense, I sometimes get a little bit frustrated with the development discussions, it's all about this, you know, how do we spend aid dollars, and let's do RCTs to figure out how to spend the aid dollars, rather than these bigger questions, which are going to have a longer-term effect on people's living standards. You know, that's changing a little bit. I'm encouraged. There are more and more people talking about firms, there are more and more people taking sort of industrial policy ideas seriously. They're talking about bigger-picture questions in a kind of micro-founded way. So there are some encouraging signs. But I think a lot of development is still about that issue of like, what's the right way to do social policy? What's the right way to do, you know, aid spending, rather than trying to understand deeply why is it that Korea was able to make this transition from a poor country to a rich country, essentially, in a generation? And why is it that many countries in Africa are not? What is it that's actually getting in the way? And for that, that's not really like how to spend aid dollars question that's more about how firms behave. What are the factors that constrain them? And those sorts of things.Tobi; This is a show about ideas. So I want to ask you, what's the one idea? Just one. One idea that you think everybody should think about and adopt, that you would like to see spread everywhere. What's that idea? It may be from your work, or it may be from other things that inspire you. What's that one idea?Eric; I think the one idea I would choose is, uh, workers have a brain. This goes back to the soccer ball study, that there's knowledge and information that, like, workers have or people who are lower down in the hierarchy have, which is not being taken advantage of. Right, the soccer ball thing was an example. The workers were understanding the technology, but because of the way they were paid, and because of the, you know, institutional arrangements, they didn't have the incentive to share that. And I think the world, including the economics profession, tends to undervalue the intelligence that people have. Even the people who are actually, you know, on the frontlines doing the work. And if we can figure out ways to harness that knowledge and give people incentives to share it and give people incentives to develop their own intellectual thinking about whatever it is they're doing, I think that'll have a big payoff. And so I'm interested in sort of investigating what are the sorts of arrangements, what are the sorts of policies that can lead that to happen more?Tobi; Yeah. Thank you so much, Eric. I mean, tell me a little bit about what you're working on right now.Eric; What am I working on right now? I mean, so one thing related to what we've been talking about that I'm excited about is, again, a paper on technology adoption. This is in Bangladesh, with an energy-efficient motor like sewing machines. They're different sorts of motors that the traditional ones they're kind of spinning all the time. And then people have the foot pedal they like to press the foot pedal and then the needle comes down and stitches right but they're actually wasting a lot of energy because these motors are spinning all the time. And so there's a new type of motor called a servo motor which spins Only when the needle is moving, right, so it's energy efficient, energy efficient motor, but it can just replace the old motor, you don't have to change anything else about the machine, you just put this new servo motor to replace the old clutch motor. And we're studying when new managers or when new owners, when do they make those decisions. And so we're trying to track we're giving them information in different intensities, like including installing the machines in their factory one is just showing a video when it's just providing information, but one is actually installing their machines. And we're seeing how they react to that information. So I think that's a big topic. It's like what's getting in the way of the adoption of energy-efficient technology? These are the people who are making mistakes, or they just don't have good information. Or that basically, maybe if they have the right information, they actually will adapt very quickly. So that's one thing I'm thinking about.Tobi; It's been fascinating talking to you, Eric. I enjoyed it so much.Eric; Thank you, Tobi. Good questions. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com/subscribe

«Puedes ignorar la realidad, pero no puedes ignorar las consecuencias de ignorar la realidad». La máxima de Ayn Rand resume la problemática de las pensiones, un embrollo económico con un enorme coste político. Los mercados penalizan hoy la falta de seriedad en las cuentas y los planes fiscalmente irresponsables son, por suerte, censurados. La crisis del Reino Unido demuestra que se terminaron los tiempos del dinero gratis. Que la disciplina que imponen los mercados no llegue tarde a España.Escucha el podcast en tu plataforma habitual:Spotify — Apple — iVoox — YouTubeEste podcast está patrocinado por Tu cerebro al desnudo.Tu cerebro al desnudo es un bonito proyecto de Osman Salazar e Ignacio Berges, un neurocirujano y un emprendedor, con un enfoque alternativo en el campo del crecimiento personal. Este es el mensaje disruptivo que quieren compartir contigo:Tu cerebro es el principal dispositivo para controlar tu dinero y tu vida. ¿Sabes cuál es el mayor problema de este sistema? Que nadie nos enseña a usarlo… y pensándolo, no es casualidad que así ocurra. En el colegio tenemos la asignatura de educación física pero no mental ni tampoco financiera. Al sistema no le conviene que sepas esto. Mientras tanto, la salud mental es el mayor problema de salud pública en el mundo. De la gestión de tu cerebro depende tu capacidad para montar negocios y tener una vida ganadora. Si no controlas tu cerebro este te controla a ti. Y, ¿sabes qué? Que el puñetero es listo, pero lo conocemos bien, básicamente porque Osman es neurocirujano, lo toca con sus manos todos los días. Nuestro plan es empoderarte para que tú tengas el control. Puedes empezar con nuestra newsletter diaria, en la que recibirás píldoras de neurociencia aplicada, sin paja. Es gratis, puedes probarla y, si no te gusta, te das de baja. Para suscribirte es aquí.Yo estoy ya recibiendo su dosis de cerebrina y solo diré que es altamente adictiva.¿Quieres patrocinar una edición de Kapital?Apuntes:¿Qué será de mi pensión? J. Ignacio Conde-Ruiz.La jubilación en el siglo XXI. J. Ignacio Conde-Ruiz.Pensiones, pensiones, pensiones. J. Ignacio Conde-Ruiz.Irresponsabilidad fiscal. J. Ignacio Conde-Ruiz.Economic rules. Dani Rodrik.The fund. Norges Bank Investment Management.Un pequeño empujón. Richard Thaler.Ikigai. Héctor Garcías & Francesc Miralles.Índice:1.48. El mayor enemigo de las pensiones son sus más firmes defensores.11.24. El equilibrio del monstruo de las galletas.28.56. La deuda es una factura para las generaciones futuras.43.23. Minimizar el mal holandés dentro de la Unión Europea.53.53. La reforma de las pensiones.1.36.49. No es decisión inteligente prescindir del talento senior.1.41.21. ¿Sistema de reparto o sistema de capitalización?1.55.02. El político controla la sociedad descapitalizada.1.58.24. Paternalismo libertario.2.01.12. La maldición del conocimiento.

Stephen M. Walt, Harvard University professor of international affairs, discusses the prospects for a negotiated ceasefire in the Russia-Ukraine war, the risk of nuclear escalation, and the potential for a prolonged stalemate. He also proposes a new future for NATO as well as suggestions for how to stabilize great power rivalry on both the economic and military fronts, particularly with China. Show NotesStephen Walt bioStephen M. Walt, “Russia's Defeat Would Be America's Problem,” Foreign Policy, September 27, 2022.Stephen M. Walt, “Which NATO Do We Need?” Foreign Policy, September 14, 2022.Stephen M. Walt, “Why Wars Are Easy to Start and Hard to End,” Foreign Policy, August 29, 2022.Dani Rodrik and Stephen M. Walt, “How to Build a Better Order: Limiting Great Power Rivalry in an Anarchic World,” Foreign Affairs 101, no. 5 (September/October 2022). Hosted on Acast. See acast.com/privacy for more information.

Chris, Zack, and special guest host Rachel Hoff of the Ronald Reagan Institute, explore the recent article by Dani Rodrik and Stephen Walt “How to Build a Better Order: Limiting Great Power Rivalry in an Anarchic World." Rodrik and Walt propose a framework — or “meta-regime” — that affirms well-established norms of international behavior (as enshrined in the U.N. Charter, for example), while also preserving space for states to act unilaterally or multilaterally, but ideally in ways that do not increase the risk of conflict. But is it even realistic to speak of a rules-based order? And should we want one? Some Americans chafe at the notion of constraints on U.S. power. And what are the actual prospects for international cooperation at all, given the increasingly competitive nature of the U.S.-China relationship? Grievances for Joe Biden's talk of nuclear Armageddon, and toward the Saudis for colluding with the Russians (and others) to raise gas prices – and maybe help Republicans in the mid-term elections. An atta-secretary to Lloyd Austin for his plan to remove the names of violent insurrectionists from U.S. military bases. And, in a first, Zack praises Chris Preble … for convincing the Biden administration to finally release the National Security Strategy. We're sure that's what did it. This episode's reading: www.warontherocks.com/2022/10/searching-for-the-elusive-rules-based-order

The EU, writes Loukas Tsoukalis, is “a strange vehicle … unlike any others on the roads of the world, surely not a flashy vehicle – rather slow and not easy to drive. However, it has been able to accommodate ever-increasing numbers of passengers and covered a remarkably long distance – often in adverse conditions and with accidents on the way”. However, while the union has shown itself to be resilient, the new economic, societal and geopolitical challenges it faces mean it has to be much more than that. It has to project as well as protect. It has to grow up. In Europe's Coming of Age (Polity, 2022), Tsoukalis explains why and how. Born in Athens, Loukas Tsoukalis studied economics and international relations in Manchester, Bruges, and Oxford where he also taught for many years, followed by chairs at the University of Athens and the London School of Economics, and visiting professorships at Harvard and the College of Europe. Today, he is a professor at Sciences Po in Paris. This is the latest of his many books on the EU including The Politics and Economics of European Monetary Integration, What Kind of Europe? and In Defence of Europe: Can the European Project Be Saved? *The authors' own book recommendations are: The Globalization Paradox: Why Global Markets, States, and Democracy Can't Coexist by Dani Rodrik (Oxford University Press, 2012), and Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic (Belknap Press, 2019). Tim Gwynn Jones is an economic and political-risk analyst at Medley Advisors and writes the Twenty-Four Two newsletter on Substack. Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/political-science

India Policy Watch #1: The Anatomy of DecentralisationInsights on topical policy issues in India— Pranay KotasthaneThe human-made floods in some parts of Bengaluru generated much furore. Writing about it in our previous edition, RSJ remarked:The way the political economy is structured right now, it is difficult to see how there will be enough devolution of power and finances to a city. A big city most often is a bankrupt political orphan in India. It doesn't look like changing any time soon.I share his anguish. However, I remain hopeful because there are many global examples of cities first committing themselves to and then rescuing themselves from the tyranny of half-hearted decentralisation. Decentralisation: Take 1The term decentralisation is a catch-all term in public policy. There was a time when it was touted as the solution to all ills. But many PhD dissertations, journal papers, and World Bank projects later, we understand it better now. Throwing some light on this concept can help us put a finger on what's exactly wrong with Indian cities. Let's begin by understanding the three forms of decentralisation — deconcentration, delegation, and devolution. Deconcentration is the simplest form of decentralisation. As the name suggests, it means decentralising functions and responsibilities. For example, if you can submit a passport application in Mysuru instead of having to come to the state capital, this function can be said to have been deconcentrated. The various government branch offices and grievance centre kiosks are examples of deconcentration. Delegation means that specific functions are carried out by another organisation or the government nearest to the citizen on behalf of the more distant government. In the Indian case, the plethora of state public sector enterprises (SPSEs) for public transport, power distribution, and water distribution are examples of delegation. For example, BESCOM is a Government of Karnataka company tasked with the responsibility of supplying electricity to the state capital.Devolution is the most comprehensive form of decentralisation. Devolved units hold defined spheres of autonomous action. Policy implementation and authority shift to the government nearer to the citizen. This typically means having elections at the subnational level. For example, Indian states are devolved units with clearly defined responsibilities, and tax revenue handles in the Constitution.With these definitions at hand, we have one way to diagnose the dismal performance of our city governments: the Union-State government relationship is characterised by devolution, while the State-local government relation is characterised by delegation and deconcentration. Elections do take place at local government levels. After the 74th Amendment in 1992, some more functions were devolved to urban local bodies. And yet, they hardly enjoy autonomy and authority in any defined sphere. State governments tightly control resources, personnel and plans, treating local governments as deconcentrated implementing agencies. Decentralisation: Take 2There's another way to see the Indian experience in light of decentralisation theories. Decentralisation can happen along three dimensions — political, administrative, and fiscal. These dimensions are further characterised by four factors: authority, autonomy, accountability, and capacity. The USAID Democratic Decentralisation Programming Handbook has a helpful framework that combines these three dimensions and four characteristics. In the chart below, here's how I think India's urban governments fare on the twelve parameters at their intersection. My crude classification into three categories is subjective and based on my understanding of local government public finances. Even so, this framework can offer valuable insights into India's urban governments. First, they are characterised by poor capacity across all three dimensions of decentralisation. Hardly surprising. But here's something more interesting: urban governments in India do pretty okay on administrative decentralisation, not so well along the political dimension, but score a big zero on the fiscal dimension. Devesh Kapur writes, “At the heart of state-building is a fiscal story”. And so, it's not unexpected that the sorry state of fiscal decentralisation is a powerful reason behind the abject failure of our urban governments. The Way AheadAnd so, to fix our cities, we need energy and focus on improving along the fiscal decentralisation dimension. And how exactly do we get there? In this talk below, organised by the Bengaluru Navanirmana Party, I propose a few ideas for the Bengaluru government:“Wherever possible, charge”: underpricing leads to overconsumption. Cities ought to get better at generating non-tax revenues.Strengthen the State Finance Commissions. It's amazing how bad they are, despite the example of the stellar performance of Union Finance Commissions. Untied grants through the state finance commissions are imperative for devolving critical political and administrative functions to urban local governments. Rent out property owned by city governments. Simplify laws for regulating businesses in the city so that trade license fees can go up. Capitalise on the property tax potential.India Policy Watch #2: This Moment is Precious Insights on topical policy issues in India — RSJThe more perceptive among you, dear readers, might have espied a certain pattern in my posts over the past six months. On the one hand, my tone has been steadily bullish on the medium-term prospects of the Indian economy. Almost four months back, in edition #168, I concluded that the then-nascent Ukraine war and the inflation roiling the developed world have put India in a sweet spot among global economies. I wrote:“I'm not often optimistic on these pages. But the way the stars have aligned themselves, India does have an opportunity to revive its economy in a manner that can sustain itself for long.”Then in edition #182 (Aisa Mauka Phir Kahan Milega?), I sort of doubled down on this:“For India, all of this is a golden opportunity. China will remain busy with these transitions that it has wrought upon itself. The jury is still out on whether it will have a soft landing on them. Global businesses that started seeking more resilient and cost-effective alternatives to China during COVID-19, are now convinced that they must employ a ‘China + 1' model to safeguard their long-term interests. There are only that many economies that have the labour pool, capital and a business environment that can take advantage of this shift away from China, however gradual.There is a high likelihood of a golden decade ahead for MSMEs in India if it plays its cards right.”In the past couple of weeks, there has been a flurry of reports from global research firms echoing the same sentiments. IMF, usually the last to know what's happening around the world, also seems to have cottoned on to this trend. This week its chief Kristalina Georgieva said that “despite global uncertainty and headwinds, India continues to be a bright spot in the global economy.” The proximate reasons are evident all around. Domestic demand is strong, inflation isn't the runaway kind, the bank balance sheets are stronger and cleaner than ever, and we seem to be seeing off the peak of the commodity cycle. The other large emerging markets have their own troubles. South America is in the throes of one of its ‘how to shoot yourselves in the foot' scenarios. Brazil is going through its most fractious election campaign ever, with the hard-left rhetoric of Lula seemingly ahead of Bolsonaro. That's been enough for Bolsonaro to again take a leaf out of Trump's playbook and raise doubts about the integrity of the electoral process. Venezuela has a Hugo Chavez bhakt running against a populist ‘outsider' who wants to upend the system and start fresh. Turkey has an autocrat who turns macroeconomic theory on its head in running its economy. South Africa is muddling through, and Russia is mostly an international pariah at the moment. Indonesia and smaller economies like Vietnam and Laos are possibly the only emerging markets that can claim to be in a similar zone as India. There's no competition, really.On the other hand, I have called out India's remarkable ability to lose its way because of either overconfidence or distracting itself with a ‘zero return' nationalist agenda of aatmanirbharta or some random ‘One Country - One X' ideology. Like I wrote in edition #182:“…not overdoing aatmanirbhar Bharat beyond the rhetoric and remaining an open and liberal democracy that convinces others that it will have sufficient checks and balances to not lose its way. These are the basic block and tackle moves to capitalise on the opportunity.Because the only lesson to learn from a possible China misstep is that overdetermined leadership and top-down economic thinking eventually fail.”It becomes challenging to plan for India's long-term prospects because of this dichotomy of being bullish on its economy while being worried about social harmony. I mean, one day, you applaud the entrepreneurial spirit taking root in small-town India and the other day, you hear another state enacting some love jihad law.It is like that E. B. White quote:“I arise in the morning torn between a desire to improve the world and a desire to savour the world. This makes it hard to plan the day.” Anyway, for the sceptics on either side, I will try to go beyond the evidence that people are good at avoiding. There are structural reasons why both these arguments about India hold.Let's tackle the issue of why India is in this sweet spot.Firstly, in the past few years, there's been a retreat from globalisation, or hyper globalisation , as Dani Rodrik would put it. This was somewhat inevitable if you go by Rodrik's trilemma: it is impossible to enjoy the fruits of integrating with a hyper-globalised economy, national sovereignty and being a democracy simultaneously, because only two of these things can be achieved at any one time. Rodrik believes that eventually, most large economies will choose national sovereignty and democracy and retreat from globalisation. This has come to a pass all over the world now. India, which has always been somewhat ambivalent about globalisation, now finds it doesn't stick out because of this stance. This retreat has meant that any economy with a large domestic market is at a relative advantage. Through a fortuitous mix of demographic dividend and periodic fiscal stimulation, domestic demand in India is going strong. This will attract capital flow into the economy.Secondly, the widespread adoption of digital means for production and distribution has meant the traditional constraints of infrastructure and labour laws aren't as binding as before. The national digital infrastructure in India (JAM, FASTag, UPI, etc.) is among the best in the world, and there's evidence now that they are improving domestic efficiencies across multiple sectors. Even surface transport, railways and ports have improved substantially in the last few years. These are nowhere near world-class, but the improvement is sufficient to reduce service costs across industries. Also, while ‘retail' corruption remains an issue in India, even the most prominent critic of the current government will admit that large-scale institutional corruption is a thing of the past. There are allegations of crony capitalism which might come back to bite in future, but for now, India provides as good a level playing field as any other emerging market.Thirdly, the aftermath of the pandemic has been surprisingly benign for India. The extended credit scheme for small businesses, free food distributed through PDS for BPL families and the restrain shown in keeping the fiscal deficit in check appear to have paid off. The national-level vaccination drive has all but erased the memory of those traumatic days of the second wave. Contrast that with China's botched vaccination policy that is still hurting its economy. I will confess I didn't see this scenario unfolding. Even the Ukraine war and the rise in oil price has been managed well. In continuing to buy oil from Russia (now in INR) and allying with the US on Quad, India seems to have manoeuvred the geopolitical storm well. Despite strong misgivings in some quarters (with good reasons), the key institutions (central bank, market regulators) have stayed objective and independent in their policy thinking. The bar on strong and independent institutions in emerging markets is set really low, and India seems to be scaling it easily. Finally, the freedom to raise or issue debt in its own currency, the inflating away of debt that's happening now and the flexibility of the labour market, all mean India isn't in any near-term danger of stagflation that's spooking the west.Many of the above factors can be credited to the sound policy measures taken over the past two decades. And, there's, of course, the good fortune of being in the right time at the right place.All good. So, why do I harp on the risks of social harmony and overdetermined leadership? Well, the history of many emerging countries is replete with such moments of opportunity in their history. Barring a few exceptions, most have failed to capitalise on them. They didn't get their economics wrong. Most often, they failed on political and social fronts.It turns out that being a functional, liberal democracy does improve your odds of getting this right. However, in most cases of failure, countries turned more illiberal, assuming it won't hurt them. Curbing freedom of expression, compromising judicial integrity, restricting voting rights of minorities and abusing coercive power of the State are classic moves here. This is abetted by creating an ‘us' versus ‘them' construct that takes over everything. The blame for any shortcoming can be laid at the doors of ‘them', who typically include the old elites, intellectuals and some hapless minorities. Once this template is set, the divisiveness in the society between ‘them' and ‘us' is played up at every opportunity. The pitch is queered further by the revisionist history project to redress past wrongs, the mindless glorification of the nation, a continuous search for enemies among the ‘them' and escalating levels of punishment for any deviation from the norm. The middle continues to shrink, and debates and compromises become rare. Everything is maximal. Many people think these moves won't hurt the economy because in markets, as the Indian aphorism goes, ‘paisa bolta hai (money talks)'. This is both a flawed understanding of economics and a complete disregard for history. A society that loses its middle ground makes terrible choices. And that shows up in the economy.We have a tremendous economic opportunity because of the way cards have fallen in our favour. And we are making the classic mistakes in potentially fomenting social trouble and losing the opportunity again. I don't understand why it is difficult to hold these two ideas together in our brains and find a way forward.There's a possibility that this dichotomy could be solved if there were public discussions on these issues together. But it is rare to find that kind of a platform where a dispassionate and constructive discussion about India's future is possible. Those who believe in the ‘sweet spot' thesis have very little inclination or a sense of historical perspective to appreciate the existential risks of social disharmony. They are happy nodding off to ‘this is India's time' lullaby. While the others who bemoan the loss of what's often called the idea of India cannot believe India could be, by design or happenstance, sitting on a golden opportunity under this regime. There must be a catch somewhere and they spend inordinate amount of time looking for it. It reflects the barren intellectual landscape prevalent in India that we cannot acknowledge and debate these in good faith. You can only be monotheistic. There can only be one truth. Those who reject it are enemies. It's a pity really. India Policy Watch #3: The Nature of Competitive Federalism in IndiaInsights on topical policy issues in India— Pranay KotasthaneIt's rare for semiconductors, federalism, and favouritism to appear in the same story. But the last week did blow up a political storm that combined the three. Vedanta-Foxconn signed a much-publicised Memorandum of Understanding (MoU) for a display and semiconductor fab with the Government of Gujarat. All was good. but then came the news that the consortium turned down the Maharashtra government's reportedly superior offer, leading to accusations of the Union government having a hand in favouring Gujarat. Keeping regional and partisan politics aside, how should we parse this news? Are there frameworks to help us appreciate such events?At first, it appears encouraging that states are vying to kick off advanced manufacturing. It seems to be a perfect illustration of the merits of what is known as Competitive Federalism. States compete for investments, woo investors, and the best one “wins” the prize. Didn't the Prime Minister say in his independence day speech that "it is the need of the hour that besides cooperative federalism, we need cooperative competitive federalism. We need competition in development”?To answer these questions, it is worthwhile to understand the “competitive federalism” rubric. This term gained prominence in public finance literature after a 1987 paper by Albert Breton titled Towards a Theory of Competitive Federalism. Crucially, he identified two preconditions for competitive federalism to be efficient. The first condition is competitive equality. This condition is similar to the logic behind affirmative action for individuals from disadvantaged communities. Healthy competition between states requires not just good umpiring but also progressive rule-making, one that does not put some states at a permanent disadvantage. In Breton's words:“horizontal competition does not require that all competing units be of equal size any more than efficient competition in markets requires that firms be of equal size. But it must be that the large units are not in a position to continually dominate, coerce, and in other ways prevent the smaller units from making independent autonomous decisions; nor are they in a position to inflict "disproportionate" damage on them. The smaller units must be able to compete with the strong on an equal footing.… A capacity to compete is more than a capacity to talk; it is also, and radically, a capacity to exert a real influence on decisions. That is the real meaning underlying the notion of "monitored" competition.”Breton identified that the responsibility for ensuring competitive equality lies squarely with the union government. In his view, two monitoring mechanisms available with the central governments are: intergovernmental grants that offset the disadvantages of certain states, and a “Council of States” that can genuinely give “salience to the provincial dimensions of public policies”.The second condition is cost-benefit appropriability. As Breton puts it:“In competing to attract businesses to its jurisdiction, either by supplying particularly attractive local public goods, such as theatre, concerts, or dance, by offering tax advantages, or by buying part of the output of the sought-after enterprises, the government of a province should not be able to shift the burden of the offered amenities to the citizens of other jurisdictions.”In other words, states should be regulated by a hard budget constraint, i.e. the consequences of breaching spending limits should be significant. A moral hazard develops if states assess that the central government will bail them out in case of fiscal failure. When the budget constraints on states are of a “soft” nature, they will continue to borrow or widen their deficits, confident that other state and union governments will come to the rescue. Competitive federalism under such conditions would not be efficient. A third precondition, proposed by M Govinda Rao, is that there should be no impediments to the unrestricted mobility of factors and products across the country.This discussion of competitive federalism suggests that not all competitive federalism is good. It needs guardrails to deliver results. And the Indian experience with competitive federalism has been suboptimal as governments have violated all three preconditions to varying degrees.As a result, we are stuck in a low-level equilibrium. States compete, but on issues such as wasteful subsidies on private goods, welfare schemes, and salary structures for government employees. And when they do compete to attract investments, they do so based on spectacular tax and non-tax waivers rather than on promises of better business and law and order environments.To make India's competitive federalism deliver, we need reforms along three dimensions:Reforms to ensure that states face a hard budget constraint. An independent fiscal council that ex-ante evaluates the costs of government proposals can help. Consider the fact that both Maharashtra and Gujarat allegedly promised subsidies worth Rs 40000 crores and Rs 28000 crores, respectively, without public scrutiny of the costs and benefits of the project. An independent fiscal council would come of use here by conducting an independent financial evaluation of such policies before they receive the final approval. A stricter Fiscal Responsibility and Budget Management Act can also help here.Reforms to improve competitive equality. Designing intergovernmental transfers that actually help bridge the gap between states will create a level playing field. Moreover, an institution that allows states and union governments to bargain and negotiate, like the one proposed by the 14th Finance Commission, might also contain unhealthy competition. And most importantly, a union government that acts as an unbiased umpire is crucial for competitive federalism to succeed. Without some reforms along these lines, we will continue to see competitive federalism of the more harmful kind. HomeWorkReading and listening recommendations on public policy matters[Article] Raghuram Rajan's note questioning the underlying assumptions of Production Linked Incentives. [Paper] Fiscal Decentralisation in Indian Federalism by M Govinda Rao explains India's experience with fiscal devolution. [Report] The USAID Democratic Decentralisation Programming Handbook is a fantastic starting point for understanding decentralisation. * From Alexis De Tocqueville's magisterial Democracy in America, in which he writes: “the federal system was created with the intention of combining the different advantages which result from the magnitude and the littleness of nations; and a glance at the United States of America discovers the advantages which they have derived from its adoption”. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit publicpolicy.substack.com

This week on Sinica, Kaiser welcomes back the Cornell political scientist Jessica Chen Weiss, who is back in Ithaca after a year spent as a CFR International Affairs Fellow working in the State Department's Office of Policy Planning. She talks about an important essay published in the latest edition of Foreign Affairs, titled "The China Trap: U.S. Foreign Policy and the Perilous Logic of Zero-Sum Competition,” which calls on the U.S. to formulate an affirmative vision for the relationship with China instead of pursuing an ad-hoc policy predicated simply on countering what China does.7:17 – Moving away from the current zero-sum framing of U.S.-China competition and adopting an “affirmative vision”12:29 – Shortcomings of the U.S. response to China's strategy in the developing world15:11 – How competition with China framing has adverse consequences for domestic American politics 18:37 – Can the U.S. benefit from adopting certain aspects of the Chinese approach? 20:49 – The steps needed to return to normalized U.S.-China diplomacy25:00 – How can the US properly calibrate its China threat assessment? 34:05 – The relationship between China's domestic challenges and its foreign policyA transcript of this podcast is available at TheChinaProject.com.Recommendations:Jessica: Stephen Walt and Dani Rodrik's essay on a establishing a new global order in Foreign Affairs [forthcoming]; and After Engagement: Dilemmas in U.S.-China Security Relations by Jacques deLisle and Avery GoldsteinKaiser: The Lord of the Rings trilogy audiobooks narrated by Andy SerkisSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

For more than a quarter century, economist and Harvard Kennedy School professor Dani Rodrik has been ringing alarm bells about the dangers of globalization. And for a long time, it didn't seem like a whole lot of people were listening. Now as record economic inequality, a climate in crisis, and global financial shocks from to the COVID pandemic and Russia's invasion of Ukraine have exposed the vulnerabilities and shortcomings of unchecked globalization and neoliberal orthodoxy about the primacy of markets, Rodrik may be having the world's least-satisfying “I told you so” moment. But while the temptation might be to look backward for vindication, Rodrik is choosing to look toward solutions instead. He says that finding a way forward for the world economy will require two kinds of thinking: small picture—about how to create good jobs in an equitable way in specific settings—and big picture: imaging possible futures and what a more inclusive, post-globalization economy might look like. And he says it will also mean freeing political and economic discourse from what he calls a “prison of ideology” that rigidly limits policymakers' ability to consider solutions outside of market-centric approaches. Rodrik recently launched a new project called Reimagining the Economy with fellow professor Gordon Hansen, supported by a $7.5 million grant from the William and Flora Hewlett Foundation. The initiative will be based at the Kennedy School's Malcolm Wiener Center for Social Policy. 

Amid the Russia-Ukraine conflict, COVID-19 lockdowns and associated supply chain disruptions, globalization is arguably facing its biggest test of the post-Cold War era. In this episode of Exchanges at Goldman Sachs, Adam Posen, president of the Peterson Institute for International Economics, Dani Rodrik, professor at the Harvard Kennedy School of Government, and Jim O'Neill, former chairman of Goldman Sachs Asset Management, discuss where globalization is headed from here and what that could mean for society, the economy, and markets. This episode is based on Goldman Sachs Research's latest Top of Mind report “(De)Globalization Ahead?”

Industrial policy is hot again, back with a new name (mission innovation) and a new target (climate change). Detractors point to past failures and the risk of costly mistakes and argue that governments should avoid picking winners and stick to carbon pricing. Is government-directed innovation a good tool for climate innovation? How can governments do it well? What should they avoid? And what lessons are there for Canada's energy transition?Join David, Sara, Ed, and industrial policy expert Dani Rodrik of Harvard University to discuss government-directed innovation as a tool for decarbonization, on Episode 30 of Energy vs Climate.EPISODE NOTES: @3:15 Dani Rodrik@4:00 Combating Inequality: Rethinking Government's Role@4:34 NDP won't oppose higher defence spending in exchange for billions on social programs@6:32 A 10-Point Plan to Cut Oil Use – Analysis - IEA @6:41 Nikos Tsafos thread about EU country commitments to fast track energy transition. @7:40 In a World on Fire, Stop Burning Things | The New Yorker and The End of Nature, by Bill McKibben@10:21 Japan discussing Russian oil import ban with U.S. and Europe@16:36 Energy vs Climate: How Solar Became Cheap@20:20 Defense Advanced Research Projects Agency@25:29 Remembering “Solyndra” – How Many $570M Green Energy Failures@26:27 TESLA | Department of Energy@31:00 AOSTRA - Oil Sands - Alberta's Energy Heritage@33:44 Tariffs on Chinese solar panels may hurt Canadian renewables industry - The Globe and Mail@35:00 Clean Fuel Standard - Canada.ca@35:23 California Air Resources Board@40:10 Canada's Future in a Net Zero World - Transition Accelerator@48:14 Small Business Microloan Program

Once you understand that markets require public institutions of governance and regulation in order to function well, and further, you accept that nations may have different preferences over the shape that those institutions and regulations should take, you have started to tell a story that leads you to radically different endings. – Dani Rodrik, The Globalization Paradox (2011) Influenced by Dani Rodrik's research and teaching at Harvard's Kennedy School, Yeling Tan, Assistant Professor of Political Science at the University of Oregon, and non-resident scholar at UCSD's 21st Century China Center, has written a book that brings together her interest and expertise in China's political economy: Disaggregrating China, Inc.: State Strategies in the Liberal Economic Order (Cornell University Press, 2021). As you will hear, Professor Tan is interested in the dynamics of international and domestic politics with a focus on the tensions involving policy change within political economies. The development and the role of institutions especially with regard to China, given its political structure and economic governance, has provided just such an intriguing case for Tan who has been immersed in PRC-related study since graduate school. The book frames the story of China's WTO entry and assesses its impact on the country's complex and sprawling structures of economic governance with the kind of inspiration that makes well-written and researched economic history as compelling as it is empirically rigorous. Professor Tan's analysis and argument fits within the interdisciplinary sphere most aptly described as political economy as she systematically ‘disaggregates' China's institutional response as a one-party state to the globalizing effects of WTO engagement. Her book draws upon a rich research literature including the post-Mao reform and opening period to frame her research questions before moving into her own theory, methods, and findings – a unique contribution to the field filling the lack of studies focused on external institutional influences on the political economy of China. As such, she moves us beyond the caricatured and monolithic simplifications underlying the bipartisan, ideologically driven interpretations reassessing the outcome of China's WTO entry and subsequent trade policy. To liberally paraphrase a key source of her intellectual inspiration, Rodrik's The Globalization Paradox: acknowledging the role of public institutions and the various value preferences of nations to help shape well-performing markets will lead you, as with Tan's story, to the start of an understanding of the relationship of markets and institutions with a radically different ending in the China context. Yeling Tan is Assistant Professor of Political Science at the University of Oregon. Keith Krueger lectures at the SILC Business School in Shanghai University. Learn more about your ad choices. Visit megaphone.fm/adchoices

Once you understand that markets require public institutions of governance and regulation in order to function well, and further, you accept that nations may have different preferences over the shape that those institutions and regulations should take, you have started to tell a story that leads you to radically different endings. – Dani Rodrik, The Globalization Paradox (2011) Influenced by Dani Rodrik's research and teaching at Harvard's Kennedy School, Yeling Tan, Assistant Professor of Political Science at the University of Oregon, and non-resident scholar at UCSD's 21st Century China Center, has written a book that brings together her interest and expertise in China's political economy: Disaggregrating China, Inc.: State Strategies in the Liberal Economic Order (Cornell University Press, 2021). As you will hear, Professor Tan is interested in the dynamics of international and domestic politics with a focus on the tensions involving policy change within political economies. The development and the role of institutions especially with regard to China, given its political structure and economic governance, has provided just such an intriguing case for Tan who has been immersed in PRC-related study since graduate school. The book frames the story of China's WTO entry and assesses its impact on the country's complex and sprawling structures of economic governance with the kind of inspiration that makes well-written and researched economic history as compelling as it is empirically rigorous. Professor Tan's analysis and argument fits within the interdisciplinary sphere most aptly described as political economy as she systematically ‘disaggregates' China's institutional response as a one-party state to the globalizing effects of WTO engagement. Her book draws upon a rich research literature including the post-Mao reform and opening period to frame her research questions before moving into her own theory, methods, and findings – a unique contribution to the field filling the lack of studies focused on external institutional influences on the political economy of China. As such, she moves us beyond the caricatured and monolithic simplifications underlying the bipartisan, ideologically driven interpretations reassessing the outcome of China's WTO entry and subsequent trade policy. To liberally paraphrase a key source of her intellectual inspiration, Rodrik's The Globalization Paradox: acknowledging the role of public institutions and the various value preferences of nations to help shape well-performing markets will lead you, as with Tan's story, to the start of an understanding of the relationship of markets and institutions with a radically different ending in the China context. Yeling Tan is Assistant Professor of Political Science at the University of Oregon. Keith Krueger lectures at the SILC Business School in Shanghai University. Learn more about your ad choices. Visit megaphone.fm/adchoices

The full conversation with Ricardo Hausmann - now with Transcript. This is a subscriber-only post.TranscriptOpening musicYou are listening to ideas Untrapped with Tobi Lawson. Tobi Lawson (intro) Welcome to another episode of ideas Untrapped and my guest today is Ricardo Hausmann, who is a professor of economic development at Harvard University, he is a former director of centre for International Development, and is currently the Director of the center's growth lab. Ricardo pioneered an approach of looking at economic development called economic complexity. My brief synopsis of the central idea is that an economy only grows and develop by learning to do many things by expanding its productive capabilities. I start by asking Ricardo, what we can learn, particularly from the East Asian experience, and what has happened in economic development over the last few decades. Thank you for always listening to the show and I hope you enjoy this one. Tobi Lawson You've been one of the most important thinkers in economic development throughout my adult life. So, it's a pleasure to speak to you. Ricardo Hausmann Pleasure to be with you. Tobi LawsonFrom Around 1990, when the results of the economic trajectory of East Asia became apparent, so many policy propositions have been developed by scholars. But, in your opinion, what do you think has been the most important lesson from that East Asian growth episode? Ricardo Hausmann I think the general experience of development is really, that development is about the growth of productive capabilities In a society, it's what our society is capable of doing and, what a society is capable of doing depends a little bit on, what are the tools and machines it has available to do things nd what are the recipes and formulas and routines and protocols it's aware of, but it's mostly about what is the know-how that it's people have and this idea of know-how is not just, you know, low and high. It's mostly How different is what each member of society knows. Because if everybody knows a lot of the same thing, the whole doesn't know much more than each individual. But if each individual knows different than the whole can know a lot, even if each individual doesn't know that much. So this division of know how in society allows for individuals to specialise and society to diversify, that a society is able to do more, because it's individuals are all different. I am originally from Venezuela, and we're Nigeria. And we all think that we are rich because we have¹ oil. And then something bad happened to explain why, given that we're rich, we're not so rich, but we're rich, because we have our, our society is rich, not because of what it has. But because of what it knows how to do. And the growth and development of a society is the growth and development of what it knows how to do well. That's the core of things. And so if you ask about East Asia, well, they started in agriculture, they move to garments, then they move to textiles, then they move to electronics, then they move to cars, and move to chemicals and shapes, and so on. So, if you look at what they have been good at, that is something that has been very rapidly changing. They become good at more things. And they can become sufficiently good at those things that they can sell them outside of the country. And if you look at their export baskets, they have been evolving dramatically. In the directions I just mentioned, if you look at the export basket of Nigeria, or the export basket or Venezuela, the only thing you'll find there is oil. But when you look at the amount of oil we're talking about, it's really peanuts. It's really, so it's not that we have a lot of oil, it's that it's the only game in town. You know, Nigeria is a society of about 200 million people, cruises about 2 million barrels of oil a day. That's like a 100th of a barrel of oil per capita. That's 100th of a $60. That's 60 cents. That's not much money that's coming out of here, right? So it's not that you have a lot of oil, it's that it's the only game in town. And that's a reflection of how little The company has got more things with the possible exception of Nollywood. Tobi Lawson You've finished Nigeria, I wouldn't just say Nollywood, sectors like telecommunications have been booming in the last 20 years. But looking broadly.... Ricardo Hausmann Wait, one second, one second, one second, that has allowed Nigerians to call each other. But that opens an enormous opportunity now, because one of the things that COVID has taught us is that many things that we used to do in the office, we can do from home. But anything that can be done from home, can be done from abroad. So there are many, many tasks that are currently done in rich countries. But that could be done by zoom in poor countries, in less developed countries. And that opens up new avenues for diversification, it will open up, you know, the possibility to participate in value chains that were unthinkable before, because people thought that, you know, the people doing those tasks had to live there. Now, we know that they don't have to live there. So you know, one message for all the youth in Nigeria, is that there's plenty of work in platforms like Upwork, and other such platforms where you can find jobs to do on the web. And that's thanks to the fact that you have you know, ICT information communication technology that has diffuse, but so far, that  diffusion has not changed what Nigeria is able to sell abroad. And that's, I think, where we have to aim, I mean, forms of livelihood, for Nigerians in Nigeria, by selling to people in the rest of the world Tobi Lawson Looking at your economic complexity approach to development, from your writings, and the writings of other scholars in that school, a society that knows how to do many things will grow rich, but how do we square that with the works of people like Robert Wade, who stressed the importance of manufacturing and industrialization in achieving growth and development? How should policymakers think about the knowledge we are getting from the sub discipline of economic developmentRicardo Hausmann Manufacturing was a very, very important stepping stone, for many of the societies that became rich, it was a very important stepping stone, because manufacturing require relatively low skilled labour. So it was easy to take people out of agriculture, with little education, put them in manufacturing, and manufacturing was, you know, generating much higher levels of productivity in agriculture at the time, and the levels of productivity manufacturing worldwide. So, for East Asia, this movement of people from agriculture to manufacturing was a very important stepping stone in the process of development. Some people think that manufacturing has become less unskilled labour intensive, it has become more skill intensive and more capital intensive. So it doesn't necessarily generate as many jobs as before and there aren't that many sort of like entry level jobs as as before. But I think they're still there. They're still there. So I think that, you know, a prosperous Nigeria would have much more manufacturing than it has today and creating the ecosystem for that manufacturing to happen is very important. And for that, I think that creating the ecosystem means what? It means that needs spaces where people can locate their factories, say, so that workers can go in and out efficiently and not spend two hours going there and two hours back home, that the materials can get in and out that you're relatively close to an efficient port, where you can bring materials from the rest of the world or send materials to the rest of the world, that you can participate in global value chain so that you give up on this idea that everything that you want to manufacture has to be manufactured with locally available raw materials, which is one of the most destructive ideas that is very popular in Africa that you want to, as you say, what's the term that you use there "beneficiate" your raw materials locally, and that that's like the angle of development. We can elaborate but that's a very, very dangerous and counterproductive idea. So you will need you know, a place that has electricity, water, security. So creating those spaces where manufacturing can thrive definitely is a path going forward and I would I would put the less attention to some of the things that goes by the older industrial policy name, and more attention to just making sure that you create spaces where a Nigerian manufacturer can be very, very productive. Tobi Lawson Let's talk a bit about the political economy of this. What exactly is the role of the state because what mostly obtains in countries like Nigeria, and the rest is heavy state involvement in trying to industrialise and doing industrial policy, allocate resources and credit and, there isn't more emphasis on the role of the private sector and even in the market. So how important is the state in this process, and what exactly is the role of the state in nurturing a growing economy? Ricardo Hausmann So, I think that the role of the state is huge. But it has to be smart, it has to be complimentary, it has to enhance the possibilities of the rest of society and not substitute the possibilities of the rest of society. So let me give you an example. Every technology you can imagine, is a combination of some things that you can buy in the market, and some things that cannot be purchased in the market that either they are provided by the state, or they're not provided. So you know, there is a market for cars, and you can go out and buy a car and different kinds of cars. There's no market for roads, or for traffic lights, or for driving rules, or for traffic police. So a car is a private good, it exists in a universe full of public goods. If the state does not provide the roads, the cars are not very useful, right? That's what I mean by the state complementing the rest of society. So society can organise some things and not others. So it's very important that the state be very good at providing the things that cannot be provided by markets. And those are quite a few. So for example, electricity penetration in Nigeria is still very low and remains a very, very significant obstacle to progress in spite of massive investments in that area. So electricity, you know, an efficient port system and efficient road system, and efficient urban transportation system, public education, you know no public health, there are so many so many tasks. Now in learning, things that can be done by markets, there's also a lot that can be done, let me tell you a little bit of a secret of the US success. If you look at Silicon Valley, for example, well, let's look first at the US as a whole, the US as a whole 14% of the population of the US is foreign born. But, if you look at the entrepreneurs in the US, 29% are foreign born. So the foreign born represent you know double the share of the entrepreneurs, than they represent the share of the population. If you look in Silicon Valley, and everybody's trying to imitate Silicon Valley, 54% of the science, technology, engineering and math workers of Silicon Valley, the stem workers 54% are foreign born, and the other 46% were not born in California, even though California is a state that has 40 million people. So the secret of Silicon Valley, is not that they have fantastic school systems and fantastic universities, and so on and so forth. It is really that they're able to attract global talent and one of the things that Africa has done in general, is that it has closed itself to the attraction of foreign talent. In many countries, it's very hard to get a visa to become a permanent resident or work permit. There is no path to citizenship. There are restrictions in how many foreigners a firm can hire, etc, etc. So, you know, in Africa, many countries cannot stop their citizens from going and working abroad. But the countries are very effective in preventing foreigners to come in, except at the very low end. So, one of the things that you want to think about in order to industrialise and to get into other things is to be able to attract talent, global talent that is capable of enhancing the capabilities you have. There's no shame in doing that. That's how it's being done in the in the rich countries. You know, everybody wants to become Singapore. But they don't know that Singapore is 45% foreign born. Singapore is what it is because it's able to attract global talent. So, you know, a lot of the improvements in the South African financial system is because they were able to attract all the Zimbabweans that were leaving Mugabe and get jobs, you know, all the educated Zimbabweans moved to South Africa. And that was very good for South Africa. So there's a lot in terms of attracting new know-how that can be done by trying to attract foreign talent. Another thing that you can do is to leverage your diaspora. Most African countries have a very significant diaspora. Much of that diaspora is in richer countries more developed countries and that diaspora is being exposed to new ways of doing business, to new industries, to new ideas, they can become a very, very important source of diversification of progress that has been documented by analysts at cellion, for the case of Taiwan, for the case of India, for the case of Israel, for many instances in which diasporas were very important in transforming the opportunities of the country. So, you want to leverage all of these things that can allow society to become more productive, more capable, more able to do more things. And no, the role of the government is in some sense not to prevent that from happening, to complement that with all the things that cannot be organised through markets, through private firms, and then, you know, maybe here and there, there's an additional space for, you know, focusing things, you know, just if there were good industrial zones, well connected by infrastructure ports, were supplied by electricity and water, well connected to places where workers live through an urban transport system, and so on. I'm sure that a lot of people would look into doing manufacturing in Nigeria. Tobi LawsonI want to get more from your answer by extending that question to state capacity. So many scholars have argued that state capacity is even the secret sauce, so to speak, of the success of East Asia, including China, and you get the impression that a state has to have fully formed capacity to deliver on so many things before it can then nurture growth and development. But you have argued in one of your lectures that I just saw that there is a coevolution, that happens between the state and the economy in terms of capabilities. So how does this co evolution work in practice, as opposed to the standard view of a fully formed capable state? Ricardo Hausmann Some people would like to say, Well, you know, first you have to have a capable state, and then you can have development. But until you get a capable state, you cannot get development. So focus on getting a capable state. But then you ask yourself the question, and how is that capable state going to rise? What's going to find that capable state if it's not a society that is able to pay the taxes and so on to feed that capable state. So So in fact, what you ended up having is a society that needs to develop in order to feed a more capable state, and a more capable state that is able to help society continuous development process. So at every point in time, you have states of very different capacities. And as a consequence, societies have a certain level of capacity consistent with that capacity of the state. So what you end up having is, the more society develops, the more resources can be put available to the state for it to do its thing. And the more the state does its thing, the more the society can develop. So these things are growing at the same time, or they're growing together. But a very important important question that you have to ask yourself, when you're thinking about the state, you're thinking about the Nigerian state. Now, what does it mean to be Nigerian? Who is Nigerian? Who is included in being Nigerian? When the state acts on behalf of Nigerians? It acts on behalf of whom? Is that on behalf of the Hausa? Does it act on behalf of the Yoruba? Does it act on behalf of the ibo? What does it mean to be Ibo and Nigerian or Hausa and Nigeria? How many things do you want to be decided in Abuja? And how many things we want to have decided at the different states, state government? So you have a relatively federal structure in Nigeria? Is that because you think that people have stronger regional identities than they have for a national identity? When you talk about Japan, or you talk about Korea, you're talking about societies that are internally very homogeneous. A Japanese person is somebody who speaks Japanese. A Korean person is somebody who speaks Korean. How many languages are spoken in Nigeria? Tobi Lawson (interjects) About 500… Ricardo Hausmann So obviously, it's not having a state is somebody's state, whose state is it? So I think one of the things that is a challenge is the construction of a Nigerian identity that can support the state. Right? Because the state is underpinned by a certain sense of us. The state is our state, it is done for us. It is how we do things collectively and it's Very important to clarify what do we mean by that we, who is inside the way, who's not inside the we, who is us, who's not us and those things are what makes often no state development difficult. Because, you know, if some people think that the state is going to be favouring some other group, then you would rather have a weak state than a state controlled by somebody who's not you and those things makes statecraft harder. Tobi LawsonI mean, devolution of powers from the centre is one of the conversations that Nigeria is having right now, especially in the light of the recent insecurity, issues and poverty, we would see how that works. But let me quickly pick up on another theme. Politicians usually valourize the role of small businesses in our economy, but in one of your essays that has made a very big impression on me. You took a different approach by looking at the role of big businesses in nurturing development and enrichment. Can you expatiate a bit on the role of big businesses in an economy. Ricardo HausmannSo I think when you have a very developed society, you tend to have, you know, markets for every possible input you want. You want electricity, somebody sells electricity, you want to photocopy or you want to print this stuff, there is a store that prints stuff for you, you want to design a campaign ad or television ad or cover it, you know, there's some people that design that. So you can start a business and buy everything else from the stuff that people produce around you. Right, so all of your possible inputs are things that other firms can do for you. So you can start small, and buy everything you need from everybody else. When you start in a less developed society. Many of those things that you wish you could buy from everybody else are just not there. And maybe you have to self provide your own electricity, maybe you'll have to print your own stuff, maybe you'll have to design your own covers, maybe we'll have to have all of these things done inside the company, because there are no reliable suppliers outside the company. So as a consequence, you know, modern firms tend to start bigger in less developed countries than in more developed countries, in more developed countries, you can just rely on other people doing stuff for you. As a consequence, no existing Corporation, or in some sense, organisations that have developed the capacity to provide internally things that markets cannot do for them. So once they exist, they have typically financial capital, they have a managerial capital, they have a reputational capital, that allows them to make it much easier for them to start a new line of business. You know, the Silicon Valley way to start a new line of business is that you create a startup, a startup is very easy to create in Silicon Valley, or in a very advanced place, because everything that the startup needs they can buy out there. But in the place where you cannot buy everything out there. You cannot start that small. But a corporation, a conglomerate, if it were to decide to diversify into more line of business, it could just reallocate some of its managers, it could reallocate some of its cash flows. It could because of its reputation, it could do joint ventures with other companies, maybe some foreign company or something that can bring in some technology and they can do things as a group that a startup cannot do. So that's why I wrote this piece saying, you know, a conglomerates can be and war in the case of Japan and Korea, a fundamental story of the growth process. Japan and Korea diversified because Toyota, Mitsubishi, di Woo, Samsung diversified internally as conglomerates. Right? It's not that just more companies appeared, it's that those companies diversified. So, I think that it's an important avenue for growth that a country should consider, but,  conglomerates can come You know, can be a force for good or they can be a force for bad either. conglomerates can just become you know, monopolist in one industry move to the next industry and become a monopolist there move to next industry and become a monopolist there and then suddenly become a huge barrier to entry for other people. It's very important that the conglomerates do well and this was the case of Japan and Korea, They are exporters, you tolerate conglomerates because they are exporters', a conglomerate that only sells domestically. It's like one of the local football teams. A conglomerate that exports is like the the national team. It's like the one that's playing at the World Cup. It's facing massive competition from other companies in other countries. So it deserves all the support of society. But a conglomerate that only sells domestically, you know, it has the danger of just becoming the local monopolist and stifling everybody else from competing against them. So, conglomerates can be a stepping stone, can be an avenue for growth, but they have to be good conglomerates. Tobi Lawson Let's talk about trade and I will set the scenario this way, a little over a year ago, about a year and a half. Nigeria closed its borders to all forms of trade. The justification was that the country is far too much of a dumping ground, especially for agricultural products, which we can actually produce locally. They were extreme measures to prevent imports of some of these products and the result, some would argue, as they argued against the move at the time, has been disastrous. Food inflation is through the roof, people became poorer. People are having to spend more on food than anything else, mostly vulnerable households. But you still hear people, either policymakers or even intellectuals, say that these are necessary sacrifices that developing countries have to make in order to industrialise. You have people like Ha Joon Chang, who provide intellectual guidance for this view, and that the West in its own process of industrialization went through much of the same thing, as a scholar who has also done a lot of work on trade for a poor developing country. What is the right way to think about trade policy? Ricardo HausmannOkay, first of all, let's separate trade from just macro-economic mismanagement. Because a lot of the problem of Nigeria comes not from trade mismanagement, but from the trade consequences of macro-economic mismanagement, you have exchange controls, dual exchange rate regimes, etc. That's not because you want to have an industrial policy. That's because you have messed up your macro policies. That is you have a government that has a deficit that is insufficiently finance. So it has to print money to finance it. As it prints the money, the dollar goes through the roof, the naira tanks, right. And then the government doesn't like that, And it wants to say that, you know, it's running out of foreign exchange. So it puts exchange controls, it tries to limit people's access to dollars, and so on. And in that context, it creates an environment where it's very hard for companies to get tools and machines from abroad, it's very hard for them to get raw materials, intermediate inputs, spare parts from abroad and it just makes them extremely unproductive and as a consequence, they have uncompetitive products that they cannot sell anywhere else, but in Nigeria, through enormous protection. Now, trying to do things without importing the tools, the raw materials, the intermediate inputs, the spare parts, is just trying to do things in a very, very difficult way. It's trying to, you know, as my father likes to say, "Why make things difficult if you can make them impossible," the way the world works, is that you don't have to make everything yourself. You just have to do some steps that add value to the things that they that you're going to put together. I remember having a conversation with Governor Fashola in Legos. And he's saying, you know, we want to have a furniture industry. So we want to prohibit the imports of foreign wood for furniture, we want it done with Nigerian wood, and said, You know, you're the governor of Lagos, not all furniture has to be made out of wood, could be made out of metals, it could be made out of plastics, it could be made out of other materials, right and all of the materials you want for furniture industry, or as far as the Lagos sport. So if you want a furniture industry, by all means have a furniture industry, but don't dump on the furniture industry the responsibility of only making furniture by buying inputs in Nigeria, because that's a recipe for disaster. If for some reason your inputs you couldn't buy in Nigeria for x or y or you could buy some inputs and not the others. Like you can buy two legs of the chair but not the other two legs. Well, then that's not a chair. So focus on making sure that your units of production have what it takes for them to succeed and that often implies access to the raw materials that intermediate inputs, the tools, spare parts that no Nigeria doesn't currently make. But that's fine. That's how East Asia did it. If you look at, you know, they started exporting garments, they weren't making the textiles, and they weren't making the fibres, and they weren't making the cotton. They started cutting and sewing and then they move from cutting and sewing to designing the shirts and so on, then they move to making the textiles then they move to maybe making the artificial threads that went into new forms of textiles and they did that gradually. But they did not start by closing themselves off from all the inputs that the world produces, and that you could use to make stuff in Nigeria. So I would say the problem in Nigeria, is that you have a fiscal problem that is being solved by printing too much money that generates an exchange rate mess, that exchange rate mess, creates an environment that makes it very difficult for companies to operate. And in that process, it generates an overvalued exchange rate, which makes manufacturing artificially uncompetitive, and you get less of it, not more of it, less of it because you want, you know, you're constraining the exchange rate at which they could be exporting. And you're constraining their access to raw materials and intermediate inputs. So if anything, you're hurting the chances for growth, not helping them. Tobi Lawson Part of the reasons asscribed to countries like Nigeria, finding it impossible to industrialise, or even diversify their sources of income is the "resource curse" hypothesis. First of all,  is this a real thing, are countries like Venezuela and Nigeria poor because of the so called Dutch disease? And secondly, how do countries that are also resource rich like Norway and Australia, who are rich and highly developed? How did they manage to break out of the "resource curse." Ricardo Hausmann So there are different interpretations of the resource curse when the Dutch disease was coined. It was coined because there was a boom in the Netherlands of a natural gas exports. And those natural gas exports meant that they were exporting a lot, generating a lot of foreign exchange, and their local currency strengthened and that strengthening of the local currency made the rest of the economy uncompetitive. So, if that were the problem, then that would have been a problem in 2007 In Nigeria when the price of oil reached $140 a barrel. But then it goes away as a problem now after 2014 when the price of oil went under $40. Right. So that's no longer the problem, right? I mean, Nigeria's exports of oil are coming down, oil production is stagnant, domestic oil consumption is up. So oil exports are going nowhere, and the price of oil is now lower than it was 10 years ago. Okay. So excess of foreign exchange that used to be called the Dutch disease is no longer a problem. I wrote a paper with my colleague Roberto Rigobon, saying that the problem may not be just how much foreign exchange your oil makes, but just the fact that it's a very volatile amount. Now that it goes up in some years down another year. So the exchange rate as a consequence is very unstable and unpredictable and it makes business in the country, very risky, because you don't know what is the exchange rate or you're going to face and that's not so much because you have a lot of oil, it's just because oil income is very volatile. So that's a separate problem. And that one typically has to be addressed by having some mechanism that stabilises government finances. So you have to run a government that has unstable income and wants to have stable spending programmes. So you want kids to be able to go to school every year. You want roads cleaned and repaired every year. You want to have the hospitals open every year. You want to police services every year but your income is going up and down. How do you do that? That's a problem of stabilising the government accounts and that's a different kind of problem of living with oil. A third problem of living with oil is something that they call rent-seeking. That is, all the money is in the government, then people who are very entrepreneurial, instead of setting up businesses may dedicate themselves to trying to grab the money that the government has. And so it distorts the incentives of society from, you know, doing things that are productive to doing things that are unproductive but profitable in just trying to seek the rents that the state has. I honestly, don't think that that's that big of a problem in Nigeria, given how small our oil revenues, vis a vis, the size of the society. So I think the big puzzle in Nigeria is why the country has not diversified more, given how little oil it has, you know, in a country like Kuwait or in a country like the United Arab Emirates, Abu Dhabi, you know, you can ask yourself a question, Well, why would they diversify, they have so much foreign exchange that they don't know what to do with it? The question in Nigeria is why have you not diversified in spite of the fact that oil is generating so little revenue these days? Tobi LawsonI'll just ask you a few off the cuff question, what is your opinion on on the so called Washington Consensus, has it failed In Africa or Latin America? Is it misunderstood? Do developing countries need to think beyond macroeconomic stability and all the other recipes proposed by the IMF? What was the way to think about this? Ricardo Hausmann Okay, so the Washington Consensus is a term that was coined by John Williamson who just passed away a week or two ago in a seminar in 1989 or 1990. I think it was 1990, a seminar that was called 'Latin American adjustment, how much has happened?' So it was really a Latin American question. Latin America was in a debt crisis, the debt crisis was associated with the fact that during the oil boom of the 1970s, it had borrowed too much money, then it was unable to pay that money and it was mired in, in a debt crisis and the question is, how do you get out of there and john Williamson said, there are these 10 things that sort of like Washington institutions agree, would be good to sort of like get out of the Latin American debt crisis. But then these 10 things became like the 10 commandments. You can take them to Eastern Europe, you can take them to sub Saharan Africa, you can take them to North Africa and the Middle East. You take them out of context, and they're supposed to work marvels no matter what. It's, it's it, in my mind, policies have to be solutions to problems. Tell me the problem, let's design a solution. It's not here are 10 solutions. You haven't told me what the problem is. So I think that policies have to be problem driven, and not solution driven and Washington Consensus is a set of solutions without a problem. So in my mind, it ended up creating an environment in which people stopped thinking about what are the policies that they need to adopt, and just as to whether they have or haven't adopted the 10 policies in the list, even if those 10 policies in the list wouldn't solve the problem that we're trying to solve? Because, you know, you haven't even asked the question, what is the problem you're trying to solve? So that's why, with my colleagues, Andres Velasco and Dani Rodrik, we develop this idea of growth diagnostics, that the first thing you have to do is to try to understand what the problem is and once you have a clear idea of what the nature of the problem is, then let's explore the solution space and most likely, you're not going to end in the Washington Consensus, because you know, it will be a coincidence that you do. So from a certain point of view, the worst thing that was delivered by the Washington Consensus, is that it encouraged people to stop thinking of what the right policies are and just assuming that they have an implemented as list of policies that may not be the right ones. Tobi LawsonYou've also been in government in Venezuela. So I'll ask you, what you think holds up the use of knowledge by policymakers? Or should I say what prevents the right diagnosis of the problems that some poor countries have? Because, what you find is that and Nigeria is also a good example of this. What you find is that a lot of these countries, even though different administrations different political actors, they come into power and repeat the same policies that have been tried in the past and failed. So, what prevents the diffusion of knowledge at a governmental level? Ricardo HausmannWell, I mean, I think that people do not act on the basis of how they see the world on the ideas that they have in their heads, and on the interpretations they make of the world. So ideas can change the world, if they change how people think about the world, how people interpret the world, how, how those ideas, help them to think how to act on the world. And I'm an optimist in the sense that I've tried to develop ideas, diffuse ideas, train people, educate people, work with governments, try to help them think through issues that they face. That's why I created the growth lab, the growth lab is a group of about 50 people, and we not only do fundamental research on the issues of economic development and growth. But, we also work with countries around the world, trying to help them think through these issues and we also you know, teach and educate them, and so on. So, I think ideas have a complicated way of diffusing. I think a lot of the problems in the world are related to the diffusion or the popularity of some bad ideas and if I didn't believe that I wouldn't be in the business of trying to produce new ideas, diffuse good ideas, and so on, or what I think are good ideas. So for example, I think that the Washington Consensus has been pretty much superseded by the idea that policies have to be solutions to problems and not solutions in search of a problem and that you don't start by assuming that you know, what the solution is, before you clarify what the nature of the problem is and I think those ideas have permeated even, you know, the World Bank, the International Monetary Fund, and so on, with difficulty, because the alternative paradigm is still popular. I mean, this whole idea of best practices, very dangerous idea, it supposes that people know how to do things, like here's the right the right way to do things, which presumes something like, you know, there is the perfect suit and you know, there's no such thing as a perfect suit, there's only a perfectly tailored suit, and everybody has a different body. So you have to tailor the suit differently and there's a lot of detail in the tailoring. So one thing is how do you defuse better ideas? And the other thing is, is it a problem of politicians not wanting to know, because the ideas they have, are an expression more of their interests than not their knowledge? It's like they like the idea because it advances their interests? Or is it just that they are wrong, or they have the wrong view of the world and you know, there's a big debate on whether its interests or whether it's ideas, the nature of the problem. I'm an optimist in the sense that I think that a lot of the things that happen in the world can be fixed by proving the ideas with which people see the world, analyse the world, interpret the world, think about the world and that's why I'm in the business of, you know, research, and teaching, you know, researching better ideas and teaching about them and by the way, Nigeria is one of the countries that sends more people to our executive education courses at the Harvard Kennedy School. There's, there's a huge community of people who have had some connection with the Harvard Kennedy School in Nigeria and you know, these are the ideas that will teach. So I'm hoping that the, you know, the reason why you have a podcast, the reason why you are trying to promote these discussions is because you also believe that the nature of the ideas with which people think the world is important for progress. That's why you do what you do. Tobi Lawson Thank you. I have a question, the relationship between democracy and development is also one that comes up regularly. I know there is a Acemoglu and Naidu paper that more or less, infer that democracy is good for growth. But lots of people, I will see people with other interests, but that's speculative, would say, Oh, well look at China. China is an authoritarian one party state and look at all the growth they have, what are the nuances on these relationships between democracy and growth or any political system? Ricardo Hausmann So I like very much the ideas about this that have been, you know, growing in a certain political economy literature, where people like Hans Rosling or Mounk or Yascha Mounk, or Dani Rodrik have been proposing, and that's that you really want to distinguish between three different rights. Okay, One is the right of the majority to make decisions about democracy. Right. So, you know, the governments are decided by a majority of people. So that's, you know, making sure that the government represents a significant swath of the population. That's, that's one idea, call that democracy. A second idea, is the idea of some kind of universal rights, that they yes, no, you might be in the minority. But that doesn't mean that the majority can kill, you can expropriate, you can harm you and torture you. Right, that there are some inalienable rights that are protected for everybody, whether you're in the majority or in the minority. And that's different. That's an idea that is often associated with liberalism. So the idea of liberal democracy is this funny balance between the majority rules, but everybody has some guarantees, right and then there is the third problem. So this second problem is called individual rights, it's very important if you're going to have something like a market economy, because if property is going to be poorly distributed as as it is everywhere, then if the majority decides to expropriate the minority, then the minority is not going to play ball and if they are the ones that have dropped the knowledge, their capacity to organise businesses and so on, they don't play ball, then there's no development. So you have to balance this individual rights with these with the idea of majority rule and on top of that, you may have other rights, a social rights that that people might want to have protected, you know, the majority might be a Muslim, and and there's a Christian minority or vice versa, do the social rights of the minority, are they protected? So there's like individual rights, social rights and majority rule and when we say democracy, we don't necessarily make these distinctions. But, what I will tell you is that the protection of individual rights is fundamental. That majority rule is also important, that these two things making them compatible is difficult and what makes it difficult to make it compatible is that somebody has to tell the majority, the elected government, the majority of society, you cannot do these things to the others and who's that thing? Well, it's suppose it's, it's an independent judiciary, something that is not under majority rule and those are the things that these populists like to destroy.  These checks and balances, that are in the system to defend the rights of the individual or the rights of minorities. So I will tell you that democracy if it's majority rule, that does not protect the rights of the individual is not going to be good for development and a lot of the development of the 19th century in Europe, happen in liberal governments, that is governments that protected individual rights, that were not democratic. So I would, instead of asking the question, you know, democracy, good or bad, I would ask the question, majority rule, individual rights, minority social rights, are they being protected? And obviously, it's great if you have all three. But let's not assume that just because you have majority rule you have all three. Tobi LawsonWhat about the issue of globalisation? I know your colleague, Dani Rodrik has written about this, he has this famous trilemma. How much should developing countries worry about things like the globalisation of capital, the level of interconnectedness of the economies with the developed countries and other parts of the world and some of the risk that may come with that, like the global financial crisis of 2008. So how should developing countries think about this, we also have the Asian Financial currency crisis of 1997 as a backdrop. Ricardo  Hausmann So as a backdrop, so the way I think about it is that, you know, Nigeria is a country of 200 million people give or take, that give or take is about 3% of the world population. If ideas were one per capita, then 97% of the ideas are outside of Nigeria and you want to use all of the ideas available to create progress in Nigeria. So you want Nigeria to connect to this global social brain. So inserting Nigeria in the flow of these ideas, these know-hows, these technologies, these ways of doing things is very important for Nigeria's development and this quote unquote, 'globalisation' this interconnection. Now people emphasize a lot, on capital flows and, or maybe goods and services. But I want to emphasise insertion of Nigeria into other flows into the flows of people Nigerians abroad and how they connect back home that they asked for, or foreigners in Nigeria? How can they bring in stuff? ideas? Know how there was not there before? How do you connect your universities abroad? How you connect your research centres with the rest of the world, etc. So how interconnected are your possibilities with, you know, all the advances of the world. So from that point of view, I will say that globalisation is a force for good. I think that, as I mentioned before, one of the key developments going forward is going to be the fact that a lot of the tasks in the world can be done from anywhere and that creates an opportunity for Nigerians to be able to perform tasks, sell their their ideas, do stuff for the rest of the world, through zoom, or, you know, Microsoft Teams, or whatever. So, you know, right now, we are producing a podcast, you're in Nigeria, I'm in the US, we didn't ask permission for anybody to do this, we're producing something jointly and you wouldn't want a world where this becomes illegal or becomes regulated or restricted. So I think that these opportunities are probably more valuable for developing countries and therefore developed countries, it's a very important stepping stone forward. So I hope the world remains sufficiently open, so that the countries in the global south are able to tap into the flows of progress that are happening elsewhere in the world. Now, that doesn't mean that you have to renounce national sovereignty too much. But it's very important to understand that there are two competing goals. One goal is to have sovereign policy. So every polity, every political community can decide more or less what it is that they want to do and that's a good thing. The other good thing is to have common policies that, you know, if we can agree on, you know, whether computers are going to run 120 volts, or 240 volts, doesn't really matter. They can work equally well, at 120, or 240. But if we have a standard, it's easier for everybody, so my stuff can work in your country and your stuff can work in my country. So having common policies is also good, and to the extent that a lot of the human interactions are happening between people who belong to different political jurisdictions, you know, people who are in different countries, then the value of common rules becomes that much more important. I like to say that sovereign state can be half a bridge over say, the river that separates it from the neighbouring country, but the other half of the bridge has to be built by the other country and on half a bridge, you don't get half the traffic, you get zero. So there is some value of having common rules. I think part of the tension that is at the core of this is that there is a good thing of having sovereign national rules that the local political community can agree on, and have in common rules, rules that are respected both by us and by people in the rest of the world that are interacting with us and that that tension is a little bit what the world is trying to figure out. But, the forces that are favouring deeper globalisation, I think are technological in nature and they're very powerful they are not, it used to be the decline in the cost of transportation. Now, it's incredible expansion of the ability to move information around and you know, you just see by the magnitude of just the number of things that are available online for you to watch whether it's Netflix or Amazon Prime, 500 different television channels, and the news of the world, etc. You would want every society to have access to COVID-19 vaccines, you wouldn't want every society to have to produce its own vaccine. So there's enormous benefits from a world where international interactions are deeper, we just need to figure out what's the political arrangements that makes that as compatible as possible with local preferences. Tobi Lawson What about inequality, which is also a very topical issue now, whether it's on TV or Davos, talking, everybody's worried about inequality issue. Is the optimal point for poor countries or developing countries to start seeing these as a problem. So what I'm saying is, do countries need to concentrate on growth first, is there a trade off, because most of the remedies to inequality at least the policy proposals involve redistribution and poor economies may not have the fiscal capacity, some attempt it, but they may not have the capacity to do the kind of redistribution that some politicians are proposing to deal with the problem. So how do you think about this? Ricardo Hausmann So I think it's very important to finish the sentence, inequality of what, because if we don't specify the what we don't know what we're talking about, and I think that a lot of the discussion presumes a what we are concerned about what inequality we're concerned about and a lot of the discussion is what you might want to call the inequality of income and the idea out there is that there's sort of like a national pie, and some people are getting very big slices of the national pie and other people are getting small slices of the national pie. And then as you say, maybe can we redistribute how people are slicing the national pie. But an alternative way of thinking about this is that there is really no national pie. There are different pies that are being baked by different organisations, by companies or firms of a different size, and so on and so in reality, what you have is an enormous inequality in the sizes of the pies that different parts of society are baking. Okay, so it's inequality in the sizes of the pie, not in the way each pie is being sliced. Imagine that each pie is a corporation, it's a company or an organisation of some kind. Well, we know some of them are informal family, micro enterprises, and some are, you know, bigger companies, and so on. So, and inside each one of them, there is a division of, of the pie in slices. But what would strike you is enormous inequality in the sizes of these pies, to call it by another name, there is enormous inequality in productivity. There are some parts of society that are operating at very low levels of productivity, you know, I drove from Abuja to Kaduna and then on to Kano, and I stopped in a bunch of rural villages, and I looked at the farms and how they were farming and how much corn they were getting per hectare, and how many hectares they had to produce, and how they were doing things. Amazingly low productivity farms, where, you know, farmers would be able working very, very hard to tender to one or two hectares, and at very low productivity and very low incomes. So one thing I really worry a lot about is what can we do to reduce the inequality in productivities and I think that the inequalities in productivities, are very large, because there's many people who are excluded from access to the things that will make them more productive to the networks of energy, or transportation, of labour markets, of knowledge, of agricultural extension services, of value chains, of storage facilities, of logistics, and so on, that would allow their work to be much more productive. So to me, a strategy of inclusion, so as to make everybody's work more productive, especially the ones that are operating at the lowest level of productivity gains, that would be good for growth, because growth has to do with how productive are people and you're able to make them more productive, output will be higher. So it's a strategy for growth. But because we're focusing on the least productive and making them more productive, you're also reducing income inequality. So our strategy for inclusion is a win-win strategy. It's a strategy that makes everybody better off and it would reduce inequality to strategy for growth. It's a strategy that would reduce inequality, a strategy of redistribution. It's sort of like compensating people for their exclusion, saying, Well, given that, you know, you have to operate in a place where there's no electricity, there's no irrigation, or no good roads, there's no storage facilities, there's no logistics, you know, so there's nobody to take your crop when it's time and it's starting to run. So you have to sell it at whatever price you can get. So we live in an environment that is very unproductive and because of that, here's a check, or here's some money. Well, that's compensating them for the fact that they cannot operate in a more productive environment, and that that's a very, very secondary improvement. These people would be much happier. If instead of compensating them for their exclusion, you would stop excluding them and focus on including them and that can be as expensive or more expensive from a fiscal space point of view than redistribution. But it implies a completely different way to think about the problem and to allocate resources. So I think that what less developed societies need is a strategy for inclusion because it's Win win and because it's better. Tobi Lawson Africa is currently at about 50% urbanisation and that's projected to reach about 75% by the middle of the century. We are quite worried about our cities, overpopulation, infrastructure, and so many other things. What do you think of new ideas and development that are coming up, like charter cities, these was first proposed by Paul Romer, a little over a decade ago, but it's gaining some traction in some circles. I know there are experiments in Honduras, and some other places, what's your opinion about fancy ideas or  radical ideas like this?Ricardo HausmannSo first of all, I think the fact that Africa is urbanising is potentially a very good thing. You're mentioning that, you know, it's dangerous, because it might require more infrastructure and so on. Well, the truth is, it's cheaper to provide infrastructure and public services in urban areas than in rural areas. So it just makes, you know, the lack of provision of infrastructure more visible maybe. But it's cheaper to provide that infrastructure in urban areas than it is in rural areas. So in principle, urbanisation can be a good thing. Unfortunately, Africa has figured out ways, and Latin America too, to make cities that are poor, and that are disastrous, and that suddenly, you might get the increases in crime and insecurity and other sorts of problems that were not there in rural life. So it's very important to get urbanisation right and I think that a critical determinant of whether a city is successful or is not successful, is one of the things that can be done in the city, and sold outside of the city, or to people who live outside of the city, every place in the country and every place in the world is dependent on being able to buy things that it doesn't make and the way to buy things that you don't make is to trade for them and for that, you have to make things that are bought by people outside of their place. So whether it's a village, whether it's a state, whether it's a city or a country, it's very, very important that you have things that you can sell to people who live outside of your place. So you can trade for the things that your place doesn't do and what we found is many cities just don't develop those things and they end up for example, one of the reasons why capital cities are so big, it's because the way they get money is by taxing the rest of the country and spending the money. But it's not that the city itself is a source of activity and wealth and production and so on. So that's why it's so important that we get cities that are competitive in a line of things that can be sold outside the city. That's the critical thing. I am not particularly enamoured by the idea that charter city is a solution for something. The idea that Paul Romer deservedly won the Nobel Prize for making us understand how difficult it is to explain growth and he has a theory of, you know, what does it take to explain global growth, that is growth at the technological frontier of the world. He doesn't really have a theory of what explains why some countries catch up and other countries don't catch up. What explains the distance that countries have relative to the technological frontier? It's a country like Singapore, with a income per capita, say of 60,000? Why are countries at $1,000 or $2,000 so? What can you do to get to $60,000? Paul Romer's contribution to economics doesn't answer that question. It asks, What determines the rate of growth of countries that are at $60,000? So he, in some sense, borrowed the idea of the problem why countries are not at $60,000 the things that prevent you from being at the technological frontier. He thinks that the reason why countries don't approach the technological frontier is because they have bad institutions. That's his explanation. That they have bad institutions and, and charter cities are a way of like buying good institutions, important, good institutions and that's his interpretation of what happened in Hong Kong. Hong Kong because of, you know, the settlement of the wars with China, it was given to Britain and it was run by Britain and it was British rules that led to the growth of Hong Kong. So he's saying why can't we make other places like Hong Kong, I will put it to you that the reason why countries don't approach the technological frontier is not necessarily institutions that you can import. It's technology itself. Technology has trouble diffusing. So the distance with technological frontiers is of technological distance and the reason why you don't catch up in that technological distance is because of the nature of technology itself. The kinds of institutions that you can import are not the only thing there was because you know, after all, the British Empire had a bunch of charter cities under British rule. That didn't make Ghana or Bangladesh or Sri Lanka rich, right. So I don't necessarily think that that technological gap can be fixed by the kind of importing of institutions by chartering your city to somebody who knows how to run things. It might be in some sense, a way of importing government technology if you want to put it in my language. So I think that the problem is really trying to understand how technology diffuses, I think the future is a lot in the hands of people that it's much easier to move brains than it is to move know how into brains. That's why I emphasise before migration diasporas promoting foreign direct investment, maybe having your conglomerates internationalise and connect your country to the rest of the world, that it is through these channels that technology flows, and it's those channels that we need to focus on. Tobi Lawson One of my final question will be going further on that note, again, last couple of years, we've seen the rise of the use of RCT in economics research, particularly development economics, built on the work of Abhijit Banerjee and Esther Duflo, and, I'm Michael Kremer, who are Nobel winners and you can see the idea gained a lot of traction where you have nonprofit organisations like Givewell adopting a lot of the findings from the research from these new school of thought so to speak. What are your impressions of this turn in development economics research, generally, especially the influence on policy? I'll give you an example. Nigeria, for example has been trying we have this national policy of lifting a 100 million people out of poverty. But when you change the proposal, what you will find is this basket of proposals that have been lifted from RCTs, you know, social interventions, cash transfers and they haven't really worked and you will find that international aid organisations and policymakers love them. So, what is your impression of this turn in development economics, have we given up on growth, is that it? Ricardo Hausmann So I think that, you know, randomised controlled trials, RCTs are a tool and, you know, they are very good to answer some questions, they are useless to answer other questions. So for example, if you want to know if it's better, to give money to farmers at the time of harvesting, or give money to farmers at the time of sowing, and in terms of you know, the impact on their well being, and so on, maybe you find that it's better to give farmers money at the time of sowing because then they can use that money to sow and if you give them the money at time of harvesting, then they already have money. So giving them more money at the time when they already have money is not the ideal time to give them money. So so maybe that's something you can answer with a randomised control trial. What kind of structure should a country have? What Social Security structure should a country have? What infrastructure plan should a country have? What exchange rate regime should a country have? What, even educational system should a country have, those things you cannot do RCT on? You know, they're just not the instrument to answer those questions. So if you only do things for which you can do an RCT, you are going to be doing some kinds of things just because, you know, as they say, you look for the keys under the lamppost, not because you lost the keys on the lamppost, it's because it's the only place where you can see something. RCTs I think, have twisted the development agenda away from policies that are probably the most impactful, but for which you cannot do RCTs and into something that my good friend Lance Pritchard likes to call kinky development policies, that they are kinky in the sense that they want to do a small kink. So for example, you can do an RCT and whether putting flip charts in a school improves learning, or whether giving tablets to kids in a school improves learning, or whether taking a picture of teachers when they attend school improves teacher attendance and consequently, student learning. So all of these things you can do an RCT on, you can take a bunch of schools, you do it in some schools or another schools, and you see if it made a difference. But those are answers to super small questions to small kinks, in if you want in the way you do things. They don't go to answer more fundamental questions as to how to organise many, many aspects of society. So in my mind, the idea, by the way, and the answer much less than the promise, for example, they can tell you that if you do it this way, it works better than if you do it that way. If you give micronutrients to children in Guatemala, that it improves their learning. Okay, it doesn't answer two questions. The first question is, how does it do it? Does it do it? Because it improves their nutrition? Does it do it because we connected the family to a set of services that had other benefits for other reasons. For example, you can do an RCT, give half a million people, we force them to smoke and the other half a million people you force them not to smoke and then we look at the difference in cancer rates to see if smoking causes cancer. But, it doesn't tell you what about smoking causes cancer. What is the substance in smoking that triggers the cancer? We learn nothing about the biology of the process, the mechanism of the process and secondly, if you say give macronutrients in Guatemala, and it works, you don't know if it would work in Nigeria or if it would work in Norway, or in Singapore because maybe in other places kids don't have those deficiencies. You can do an RCT to find that, you know, whether if you give tablets to kids in school, you want to know if they can improve learning or not and you find out that it didn't improve learning. What have you learned? Well, you've already learned that that tablet used in that particular way, with that particular teaching materials in the tablet, by teachers trained in that particular way, didn't make much difference. But it doesn't answer the question. If you were to try to improve education in the school, and one of the elements would be the tablet, how should we use the tablet? What teaching materials should the tablet include? How should the teacher use those teaching materials? What should students be expected to do with those teaching materials? and so on? So it doesn't answer any of those questions? It just tells you, you did x, do some didn't have some effect or not have that effect. And as a consequence, I think one of the bad things that the RCT revolution has done is it has tended to put donors and a lot of attention to these small questions that can be answered by RCTs away from the really important questions that may not be answerable to RCTs. Tobi Lawson Do you think that economists should be more involved or influential in the politics in developing economies, for example, it's impossible to know this, but I want to pose the hypothetical anyway. How would Venezuela have fared if you were the president instead of the economic Minister? Ricardo Hausmann So, I think for economics to do its work? Well, it should be a science that answers questions. But that politics should be decided not only on the basis of technical solutions to questions, but also in terms of social preferences of what people want done, what priorities people have, what's more important for them, what do they want? And so I think that science cannot be a substitute of the political process. I think science should participate in the political process. I don't like when people say, you know, government should do what scientists tells them to do. Science doesn't answer the questions that many political systems need to address. For example, science can tell you if there is contagion, or there is a contagion in schools or how much contagion in schools varies. It might help you understand how are people getting infected and how they get

In this episode of the Political Economists, Max and Jorrel explore Dani Rodrik's interesting Trilemma and how it relates to the Gold Standard. With cryptocurrency and the economy teetering in the balance, uncertainty in the world has become top of mind for most. Join the two political economists as they bring in another perspective on the ability of BTC and other cryptocurrencies to sustain as a store of value, and what does this mean for our future.

“Where does the backlash against globalization come from? Where is it headed? And what would a better globalization look like?” Dani Rodrik [https://drodrik.scholar.harvard.edu] is an economist whose research covers globalization, economic growth and development, and political economy. He is the Ford Foundation Professor of International Political Economy at Harvard's John F. Kennedy School of Government. He was previously the Albert O. Hirschman Professor in the School of Social Science at the Institute for Advanced Study in Princeton (2013-2015). Professor Rodrik is currently President-Elect of the International Economic Association [http://www.iea-world.org]. His newest book is Straight Talk on Trade: Ideas for a Sane World Economy (2017)[https://drodrik.scholar.harvard.edu/straight-talk-trade]. Watch Watson Institute talk with Dani Rodrik, Mark Blyth, and Brendan Greeley: [https://youtu.be/bsy349k3zds] You can read a transcript of this episode here: [https://drive.google.com/file/d/1fVi-zfLv-zns_kfj1HOU8e9OnqsTYvhJ/view?usp=sharing]

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 4 of this 4-episode conversation, they provide a...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 4 of this 4-episode conversation, they provide a...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 3 of this 4-episode conversation, they discuss concerns...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 3 of this 4-episode conversation, they discuss concerns...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 2 of this 4-episode conversation, they discuss ways...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 1 of this 4-episode conversation, they discuss the...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 2 of this 4-episode conversation, they discuss ways...

Soumaya Keynes of The Economist and PIIE Senior Fellow Chad P. Bown have a wide-ranging conversation with Dani Rodrik (Harvard Kennedy School) about trade agreements. In Part 1 of this 4-episode conversation, they discuss the...