Dani Rodrik (Istanbul, Türkiye, 66 years old), professor of Political Economy at Harvard and 2020 Princess of Asturias winner of Social Sciences, confesses that he does not know what globalization will look like in the future, but he has three options: the good, the ugly and the bad. He chooses one depending on how optimistic or pessimistic he is. In the best option (he does not want to give much importance to the others), nations will rebalance their prerogatives in a sort of return to the spirit of Bretton Woods. A rebalancing that, he says, is taking place in the United States with the policy of the Biden Administration. In the worst scenario, globalization will continue to be seen as politicians like Bill Clinton saw it, as a phenomenon that cannot be stopped or controlled in which there are a good number of losers. Invited to give a conference at the La Toja Forumwhich was held this week on the Pontevedra island, Rodrik believes that the United States has to give space to China instead of seeking its constant dominance, and warns in turn that the Asian country cannot be subject to the monopolistic dictate of the Communist Party if you want a modern and diversified economy.
Ask. We are seeing times of geopolitical upheaval, awareness of climate change, demographic contraction in advanced countries and labor market resilience despite rising rates. Has it become very difficult to make predictions?
Answer. Economists have never been good at predicting. An economist I know says that God created astrologers to make economists look good (laughs). There is one thing I feel quite confident about: we are in a time of transition and the future is going to be different from the past.
Q. In an article published more than 20 years ago in this newspaper, you talked about a globalization where non-democratic countries could not enjoy the same privileges as democratic ones in the field of foreign trade. But it is precisely certain autocracies (especially China) that have led the greatest growth linked to globalization. What do you think about the role China will play in the future?
R. China benefits a lot from globalization. In large part it is because he has played by his own rules. He did not play by the rules of many other low- and middle-income countries, for example in Latin America or Central America. China combined its incorporation into the global economy with many policies, such as the control of capital flows; the management of exchange rates or the extensive use of state subsidies and industrial policies contrary to the rules of globalization. We must be careful when attributing China’s success to globalization. The overall lesson is that countries that took advantage of globalization and managed their economies did well. China is in a moment of transition. He is now facing problems of great magnitude. The biggest is that its political system is not well adapted to the modern diversified high-tech economy, and that was a problem that I always thought would ultimately work against China. You cannot have a modern, diversified high-tech economy with the monopolistic control of a centralized political party. The biggest problem China faces is how its political system adapts.
Q. What do you think of the growing influence that Beijing exercises in Africa, Latin America or even Europe, through trade agreements?
R. When it comes to international trade and finance, for the most part we should trade with China like any other country. After all, trade is a two-way street. We trade with countries not to provide benefits to them, but to provide benefits to us, and therefore we should not put obstacles in the way of trade with China. I believe that there are certain segments that involve Human Rights: what is happening, for example, in [la región de] Xinjiang; the treatment of some ethnic minorities or the use of cheap labor. But overall, I think China is a growing economy and has become a powerful economy.
Q. How can the inclusive globalization that you propose be achieved if many times (as happens, for example, with the action of the G-20) international agreements remain mere intentions?
R. The main transition we need is some kind of change or transformation in mindset. 10, 15, 20 years ago the main political forces constructed globalization as an end in itself and society and the economy had to adjust to it. This is how globalization was presented to the public. I think that brought with it a lot of problems and now we are moving to a stage where we are returning to a healthier understanding of globalization. Global markets meet the needs of our economy and societies and countries will naturally prioritize their own needs, whether inequality, the need to address the climate transition or human rights concerns with trading partners. The fact that these concerns emerge and become priorities is not necessarily detrimental to globalization, but rather a necessary rebalancing. And I believe that if that happens we will have a healthier and more sustainable globalization.
Q. It defends that the international economy must serve the objectives of each country, and not the other way around. But how is that combined with the climate emergency?
R. There is a very interesting paradox, and that is that if we think of an ideal world, the needs of the climate transition would be sought by nations uniting to establish a global carbon price and also establishing technological and financial transfer mechanisms to low-income countries to that they are not affected during the economic development process. In that ideal world there would be enormous global cooperation, but we know that is not happening. We live in an imperfect world, and I encourage action and leadership, whether by individual nations, like the United States, or groupings of nations, like the European Union. The US has committed to a major program, President Biden’s IRA (Inflation Reduction Act), so we have a greater opportunity to solve and address the climate problem because countries are independently designing their approaches to climate solutions, addressing their own policy obstacles and program design. If we wait for all of them to cooperate on a global level that is not going to happen, and I think that is the paradox.
Q. What do you think of the results of the BRICS summit? [las siglas con que se conoce al grupo formado por Brasil, Rusia, India, China y Sudáfrica]?
R. The BRICS have lost their way. I’m no longer sure what they represent. I wish they could become one of the many groups in the multipolar world, because we need a multipolar world. We do not want a world governed by the United States in a hegemonic way, or in which we confront China and everyone is left out. I think we will have a healthier world if we have multipolarity, that is always my hope for the BRICS. The danger is that the BRICS will end up being a refuge for authoritarian governments in an authoritarian world. I think it would be harmful.
Q. We are at the beginning of a new technological revolution with Artificial Intelligence. How will it affect us?
R. In many ways, it is something that is very difficult to make predictions about, but it is safe to say that it is going to have tremendous and very significant consequences. We must not be technological determinists and make the same mistake that we made with globalization, which was saying that globalization is something that falls from the sky and that we cannot do anything about it, that we cannot shape it and that everyone has to adapt. . I think we are going to make the same mistake with AI and the digital revolution saying that it is something we cannot control. Society has to adapt. We have to adapt and the worker market will have to adapt. We will all have to acquire new skills, but I think it is also in our power to shape and regulate AI and if we don’t do it, if we don’t think deeply about the consequences, they are going to be quite undesirable.
Q. In Europe, the slowdown is not as strong as in China, but the manufacturing sector continues to be affected by weak trade with Asia. Is it good to reactivate industrial policy?
R. I don’t think industrial policy can save manufacturing. I believe that industrial policy has to be directed towards the green transition. Some of these policies, not all, have to be directed towards industries in which productivity tends to be low and in which a large part of the labor force is absorbed. So I think it would be a mistake to think that industrial policy can revive industrialization in terms of increasing the share of employment in manufacturing. We need to be realistic and reorient industrial policy towards new sectors, such as renewable energy and green technology, and also towards where much of the workforce is located: education, retail, hospitality and care are sectors which we don’t normally think about when we think about industrial policy. That’s where we really have to think about how we can increase productivity.
Q. Is Europe doing it right?
R. Even the most conservative governments carry out industrial policy, so I think the good thing about the revival of industrial policy is that we can engage in a strategic way, and in doing so, I think it is important that we are clear about what the objective is that is pursued: it cannot be the industrial policy of 1960, 1970 or 1980. It cannot be the steel industry or the naval industry. Europe was always good at these industries, but they are not going to employ many workers. We have to direct industrial policy where it really makes a difference.
Q. Are you more optimistic about the future of the euro?
R. The EU and the euro face a deep structural and existential problem, which is the compatibility of a currency with a single policy. Political power continues to be exercised by different nations. I have been saying for a long time that Europe ultimately has to decide whether it wants to maintain a single market with a single currency. To do this, it will have to find a way to build a single policy at the same time. This type of thing that the US is doing, experimenting with industrial policy, with different approaches to the labor market, or to confront the power of corporations… that is not possible in Europe. The threat is that Europe remains a liberal technocracy that is not capable of adapting to the needs of the people.
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