Policy Innovations The central address for a fairer globalization

A publication of the Carnegie Council

Can Integration Into the World Economy Substitute for a Development Strategy?

By Dani Rodrik

, May 1, 2000

Abstract: It is now well understood that integration into the world economy has highly demanding institutional prerequisites. I shall argue that investing in these prerequisites as the first order of business for development not only closes off alternative development paths, it also crowds out possibly more urgent priorities by diverting human resources, administrative capabilities, and political capital away from other tasks. That would not be bad news if the payoffs to international economic integration were significant--if openness were indeed the key to growth. Alas, the evidence we have is that the link between a country's trade barriers and its rate of economic growth is weak at best (at least for levels of trade restrictions observed during the last couple of decades). There is simply no credible evidence that should lead us to place a very high probability on the likelihood that a sustained, significant growth boost will follow from the lowering of barriers to trade and investment. All of this leads me to the conclusion that openness is not an adequate substitute for a development strategy. Policy makers have to evaluate globalization in terms of developmental needs, not vice versa.

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