Monday, October 13, 2014

Dialogus de Beijing Consensus -- The Beijing Consensus v.2: Experimentalism

A couple of years after Ramo postulated the notion of a Beijing Consensus, several scholars began advancing another kind of development model deriving, as they saw it, from China's experience.  Different scholars have attached different names to this model, Randal Peerenboom -- following the World Bank -- called it the 'East Asian Model'; Dani  Rodrik has termed it 'New Development Economics'.  What these share in common, however, is a claim that China's development has been driven by a distinct approach that eschews teleological pursuit of some a priori developmental agenda in favor of 'policy experimentation' (to use Sebastian Heilmann's term -- see below).  We might refer to these various models, collectively, as 'experimentalist' models for development.  Does such experimentalism hold meaningful promise as a 'model' for promoting 'development' more generally?

Pessimo:

'No, it does not.'

Before explaining why, I need here to tie up a loose end from our discussion of Ramo's Beijing Consensus.  At several points in our previous dialogue, Optimo noted that the simple fact that China might not have actually conformed to the prescriptions advanced by Ramo does not by itself invalidate those prescriptions, just like the fact that fact that there is nothing meaningfully 'Dutch' about a 'Dutch treat' does not invalidate its actual utility in stopping Optimo from always pick up the tab when we have dinner.

I accept that claim with regards to Ramo's model.  But I do not think that it stands with regards to the other variants that we will be exploring -- namely the experimental variant (aka 'Beijing Consensus v.2') and the state-capitalist variant (aka 'Beijing Consensus v.3').  Here, we need to take the 'Beijing' part of the 'Beijing Consensus' at face value, because the point that we are ultimately exploring now is whether there is something distinctive in China's particular developmental experience that can serve as a model for the rest of the developing world.

My argument with regard to experimentalism will be based on two claims.  First, in this post, I will argue that there has been nothing significant that could meaningfully termed 'experimental' in China's developmental project.  After Optimo has had a chance to respond to this, I will then argue that even if there is something that could meaningfully termed 'experimental' in China's approach to development, it does not provide a useful model for the rest of the developing world.

Simply put, having been involved in China studies for over two decades, I simply do not see anything in China's approach to development that can meaningfully be termed experimental.  In order to explain what I mean by this, I need to unpack the notion of 'experimentalism', and in particular to distinguish it both from 'decentralization' and from 'change'.  Change resembles experimentalism in that both describe distinctly dynamic processes.  Decentralization resembles experimentalism in that both eschew monocratic or singular 'best-practices' approaches (what are sometimes called 'one-size-fits-all' approaches).  But in both cases, what distinguishes experimentalism is the post hoc use of what Rodrik calls 'diagnostics and evaluation'.  Put differently, in order for something to be experimental, there must be a process in place that is able to determine whether that experiment as 'failed' insofar a future policymaking is concerned.

Put another way, one essential and inevitable byproduct of experimentation is 'failure'.  But we simply do not see evidence of China's experimentation ever leading to a rejection of some developmental policy alternative. And on the other hand, as Linda Chelan Li has pointed out, nor do we see evidence of some experimental outcome contributing to more global policy formation (see, e.g., here).  In this sense, what others are calling experimentalism is really just simple 'decentralization'.  And as will be discussed further in my next post, simple decentralization -- without anything else -- does not really constitute anything that could be meaningfully called a developmental model.


Another line of support for the claim of experimentalism comes from the work of Sebastian Heilmann, whose article "Policy Experimentation in China's Economic Rise" seems to have been a significant influence on Rodrik in particular.  In that article, Heilmann describes three distinct 'tools of experimentation' in China.  These are 'experimental regulation', 'experimental points', and 'experimental zones'. 

But consistent with my argument above, in fact, none of these are really 'experimental' as we, following Rodrik, have defined that term above.  'Experimental regulation' is simply a statutory designation for executive regulation the authority for which has not been expressly delegated to the executive by the NPC or the constitution, as is otherwise required by the PRC Constitution.  It is probably more realistic to refer to it as 'extra-constitutional legislation.'  Theoretically, such legislation was supposed to be temporary, and needed to be confirmed by parliament in order to become permanent.  But most of the time, it turned out to be perpetual even without parliamentary confirmation.  I know of no example of 'experimental regulation' that was actually treated as an experiment, i.e., that was subject to any meaningful, post hoc diagnosis and evaluation.  I know of no example of experimental regulation that withdrawn or not approved because it did not work out as expected.  What was 'experimental in theory always turned out to be fait accompli in fact.  

Similarly, what Heilmann calls 'experimental points' seem really to be just simply sites of decentralization, they are not experimental in the sense of involving post hoc evaluation.  Lack of strong, centralized policymaking authority in China has always resulted in much local autonomy in setting and pursuing developmental goals.  This was more or less a spontaneous phenomenon prior to 1988.  I would argue that the Bureau for Comprehensive Planning and Experimental Points was in fact an effort not to promote experimentation, as Heilmann suggests, but to cabin and  control such deviations from national policy -- it was in effect anti-experimental rather than pro experimental in its intent.  And as Heilmann reports, even in that it failed, and -- reflecting the reality of unconstrained decentralization -- responsibility for 'experimentation' was formally passed off to regional governments in 1998, albeit subject to central guidelines.  But even at this provincial level, Heilmann's account gives no any evidence of post hoc diagnosis and evaluation of these experimental points resulting in policy change.  These experimental points are simply more localized cites of what is still top-down policy imposition.  

The same observation attaches to 'experimental zones'.  As Heilmann notes, the paradigmatic example of these are the Special Economic Zones.  But as with 'experimental point', these seem to have been intended primarily as places to cabin and control economic opening, not as sites for finding the best way to expand that opening to other locales.  I know of no central policy innovation to emerge from these zones.  It is true that Heilmann cites in particular the 'new socialist countryside' campaign, an example of such zones producing "major policy changes regarding the and the introduction of central government co-funding of rural health services."  He also writes that "[e]xperimental policy tools continue to be used for pioneering reforms that belong to the top of the policy agenda".  But it's hard to evaluate these claims since he does not give any specific examples.  And his claims are contradicted by numerous field studies.  For example, here is how one local rural governmental official -- a director of the Department of Finance of Mizhi county in Shaanxi -- described that campaign, as recounted in a recent article by Anna L. Ahlers and Gunter Schubert:
     The meaning of XNCJS ['new socialist countryside'] is very complex. Basically, you have to distinguish between a narrow (xiayi) and a broad (guangyi) conception of the term. In the narrow sense, XNCJS means nothing more than our government departments’ daily work, such as the construction and maintenance of retaining dams, the provision of sanitary services, etc.  In the broader sense of the term, XNCJS does not necessarily refer to the formulation and implementation of specific projects. It means much more the comprehensive development of a new rural society, including education, public sanitation, social welfare and measures to increase the rural income, that is, a complex setting which must be negotiated between the relevant departments. This comprehensive approach is the “New” in the term “Constructing a New Countryside”.
      The most important manifestations of XNCJS are (1) the concretization of policies passed down from above in order to facilitate local implementation, (2) an increase in the absolute and relative volume of central government subsidies (butie) for rural development, and (3) the strong emphasis in our work on rural construction.
Similarly, in her study of the New Countryside Campaign, and specifically of its success in "[abolishing] entire categories of rural taxes and levies", Linda Li (also mentioned above) found that:
Drawing from fieldwork and archival research, the paper describes dimensions of reform processes from both the top and bottom ends of the state hierarchy and argues that the reform outcomes—reduced burden levels and increased central-provincial inputs to rural services—emerged unintentionally out of strategic interactions between central and local state actors, each embedded in considerations more mundane than caring for the peasants.
Again, this is decentralization, but is not experimentation.  Policy is still being centrally dictated a priori---albeit vaguely.  Moreover, while there is some degree of post hoc monitoring, it is telling that it focus solely on assessing compliance with centralized performance goals.  There is no evidence of using these decentralized experiences to identify / benchmark new and innovative solutions to difficult developmental problems.  Again to quote from Ahlers and Schubert:
Interestingly, the cadres in Mizhi had a hard time explaining to us how these villages could best be emulated by others, given the differences in natural conditions, historical trajectories and the degree of economic development. It was quite obvious that model villages served as showcases for successful policy implementation to boost the cadres’ legitimacy. As many of our respondents confirmed, funding decisions also depend in part on the degree of “peaceful” cooperation within a village (between the village and party committees), which ensures smooth project implementation on the ground, and on the quality of communication between the cadre bureaucracies at the village, township and county levels, which translates into a clear advantage for villages and townships that have established a good working relationship with the county bureaus and the county lingdao banzi.
To be sure, there are some examples of local 'experimentation' that have blossomed into policy evolution.  Perhaps the most famous of these have been the Township-Village Enterprises.  My former co-editor Stephanie Balme has documented how local redress of what are called 'married-out women' cases resulted in centralized policy evolutions as to how to handle such cases.  But both of these examples were ad hoc and largely accidental or spontaneous.  They were not the product of any systematic 'experimentalism' of the kind advance by Rodrik.  And as will be discussed in my next post, their accidental and ad hoc character prevents them from being able to be constituent of a development 'model'.

Wednesday, October 1, 2014

No São Paulo Consensus or Happiness for Pessimo

 Pessimo brought a measure of well-being to suggest that São Paulo would be probably be a good place to be. I suggest instead that we adopt a development-related concept, which is the World Happiness Index. As Michael Trebilcock and Mariana Mota Prado describe in their new book, Advanced Introduction to Law and Development:


"A movement to redefine development based on well-being supported the development of the Gross National Happiness (GNH) Index. Spearheaded by the King of Bhutan, the index includes nine domains: psychological wellbeing, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. These domains are considered conditions of a ‘good life’ and are measured by 33 indicators. While initially supported only by a few academics and the government of Bhutan, the concept has gained international attention recently. In 2011, the United Nations approved a resolution entitled "Happiness: Towards a Holistic Approach to Development". (...) This resolution was followed by two World Happiness Reports, published in 2012 and 2013, which measure the overall happiness in different countries and rank them against each other. Alongside its recognition at the UN, in 2013 the OECD issued guidelines for an international standard for the measurement of well-being, largely subscribing to the concerns that have driven to the creation of the happiness index."

 
So, how happy was Optimo in Brazil? Not very happy. According to the 2013 report, Brazil ranks 24th. This is not the worse place to be, but it is still not at the top of the ranking as Pessimo suggested in his previous post. It is certainly a better place to be than Singapore (30th), but not better than Canada (6th). Therefore, we would not be on solid grounds to propose a São Paulo consensus on this basis. Moreover, we need to consider that Germany was two positions in the ranking below Brazil in 2013. This may have changed since the World Cup. 

If we focus the analysis in São Paulo, the city is going through one of the worse droughts in its history, which is threating water supply. While this may be a temporary problem, the UN indicated that São Paulo is the city with the highest level of mental disorders associated with urbanization among 23 cities analyzed. So, let me assure Pessimo that levels of well being are not particularly high down there. 

Considering the Index, and the fact that Optimo is now (happily!) back to higher levels of happiness Canada, I am looking forward to continuing the conversation about the Beijing Consensus.

Post scriptum: Would Portugal have been able to produce the most melancholic music in the World (fado) if they were not occupying the last position in the ranking?  

Sunday, September 21, 2014

Optimo in Sao Paulo -- another shot at a Sao Paulo consensus

Pessimo:

Optimo and I are taking a break from our Beijing Consensus dialogue because Optimo decided to go to Sao Paulo.

As you may recall, I've been trying to find a meaningful Sao Paulo Consensus, but so far have been 'disappointed' (as I like to be).  Brazil does not do particularly well in my PAW index; its HDI/IHDI differential is negative.  It is, in this sense, perfect for Pessimo's pessimistic view of 'development'.  So, one wonders, why would someone named Optimo seek out such a disappointing place?

Because, as it turns out, Brazil is an incredibly optimistic place!  According to the most recent  Gallup-Healthways Well-Being Index, Brazilians ranked tied for 5th (!) in the world in feeling of subjective well being.  No wonder Optimo would want to go there!  Despite all their developmental disappointments, Brazil nevertheless seems to be relatively full of people who ultimately see the world the way that Optimo sees it.

And maybe, that's the best consensus we could ultimately hope to find.  After all (and with apologies to Groucho Marx), Pessimo would never consent to a consensus to which he would actually consent.

Wednesday, September 17, 2014

Dialogus de Beijing Consensus -- Pessimo response regarding Ramo's Third theorem

I don't think that Optimo and I are in much disagreement regarding Ramo's 3rd theorem.  First, to clearify, I don't think that Ramo meant "self-determination' to refer to post-colonial status (since China per se was never a colony -- although parts of it were (e.g., Manchuria, Qingdao, Shanghai and of course Hong Kong).  My own understanding is like that of Optimo -- that by self-determination, Ramo is referring to autonomy with regards to policymaking, and I suspect even more particularly with regards to monatary policy, since Beijing's refusal to float the RMB is probably the most well known and oft-referred to example of Beijing's autonomy from global (American) economic orthodoxy.

Optimo is also probably right in suggesting that I placed too much weight on economic size in setting out a country's capacity to achieve policy self-determination.  However, I do think that is the case with regards to China.  Contrary to Rodrik's suggestion, Japan and South Korea are not good counter-examples, both developed their economies well before the onset of the Washington Consensus hegemony in the mid 1990s, and both were given economic carte-blanc by the US during the 1950s through 1980s primarily due to their front-line status during the Cold War.  I remember hearing a Washington DC policymaker or think-tank type saying during the early 1990s that Washington had "learned its lesson" from Japan, and "would not make the same mistake again", meaning that Washington was not about to let other government -- I recall he was referring specifically to Taiwan and the Mainland -- get away with the disregard for the global neoliberalism, particularly insofar as trade and IPR were concerned.  How autonomous India's economic policymaking is is an open question, India's efforts to defend its economic policies with regards to compulsory licensing of medicines has met with limited success, and according to some appear likely to fail in the long run (see, e.g., Christopher Arup, “The Transfer of Pharmaceutical Patent Laws: The Case of India’s Paragraph 3(d),” in Law and Development and the Global Discourses of Legal Transfers (John Gillespie and Pip Nicholson, eds., Cambridge University Press, 2013), pp. 121-142).  More recently, it's ability to set policy with regards to foreign investment has been dealt a significant blow when a ruling by an international investment effectively required Indian law to give foreign investors greater protections than they give their own domestic firms (see the White Industries v India case).

But that having been said, there are indeed examples of smaller economies that have resisted transnational neoliberal hegemony.  The best example of this is probably found in Malaysia's decision to impose capital controls on its currency, against the strong opposition of both the IMF and Wall Street, during the Asian Economic Crisis of the late 1990s.

But at the end of the day, Optimo gets me right when he or she suggested:
Pessimo raises an important question about what defines a model, arguing that it needs to provide guidance for action. If this is the case, Pessimo may have the same reservations to the third theorem that he has regarding the second theorem, i.e. the theorem does not seem to present any guidance to action. Indeed, if anything, the theorem seems to say “do what you think is best”. I would claim instead that it says "do not listen to the World Bank and the IMF", which can be interpreted as a negative guidance for action. If Pessimo wants positive guidance, this may fall a bit short. But I will leave this for Pessimo to confirm (or not) and then I may come back to this in a future post.
Yes, I do think that ultimately, that is my position.   And it lead us directly to the second version of the Beijing Consensus as outlined in the prologue, the 'experimentalist' version set out independently by Randy Peerenboom in his book on the 'East Asian Model' and Dani Rodrik in his article on 'new development economics'.  It is to this I now propose we turn.

Sunday, September 14, 2014

More on the proposed PAW ('Punching above [GDP] Weight') index: On the relationship between HDI, IHDI, and PAW

In a commentary response to my earlier posting on the possible utility of an index comparing GDP to HDI ranking, which I called the PAW ('Punches above its Weight') index, Mariana Prado suggested that the PAW index might be improved if one were to use inequality-adjusted HDI (IHDI) rather than raw HDI:
 The HDI includes a measure of wealth (until recently they used GDP per capita, and now they use GNI per capita). As a consequence, the rank of a particular country in the HDI may reflect a high level of income, and relatively low levels of education and health. Therefore, my suggestion is to calculate the PAW as the difference between a country's rank in GDP (or GNI) per capita) minus its rank the HDI health and education indexes. If this is too complicated, perhaps an easy improvement would be to use inequality-adjusted HDI (IHDI) instead. The advantage of IHDI is that it reflects more accurately the percentage of the population that is actually benefiting from the existing levels of income, health and education in the country.
Actually, exploring the relationship between IHDI, HDI, and PAW revealed something very interesting:  namely, that the relationship between a country’s IHDI and HDI rankings seems to correlate significantly with that country's PAW index.  In other words, the greater the positive difference between a country’s IHDI and HDI rankings, the more likely that country will also have a high PAW (i.e., high positive difference between its HDI and GDP rankings).  Below are the top 15 countries listed in order of difference between IHDI rankings and HDI rankings (IHDI/HDI), followed by their PAW.


Country
IHDI/HDI
PAW
Moldova
18
22
Uzbekistan
17
19
Kyrgyzstan
17
21
Mongolia
15
18
Ukraine
14
34
Vietnam
14
13
Armenia
13
31
Azerbaijan
11
11
Belarus
10
11
Czech Republic
9
11
Serbia
9
9
Sri Lanka
9
39
Gabon
8
-60
Indonesia
8
17
Tajikistan
8
17
Jordan
5
43
Georgia
2
30


This leads me to suspect that what IHDI is adding to HDI may be similar to what PAW is adding to GDP.  This makes sense, conceptually.  The lower HDI conditions of the poorer and more impoverished part of a country's population are the low-hanging fruit of HDI development:  the relatively low level of HDI resources available to this population means that it is likely to be the easiest and most cost effective part of the HDI spectrum to improve.  All in all, it suggests that the way that a country punches above its GDP weight is by effecting a progressive (re)distribution of HDI resources to poorer populations. 

There are a number of significant implications stemming from this.  First, the PAW index probably should not use iHDI rather than HDI, because that would lead to double counting -- if PAW is ultimately measuring inequality in HDI resource distribution, and IHDI is also measuring inequality in resource distribution, than using IHDI rather than HDI in calculating PAW would be counting resource inequality twice.

Second, it would seem to confirm my hypothesis that insofar as development is concerned, strategic institutional design -- aka 'law and development' -- should properly focus on issues of resource (re)distribution and not on growth, as that is the part of the HDI basket that is most likely to be susceptible to institutional architecture.

This leads to a third implication, which has significant and very ambiguous implication for the law and development project.  Because it is unclear to my mind how much legal-institution reform can actually effectuate progressive redistribution of HDI resources.  I will address this in a separate post.

Saturday, September 13, 2014

Engelmann on International Capital and Legal Space in Brazil



Fabiano Engelmann has just circulated an important article in Portuguese on International Capital and Legal Space in Brazil "O Espaco Juridico Brasileira e as Condicoes de Uso do Capital Internacional"

Engelmann follows Dezalay and Garth in his analysis of the impact of Rule of Law reforms in Brazil and the impact of global legal ideas on Brazil's "juridical space". He describes how FGV has played a role in building up the role of "corporate lawyer" and USP has spearheaded diffusion of Law and Economics.

He charts the rise of elite corporate law firms that present themselves as representatives of foreign corporations and which, due to their "size, insertion in the world of business, and lawyering methods distance themselves from traditional lawyer's offices and operate like large corporations" (my translation). The paper includes data on the 10 largest elite firms including areas of specialization and examples of cases handled as well as data on the history of the firm, size, and international connections of principal partners.

Engelmann observes:

         "This sketch of a preliminary map of the space for legitimation of "corporate lawyers"  in the academic and professional spheres, along with the construction of legal institutions with affinity to the market, allows us to affirm that this sector grew significantly since 1995. We can point to the initiatives of FGV and the law and economic movement as evidence of the import of techniques of corporate lawyering and the embedding of legal institutions supportive of business practice." (my translation).

While the corporate law sector and the norms it favors have had significant impact on juridical space, there are counter tendencies and resistances. The paper describes a number of intellectual and advocacy movements largely based on interpretation of the 1988 Constitution that tend to affirm more state-centric approaches and resist market norms. He mentions judicial decisions and post-graduate courses in law both which have reinforced public law doctrines and collective rights.

    "The combination of judicial decisions and intellectual production in the academic field has strengthened the recognition of collective rights and buttressed public policies aimed at reducing inequality in contrast with efforts to use judicial space to guaranty individual rights, contract and property" (my translation).

The article ends by suggesting that the future will see a continued struggle between efforts to legitimate a market legal culture based on models exported by the World Bank and  favorable to international business on the one hand, and alternatives visions supported by interpreters of the Constitutions largely positioned in careers in the State.

Friday, September 12, 2014

Dialogus de Beijing Consensus -- Optimo on Ramo's idea of a 'Beijing Consensus' (Third theorem)


As promised, I now turn to the third theorem of Ramo, which is the following:

Finally, the Beijing Consensus contains a theory of self-determination, one that stresses using leverage to move big, hegemonic powers that may be tempted to tread on your toes. This new security doctrine is important enough that I treat it later in a separate chapter.

Pessimo had two reactions to this theorem. First, Pessimo seems to agree that self-determination is relevant but disagrees with Ramo’s assumption that such condition can be influenced by domestic policies. In other words, while Ramo perceives this a power struggle, Pessimo is more determinist: “China’s autonomy was and is pure and simply a function of its size”. Second, Pessimo argues that while Ramo is concerned with the “hegemonic powers”, markets and the private actors operating in them offer a bigger threat to a country’s self-determination.

I am guessing that the first reaction of Pessimo comes from his determinist view of development. Indeed, the idea that China’s self-determination comes from its size seems even more drastically deterministic than Pessimo’s argument that a country’s physical and cultural proximity to other countries determines its development’s prospects. As you may remember, Pessimo offered a series of clarifications to my first post, including the following:


Let me preface everything that I will say by indicating that there are very vague terms both in Ramo and in Pessimo’s formulations. Thus, part of my response is based on some speculation about what these terms actually mean.

Let’s assume that a good measure of self-determination is the fact that a country has not been colonized, which lends itself to a series of important consequences, such complexes and often largely domineering post-colonial relationship (with the actual colonizer of with its replacement). China has never been colonized, along with a few other nations: Liberia, Japan, Thailand, Bhutan and Iran. Just by looking at the list of countries, it would be hard to claim that countries are not colonized because of their sizes. Thus, a more complex set of facts needs to be used to explain this. Let’s assume that by size, Pessimo is referring to population and self-determination is still referring to not being colonized. It is true that China has never been a colony, but other countries with similarly large populations, such as India, have been colonized. Perhaps Pessimo is referring to territory, not population.  In this case, there are at least two other countries of comparable territorial size that were colonies: Brazil and Canada (although the colonial territory expanded overtime as opposed to being set out at the outset). In sum, these definitions seem too easily questionable for me to believe that this is what we are talking about.

Let’s assume instead that by self-determination we referring to a country’s ability to determine its domestic policies independently of the influence of other nations. Again, the size of a country seems to be of much less important than its political and economic power and, perhaps most importantly, the governance structure of international institutions. Indeed, the tension between having an international world order and maintaining a country’s ability to define its own domestic policies is beautifully explored in Dani Rodrik’s book the Globalization Paradox. As one review of the book suggests, if there are any lessons that come from Asian countries, including China, is that they have kept their ability to decide their own domestic policies in the face of the Washington Consensus formulas:

“As Rodrik sees it, globalization began to run off the rails when it got hijacked by the notion that any restrictions on the flow of goods or capital across borders would result in great sacrifice to efficiency and economic growth. Not only was this free-market ideology imposed by the United States on developing countries through the interventions of the World Bank and the International Monetary Fund, but it was also imposed on the United States itself through a succession of free-trade treaties, the deregulation of finance and the retreat from any semblance of industrial policy.

The irony, Rodrik notes, is that the countries that experienced the greatest growth during the heyday of the "Washington consensus" were Japan, China, South Korea and India, which never embraced it. For years, they had nurtured, protected and subsidized key industries before subjecting them to foreign competition. They had closely controlled the allocation of capital and the flow of capital across their borders. And they flagrantly manipulated their currency and maintained formal and informal barriers to imports. Does anyone, he asks, really think that these countries would be better off today if they had played the game, instead, by the Washington rules?”

(For the entire review, see here).

In other words, China and other Asian countries do provide a model of self-determination in light of the attempts, such as those influenced by the Washington Consensus, to imposed one single policy (a free market policy) to all countries. The high level of self-determination of these Asian countries has protected them both from the so-called “hegemonic powers” and their pressure in favour of free markets. Incidentally this self-determination also seems to have protected them from “the markets”, which is Pessimo’s second concern. If this is the correct interpretation of what Ramo mean by self-determination, it is very clear from the list of countries listed in above (Japan, China, South Korea and India) that size does not matter.

Pessimo may have still reservations regarding this point. In an excellent response to my comments to the second theorem, Pessimo raises an important question about what defines a model, arguing that it needs to provide guidance for action. If this is the case, Pessimo may have the same reservations to the third theorem that he has regarding the second theorem, i.e. the theorem does not seem to present any guidance to action. Indeed, if anything, the theorem seems to say “do what you think is best”. I would claim instead that it says "do not listen to the World Bank and the IMF", which can be interpreted as a negative guidance for action. If Pessimo wants positive guidance, this may fall a bit short. But I will leave this for Pessimo to confirm (or not) and then I may come back to this in a future post.

Let’s turn to Pessimo’s second point: “the much bigger problem is domination by market”. Pessimo not only argues that markets can offer a bigger threat than hegemonic powers, but he also argues that the solutions available are rather limited:


My first comment is that Prado would be a much more influential scholar if the BRICS Bank had been inspired by some of her ideas, but unfortunately that is not the case. Second, Pessimo here suggests that self-determination would be restricted to “domestic financial autonomy”. As I have argued earlier, I would rather define self-determination as the country’s ability to set up its own policies. The idea of financial autonomy seems a bit vague, not to say utopian. Does domestic financial autonomy means having enough resources in the national economy not to need foreign direct investment or foreign investment of any kind? This seems like a rather tall order. To make matters more complicated, towards the end Pessimo changes the term to “economic autonomy”, which makes the statement even more confusing.What is economic autonomy?

In any event, I think the excerpt cited earlier provides a good illustration of the fact that Asian countries, including China, have managed to protect themselves from such intrusive market forces (and the vulnerability associated with them) by creating protective policies. If this kind of limited vulnerability is what defines "financial or economic autonomy", we are back to my earlier point. such autonomy is derived from a country’s ability to determine its own policies (insulating itself from “markets” as much as it deems appropriate). So, we are back into the idea that self-determination is connected with a country’s capacity to define its own policies. And size (however defined) does not seem to have anything to do with it.

In sum, as they say: “It's not the size of the dog in the fight, it's the size of the fight in the dog.”