Dani Rodrik: How the Rich Rule

PRINCETON – It is hardly news that the rich have more political power than the poor, even in democratic countries where everyone gets a single vote in elections. But two political scientists, Martin Gilens of Princeton University and Benjamin Page of Northwestern University, have recently produced some stark findings for the United States that have dramatic implications for the functioning of democracy – in the US and elsewhere.

The authors’ research builds on prior work by Gilens, who painstakingly collected public-opinion polls on nearly 2,000 policy questions from 1981 to 2002. The pair then examined whether America’s federal government adopted the policy in question within four years of the survey, and tracked how closely the outcome matched the preferences of voters at different points of the income distribution.

When viewed in isolation, the preferences of the “average” voter – that is, a voter in the middle of the income distribution – seem to have a strongly positive influence on the government’s ultimate response. A policy that the average voter would like is significantly more likely to be enacted.

But, as Gilens and Page note, this gives a misleadingly upbeat impression of the representativeness of government decisions. The preferences of the average voter and of economic elites are not very different on most policy matters. For example, both groups of voters would like to see a strong national defense and a healthy economy. A better test would be to examine what the government does when the two groups have divergent views.

To carry out that test, Gilens and Page ran a horse race between the preferences of average voters and those of economic elites – defined as individuals at the top tenth percentile of the income distribution – to see which voters exert greater influence. They found that the effect of the average voter drops to insignificant levels, while that of economic elites remains substantial. 

The implication is clear: when the elites’ interests differ from those of the rest of society, it is their views that count – almost exclusively. (As Gilens and Page explain, we should think of the preferences of the top 10% as a proxy for the views of the truly wealthy, say, the top 1% – the genuine elite.)

Gilens and Page report similar results for organized interest groups, which wield a powerful influence on policy formation. As they point out, “it makes very little difference what the general public thinks” once interest-group alignments and the preferences of affluent Americans are taken into account.

These disheartening results raise an important question: How do politicians who are unresponsive to the interests of the vast majority of their constituents get elected and, more important, re-elected, while doing the bidding mostly of the wealthiest individuals?

Part of the explanation may be that most voters have a poor understanding of how the political system works and how it is tilted in favor of the economic elite. As Gilens and Page emphasize, their evidence does not imply that government policy makes the average citizen worse off. Ordinary citizens often do get what they want, by virtue of the fact that their preferences frequently are similar to those of the elite. This correlation of the two groups’ preferences may make it difficult for voters to discern politicians’ bias.

But another, more pernicious, part of the answer may lie in the strategies to which political leaders resort in order to get elected. A politician who represents the interests primarily of economic elites has to find other means of appealing to the masses. Such an alternative is provided by the politics of nationalism, sectarianism, and identity – a politics based on cultural values and symbolism rather than bread-and-butter interests. When politics is waged on these grounds, elections are won by those who are most successful at “priming” our latent cultural and psychological markers, not those who best represent our interests.

Karl Marx famously said that religion is “the opium of the people.” What he meant is that religious sentiment could obscure the material deprivations that workers and other exploited people experience in their daily lives.

In much of the same way, the rise of the religious right and, with it, culture wars over “family values” and other highly polarizing issues (for example, immigration) have served to insulate American politics from the sharp rise in economic inequality since the late 1970s. As a result, conservatives have been able to retain power despite their pursuit of economic and social policies that are inimical to the interests of the middle and lower classes.

Identity politics is malignant because it tends to draw boundaries around a privileged in-group and requires the exclusion of outsiders – those of other countries, values, religions, or ethnicities. This can be seen most clearly in illiberal democracies such as Russia, Turkey, and Hungary. In order to solidify their electoral base, leaders in these countries appeal heavily to national, cultural, and religious symbols.

In doing so, they typically inflame passions against religious and ethnic minorities. For regimes that represent economic elites (and are often corrupt to the core), it is a ploy that pays off handsomely at the polls.

Widening inequality in the world’s advanced and developing countries thus inflicts two blows against democratic politics. Not only does it lead to greater disenfranchisement of the middle and lower classes; it also fosters among the elite a poisonous politics of sectarianism.

Dani Rodrik is Professor of Social Science at the Institute for Advanced Study, Princeton, New Jersey. He is the author of One Economics, Many Recipes: Globalization, Institutions, and Economic Growth and, most recently, The Globalization Paradox: Democracy and the Future of the World Economy

Dani Rodrik : Africa’s Structural Transformation Challenge

PRINCETON – Long viewed as an economic basket case, Sub-Saharan Africa is experiencing its best growth performance since the immediate post-independence years. Natural-resource windfalls have helped, but the good news extends beyond resource-rich countries. Countries such as Ethiopia, Rwanda, and Uganda, among others, have grown at East Asian rates since the mid-1990’s. And Africa’s business and political leaders are teeming with optimism about the continent’s future.

The question is whether this performance can be sustained. So far, growth has been driven by a combination of external resources (aid, debt relief, or commodity windfalls) and the removal of some of the worst policy distortions of the past. Domestic productivity has been given a boost by an increase in demand for domestic goods and services (mostly the latter) and more efficient use of resources. The trouble is that it is not clear from whence future productivity gains will come.

The underlying problem is the weakness of these economies’ structural transformation. East Asian countries grew rapidly by replicating, in a much shorter time frame, what today’s advanced countries did following the Industrial Revolution. They turned their farmers into manufacturing workers, diversified their economies, and exported a range of increasingly sophisticated goods.

Little of this process is taking place in Africa. As researchers at the African Center for Economic Transformation in Accra, Ghana, put it, the continent is “growing rapidly, transforming slowly.”

In principle, the region’s potential for labor-intensive industrialization is great. A Chinese shoe manufacturer, for example, pays its Ethiopian workers one-tenth what it pays its workers back home. It can raise Ethiopian workers’ productivity to half or more of Chinese levels through in-house training. The savings in labor costs more than offset other incremental costs of doing business in an African environment, such as poor infrastructure and bureaucratic red tape.

But the aggregate numbers tell a worrying story. Fewer than 10% of African workers find jobs in manufacturing, and among those only a tiny fraction – as low as one-tenth – are employed in modern, formal firms with adequate technology. Distressingly, there has been very little improvement in this regard, despite high growth rates. In fact, Sub-Saharan Africa is less industrialized today than it was in the 1980’s. Private investment in modern industries, especially non-resource tradables, has not increased, and remains too low to sustain structural transformation.

As in all developing countries, farmers in Africa are flocking to the cities. And yet, as a recent study from the Groningen Growth and Development Center shows, rural migrants do not end up in modern manufacturing industries, as they did in East Asia, but in services such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic in Africa and have been falling behind the world frontier.

Consider Rwanda, a much-heralded success story where GDP has increased by a whopping 9.6% per year, on average, since 1995 (with per capita incomes rising at an annual rate of 5.2%). Xinshen Diao of the International Food Policy Research Institute has shown that this growth was led by non-tradable services, in particular construction, transport, and hotels and restaurants. The public sector dominates investment, and the bulk of public investment is financed by foreign grants. Foreign aid has caused the real exchange rate to appreciate, compounding the difficulties faced by manufacturing and other tradables.

None of this is to dismiss Rwanda’s progress in reducing poverty, which reflects reforms in health, education, and the general policy environment. Without question, these improvements have raised the country’s potential income. But improved governance and human capital do not necessarily translate into economic dynamism. What Rwanda and other African countries lack are the modern, tradable industries that can turn the potential into reality by acting as the domestic engine of productivity growth.

The African economic landscape’s dominant feature – an informal sector comprising microenterprises, household production, and unofficial activities – is absorbing the growing urban labor force and acting as a social safety net. But the evidence suggests that it cannot provide the missing productive dynamism. Studies show that very few microenterprises grow beyond informality, just as the bulk of successful established firms do not start out as small, informal enterprises.

Optimists say that the good news about African structural transformation has not yet shown up in macroeconomic data. They may well be right. But if they are wrong, Africa may confront some serious difficulties in the decades ahead.

Half of Sub-Saharan Africa’s population is under 25 years of age. According to the World Bank, each year an additional five million turn 15, “crossing the threshold from childhood to adulthood.” Given the slow pace of positive structural transformation, the Bank projects that over the next decade only one in four African youth will find regular employment as a salaried worker, and that only a small fraction of those will be in the formal sector of modern enterprises.

Two decades of economic expansion in Sub-Saharan Africa have raised a young population’s expectations of good jobs without greatly expanding the capacity to deliver them. These are the conditions that make social protest and political instability likely. Economic planning based on simple extrapolations of recent growth will exacerbate the discrepancy. Instead, African political leaders may have to manage expectations downward, while working to increase the rate of structural transformation and social inclusion.

Dani Rodrik is Professor of Social Science at the Institute for Advanced Study, Princeton, New Jersey. He is the author of One Economics, Many Recipes: Globalization, Institutions, and Economic Growth and, most recently, The Globalization Paradox: Democracy and the Future of the World

Dani Rodrik: The Problem is Authoritarianism, Not Islam

PRINCETON – Is Islam fundamentally incompatible with democracy? Time and again events compel us to ask this question. And yet it is a question that obscures more than it illuminates.

Turkey, Egypt, and Tunisia are very different countries, but one thing that they share are Islamist governments (at least until recently in Egypt’s case). To varying degrees, these governments have undermined their democratic credentials by failing to protect civil and human rights and employing heavy-handed tactics against their opponents. Despite repeated assurances, Islamist leaders have shown little interest in democracy beyond winning at the ballot box.

So those who believe that the removal of Egyptian President Mohamed Morsi’s government was justified have a point. As the Muslim Brotherhood’s rule became increasingly authoritarian, it trampled on the ideals and aspirations of the Tahrir Square revolution that toppled former President Hosni Mubarak in 2011.

Nonetheless, the support that the military coup received from many Egyptian liberals is difficult to fathom. Clever word games cannot hide the essence of what happened: a government that came to power in a fair election was overthrown by the army.

Some believe that military interventions can serve as a useful course correction. US Secretary of State John Kerry said that the Egyptian army was “restoring democracy.” And the former US ambassador James Jeffrey drew on Turkey’s experience, and the 1980 coup in particular, to argue that the military could help in “moderating Islamist movements.”

The notion that a politically transcendent impartial arbiter can step in to prevent abuse of power and reinvigorate democracy is an attractive one. But it is belied by Turkey’s own history. True, the Turkish military was not interested in governing directly, and handed power back to civilian governments after its coups. Even so, its repeated interventions greatly harmed the development of a democratic political culture.

Ultimately, democracy relies on an implicit quid pro quo among contending groups, according to which each agrees to protect the others’ rights in exchange for recognition of its entitlement to govern should it win an election. Constitutional provisions alone cannot ensure such an outcome, for those in power can easily override them. Instead, norms of proper political behavior must become embodied in the polity’s enduring institutions – its political parties, parliaments, and courts – in order to prevent abuse of power.

What sustains these norms is the knowledge that undermining them will have consequences that are damaging to all. If I do not protect your rights while in power today, you will have little reason to respect mine when you come to power tomorrow.

When an outside force such as the military interrupts this game, either directly or because one of the parties can rely on its intervention, the dynamics of political behavior change irrevocably. The loss of continuity in political parties, parliamentary procedures, and judicial processes encourages short-term calculation and spawns illiberal practices. This is exactly the malady of young democracies.

It is also the problem that plagues Turkish democracy, despite its longer track record. When Prime Minister Recep Tayyip Erdoğan’s Justice and Development Party (AKP) came to power in 2002, it not only lacked a democratic culture, but also had much to fear about how the secularist-military old guard might react. So it behaved exactly according to its fear, launching a series of show trials targeting senior military officials and other perceived opponents. When Erdoğan’s government eventually lost the support of liberals who had initially supported it, it cracked down on the media and freedom of expression.

Given this backdrop of repression and punctuated democracy, the failure of Islamists in Egypt and Turkey tells us less about Islam’s compatibility with democracy than we might think. Did Morsi and Erdoğan behave as they did because of their religious ideologies, or would most political leaders seeking to retain power have acted in similar ways in their position? Latin America, where Islam plays no political role, has no shortage of populist strongmen who routinely violate civil liberties and political rights.

None of this is to condone the abuse of power by Islamist leaders. But, just as the Turkish military’s repeated interventions against a perceived Islamist threat have impeded democracy, so the Egyptian military’s toppling of Morsi will not help to restore it. An entity that is authoritarian and hierarchical in nature cannot be relied on to protect and promote a democratic transition. A case can be made for military intervention when a country finds itself on the edge of civil war, as Turkey was in 1980 (and as Egypt arguably was in July); but one should not confuse restoring order with restoring democracy.

While the battle for democracy must be won or lost at home, outsiders do have a role to play. International actors such as human-rights organizations can usefully document and publicize rights violations and other abuses of power.

Democratic countries – particularly the United States and members of the European Union – can denounce authoritarian practices with a clear voice and resist the temptation of cozying up to regional bullies for short-term strategic advantage. Given economic globalization and global communications, autocratic rulers derive almost as much strength from their international standing as they do from their control of domestic institutions.

What does not help – and in fact backfires – is for outsiders to view the political crisis of Middle Eastern societies as the result of an Islamist-secularist divide. This perspective plays directly into the hands of authoritarian rulers like Erdoğan, who can leverage the perceived Islamophobia of foreign powers to mobilize their political base. Human-rights abuses and violations of the rule of law should be denounced for what they are – without linking them to culture or religion.

Dani Rodrik is Professor of Social Science at the Institute for Advanced Study, Princeton, New Jersey. He is the author of One Economics, Many Recipes: Globalization, Institutions, and Economic Growth and, most recently, The Globalization Paradox: Democracy and the Future of the World Economy.

Dani Rodrik: The Tyranny of Political Economy

CAMBRIDGE – There was a time when we economists steered clear of politics. We viewed our job as describing how market economies work, when they fail, and how well-designed policies can enhance efficiency. We analyzed trade-offs between competing objectives (say, equity versus efficiency), and prescribed policies to meet desired economic outcomes, including redistribution. It was up to politicians to take our advice (or not), and to bureaucrats to implement it.

Then some of us became more ambitious. Frustrated by the reality that much of our advice went unheeded (so many free-market solutions still waiting to be taken up!), we turned our analytical toolkit on the behavior of politicians and bureaucrats themselves. We began to examine political behavior using the same conceptual framework that we use for consumer and producer decisions in a market economy. Politicians became income-maximizing suppliers of policy favors; citizens became rent-seeking lobbies and special interests; and political systems became marketplaces in which votes and political influence are traded for economic benefits.
Thus was born the field of rational-choice political economy, and a style of theorizing that many political scientists readily emulated. The apparent payoff was that we could now explain why politicians did so many things that violated economic rationality. Indeed, there was no economic malfunction that the two words “vested interests” could not account for.

Why are so many industries closed off to real competition? Because politicians are in the pockets of the incumbents who reap the rents. Why do governments erect barriers to international trade? Because the beneficiaries of trade protection are concentrated and politically influential, while consumers are diffuse and disorganized. Why do political elites block reforms that would spur economic growth and development?  Because growth and development would undermine their hold on political power. Why are there financial crises? Because banks capture the policymaking process so that they can take excessive risks at the expense of the general public.

In order to change the world, we need to understand it. And this mode of analysis seemed to transport us to a higher level of understanding of economic and political outcomes.

But there was a deep paradox in all of this. The more we claimed to be explaining, the less room was left for improving matters. If politicians’ behavior is determined by the vested interests to which they are beholden, economists’ advocacy of policy reforms is bound to fall on deaf ears. The more complete our social science, the more irrelevant our policy analysis.
This is where the analogy between human sciences and natural sciences breaks down. Consider the relationship between science and engineering. As scientists’ understanding of the physical laws of nature grows more sophisticated, engineers can build better bridges and buildings. Improvements in natural science enhance, rather than impede, our ability to shape our physical environment.

The relationship between political economy and policy analysis is not at all like this. By endogenizing politicians’ behavior, political economy disempowers policy analysts. It is as if physicists came up with theories that explained not only natural phenomena, but also determined which bridges and buildings engineers would build. There would then scarcely be any need for engineering schools.

If it seems to you that something is wrong with this, you are on to something. In reality, our contemporary frameworks for political economy are replete with unstated assumptions about the system of ideas underlying the operation of political systems. Make those assumptions explicit, and the decisive role of vested interests evaporates. Policy design, political leadership, and human agency come back to life.

There are three ways in which ideas shape interests. First, ideas determine how political elites define themselves and the objectives they pursue – money, honor, status, longevity in power, or simply a place in history. These questions of identity are central to how they choose to act.

Second, ideas determine political actors’ views about how the world works. Powerful business interests will lobby for different policies when they believe that fiscal stimulus yields only inflation than when they believe that it generates higher aggregate demand. Revenue hungry governments will impose a lower tax when they think that it can be evaded than when they think that it cannot.

Most important from the perspective of policy analysis, ideas determine the strategies that political actors believe they can pursue. For example, one way for elites to remain in power is to suppress all economic activity. But another is to encourage economic development while diversifying their own economic base, establishing coalitions, fostering state-directed industrialization, or pursuing a variety of other strategies limited only by the elites’ imagination. Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes.

Indeed, this is what explains some of the most astounding turnarounds in economic performance in recent decades, such as South Korea’s and China’s breakout growth (in the 1960’s and the late 1970’s, respectively). In both cases, the biggest winners were “vested interests” (Korea’s business establishment and the Chinese Communist Party). What enabled reform was not a reconfiguration of political power, but the emergence of new strategies. Economic change often happens not when vested interests are defeated, but when different strategies are used to pursue those interests.

Political economy undoubtedly remains important. Without a clear understanding of who gains and who loses from the status quo, it is difficult to make sense of our existing policies. But an excessive focus on vested interests can easily divert us from the critical contribution that policy analysis and political entrepreneurship can make. The possibilities of economic change are limited not just by the realities of political power, but also by the poverty of our ideas.


Dani Rodrik is Professor of International Political Economy at Harvard University’s Kennedy School of Government and a leading scholar of globalization and economic development. His most recent book is The Globalization Paradox: Democracy and the Future of the World Economy.

Dani Rodrik: America’s Third-World Politics

CAMBRIDGE – With its presidential election over, the United States can finally take a breather from campaign politics, at least for a while. But an uncomfortable question lingers: How is it possible for the world’s most powerful country and its oldest continuous democracy to exhibit a state of political discourse that is more reminiscent of a failed African state?

Maybe that is too harsh an assessment of Africa’s nascent democracies. If you think I exaggerate, you have not been paying close attention. The pandering to extremist groups, the rejection of science, the outright lies and distortions, and the evasion of the real issues that characterized the most recent election cycle set a new low for democratic politics.

Without question, the worst offenders are America’s Republicans, whose leaders have somehow become enraptured by ideas that are beyond the pale in other advanced countries. Of the party’s dozen presidential candidates, only two (Mitt Romney and Jon Huntsman) declined to reject scientific evidence concerning global warming and its human causes. But, when pressed on it, Romney was sufficiently uncomfortable about his position that he wobbled on the issue.

The Darwinian theory of evolution has long been a dirty word among Republicans as well. Rick Perry, the governor of Texas and an early frontrunner in the Republican primary, called it just a “theory out there,” while Romney himself has had to argue that it is consistent with creationism – the idea that an intelligent force designed the universe and brought it into being.

Likewise, if there is an archaic idea in economics, it is that the US should return to the Gold Standard. Yet, this idea, too, has strong support within the Republican Party – led by Ron Paul, another contender for the party’s presidential nomination. No one was surprised when the party’s platform gave a nod to the Gold Standard in its convention in August.

Most non-Americans would find it crazy that neither Romney nor Barack Obama supported stricter gun-control laws (with Obama making an exception only for assault weapons such as AK-47s), in a country where it is sometimes easier to buy guns than it is to vote. Most Europeans cannot understand how, in a civilized country, both candidates can favor the death penalty. And I won’t even get into the abortion debate.

Candidate Romney was so cowed by his party’s obsession with low taxes that he never put forth a budget that added up. It was left to his spinners to explain, as The Economist put it, that this was “necessary rubbish, concocted to persuade the fanatics who vote in the Republican primaries.”

Obama, for his part, catered to economic nationalists by attacking Romney as an “outsourcing pioneer” and calling him an “outsourcer in chief” – as if outsourcing were evil, could be stopped, or Obama himself had done much to discourage it.

So rampant were the equivocations, untruths, and outright lies from both camps that many media outlets and non-partisan groups maintained running lists of factual distortions. One of the best known, FactCheck.org, an initiative of the Annenberg Public Policy Center at the University of Pennsylvania, confessed that this campaign had kept them exceptionally busy.
Some of the most egregious examples included Obama’s claims that Romney was planning to raise taxes by $2,000 on middle-income taxpayers and/or cut taxes by $5 trillion, and that Romney backed a law that would outlaw “all abortions, even in cases of rape and incest.” Romney went even further, claiming that Obama planned to raise taxes by $4,000 on middle-income taxpayers; that Obama planned “to gut welfare reform by dropping work requirements”; and that Chrysler, bailed out by the Obama administration, was moving all of its Jeep production to China.

None of these claims was true. 

 “It’s been that sort of campaign,” FactCheck.org’s analysts wrote, “filled from beginning to end with deceptive attacks and counterattacks, and dubious claims.” 

Meanwhile, over the course of three televised presidential debates and one vice-presidential debate, climate change, the signature issue of our time and the most serious problem confronting our planet, was not mentioned even once.

One can draw two possible conclusions from America’s election. One is that the US will ultimately be undone by the poor quality of its democratic discourse, and that it is merely at the start of an inevitable decline. The symptoms are there, even if the disease has not yet infected the entire body.

The other possibility is that what is said and done during an election makes little difference to a polity’s health. Campaigns are always a time for cheap populism and kowtowing to single-issue fundamentalists. Perhaps what really matters is what happens after a candidate takes office: the quality of the checks and balances within which he or she operates, the advice offered, the decisions taken, and, ultimately, the policies pursued.

But, if American elections are nothing other than entertainment, why is so much money spent on them, and why do so many people get so exercised over them? Can the answer be that the outcome would be even worse otherwise?

To paraphrase Winston Churchill, elections are the worst way to select a political leader, save for all other methods that have been tried – and nowhere more so than in America.


Dani Rodrik is Professor of International Political Economy at Harvard University’s Kennedy School of Government and a leading scholar of globalization and economic development. His most recent book is The Globalization Paradox: Democracy and the Future of the World Economy.

Dani Rodrik: The Truth About Sovereignty

CAMBRIDGE – In the French parliament’s recent debate on Europe’s new fiscal treaty, the country’s Socialist government vehemently denied that ratification of the treaty would undermine French sovereignty. It places “not one constraint on the level of public spending,” Jean-Marc Ayrault, the prime minister, asserted. “Budget sovereignty remains in the parliament of the French Republic.”

As Ayrault was trying to reassure his skeptical colleagues, including many members of his own party, European Commissioner for Competition Joaquin Almunia was delivering a similar message to his fellow social democrats in Brussels. To succeed, he argued, Europe must prove wrong those who believe there is a conflict between globalization and sovereignty.

Nobody likes to give up national sovereignty, least of all, it seems, politicians on the left. Yet, by denying the obvious fact that the eurozone’s viability depends on substantial restraints on sovereignty, Europe’s leaders are misleading their voters, delaying the Europeanization of democratic politics, and raising the political and economic costs of the ultimate reckoning.

The eurozone aspires to full economic integration, which entails the elimination of transaction costs that impede cross-border commerce and finance. 

Obviously, it requires that governments renounce direct restrictions on trade and capital flows. But it also requires that they harmonize their domestic rules and regulations – such as product-safety standards and bank regulations – with those of other member states in order to ensure they do not act as indirect trade barriers. And governments must forswear changes in these policies, lest the uncertainty itself act as a transaction cost.

This was all implicit in the European Union’s single-market initiative. The eurozone went one step further, aiming through monetary unification to eradicate fully the transaction costs associated with national currencies and exchange-rate risk.

Simply put, the European integration project has hinged on restrictions on national sovereignty. If its future is now in doubt, it is because sovereignty stands in the way once again. In a true economic union, underpinned by union-wide political institutions, the financial problems of Greece, Spain, and the others would not have blown up to their current proportions, threatening the existence of the union itself.

Consider the United States. No one even keeps track of, say, Florida’s current-account deficit with the rest of the country, although we can safely guess that it is huge (since the state is home to many retirees living off benefits that come from elsewhere).

When Florida’s state government goes bankrupt, Florida’s banks continue to operate normally, because they are under federal rather than state jurisdiction. When Florida’s banks go belly-up, state finances are insulated, because the banks are ultimately the responsibility of federal institutions.

When Florida’s workers become unemployed, they get unemployment checks from Washington, DC. And when Florida’s voters are disenchanted about the economy, they do not riot outside the state capital; they put pressure on their representatives in Congress to push for changes in federal policies. Nobody would argue that US states have an abundance of sovereignty.

The relationship between sovereignty and democracy is also misunderstood. Not all restrictions on the exercise of sovereign power are undemocratic. Political scientists talk about “democratic delegation” – the idea that a sovereign might want to tie its hands (through international commitments or delegation to autonomous agencies) in order to achieve better outcomes. The delegation of monetary policy to an independent central bank is the archetypal example: in the service of price stability, daily management of monetary policy is insulated from politics.

Even if selective limitations on sovereignty may enhance democratic performance, there is no guarantee that all limitations implied by market integration would do so. In domestic politics, delegation is carefully calibrated and restricted to a few areas where the issues tend to be highly technical and partisan differences are not large.

A truly democracy-enhancing globalization would respect these boundaries. It would impose only those limits that are consistent with democratic delegation, possibly along with a limited number of procedural norms (such as transparency, accountability, representativeness, use of scientific evidence, etc.) that enhance democratic deliberation at home.

As the American example illustrates, it is possible to give up on sovereignty – as Florida, Texas, California, and the other US states have done – without giving up on democracy. But combining market integration with democracy requires the creation of supranational political institutions that are representative and accountable.

The conflict between democracy and globalization becomes acute when globalization restricts the domestic articulation of policy preferences without a compensating expansion of democratic space at the regional/global level. Europe is already on the wrong side of this boundary, as the political unrest in Spain and Greece indicates.

That is where my political trilemma begins to bite: We cannot have globalization, democracy, and national sovereignty simultaneously. We must choose two among the three.

If European leaders want to maintain democracy, they must make a choice between political union and economic disintegration. They must either explicitly renounce economic sovereignty or actively put it to use for the benefit of their citizens. The first would entail coming clean with their own electorates and building democratic space above the level of the nation-state. The second would mean giving up on monetary union in order to be able to deploy national monetary and fiscal policies in the service of longer-term recovery.

The longer this choice is postponed, the greater the economic and political cost that ultimately will have to be paid.

Dani Rodrik is Professor of International Political Economy at Harvard University’s Kennedy School of Government and a leading scholar of globalization and economic development. His most recent book is The Globalization Paradox: Democracy and the Future of the World Economy.

Dani Rodrik: After the Millennium Development Goals

CAMBRIDGE – In 2000, 189 countries collectively adopted the United Nations Millennium Declaration, which evolved into a set of concrete targets called the Millennium Development Goals (MDGs). These ambitious targets – ranging from halving extreme poverty and reducing maternal mortality by three-quarters to achieving universal primary schooling and halting (and beginning to reverse) the spread of HIV/AIDS – are supposed to be met by the end of 2015. As the deadline approaches, development experts are debating a new question: What comes next?

It is virtually certain that many of the MDGs will not have been met by the end of 2015, but there have been striking successes in some areas. For example, the goal of halving extreme poverty (measured by the number of people living on less than $1.25 a day) will likely be achieved ahead of time, largely thanks to China’s phenomenal growth.

At the same time, there is little evidence to suggest that those successes were the result of the MDGs themselves. China implemented the policies that engineered history’s greatest poverty eradication program prior to, and independently from, the Millennium Declaration and the MDGs.

Clearly, however, the MDGs were a public-relations triumph, which is not to belittle their contribution. Like all worthwhile PR efforts, the MDGs served to raise awareness, galvanize attention, and mobilize action – all for a good cause. They amplified the global conversation about development and defined its terms. And there is evidence that they got advanced countries to pay more attention to poor nations.

Indeed, the MDGs possibly had their clearest impact on aid flows from rich to poor countries. A study by Charles Kenny and Andy Sumner for the Center for Global Development in Washington, DC, suggests that the MDGs not only boosted aid flows, but also redirected them toward smaller, poorer countries, and toward targeted areas like education and public health. However, aid was not directly linked to performance and results, and it is much more difficult to know whether it had the desired impact overall.

The MDGs encompass eight goals, 21 targets, and 60 indicators. Much criticism has focused on the use of these numerical targets and indicators, which, skeptics argue, are misspecified, mismeasured, and divert attention from equally important areas. But these complaints miss the point. Any effort that is concrete and implementable needs to monitor the results, and setting clear numerical targets is the best way to do so.

Still, a central paradox plagues the MDGs. The Millennium Declaration was meant to be a compact between the world’s rich and poor countries. Poor countries promised to refocus their development efforts while rich countries pledged to support them with finance, technology, and access to their markets. But, oddly, of the eight goals, only the last one deals with “global partnership,” or what rich countries can and should do.

Even here, the MDGs contain no numerical target for financial aid or any other aspect of rich countries’ assistance, in contrast to the highly specific poverty-related targets set for developing countries. It is perhaps telling that the “progress charts” prepared by the United Nations Development Program, the agency charged with reporting on progress toward achieving the MDGs, track only Internet usage under that goal.

Why we need a global effort to convince developing countries to do what is good for them is not clear. Poverty reduction and human development should be the first order of business for governments in these countries, with or without the MDGs.

It is true, of course, that these governments often pursue different goals, for political, military, and other reasons. But it is wishful thinking to believe that they can be persuaded to act otherwise by international declarations that lack enforcement mechanisms. If we have learned one thing in the development business, it is that real reform cannot be bought with donors’ money, let alone with vague promises of money.

Equally problematic, the MDGs implicitly assume that we know how to achieve development targets, and that only resources and political will are missing. But it is doubtful that even well-intentioned policymakers have a good handle on, say, how to raise secondary-school completion rates sustainably or reduce maternal mortality.

Many development economists would argue that significant improvements in governance and political institutions are required before such goals can be achieved. The most that rich countries can do is to provide an enabling environment for the benefit of developing countries that are willing and able to take advantage of it.

These considerations suggest an obvious direction for the next iteration of the MDGs. First, a new global compact should focus more directly on rich countries’ responsibilities. Second, it should emphasize policies beyond aid and trade that have an equal, if not greater, impact on poor countries’ development prospects.

A short list of such policies would include: carbon taxes and other measures to ameliorate climate change; more work visas to allow larger temporary migration flows from poor countries; strict controls on arms sales to developing nations; reduced support for repressive regimes; and improved sharing of financial information to reduce money laundering and tax avoidance.

Notice that most of these measures are actually aimed at reducing damage – for example, climate change, military conflict, and financial crime – that otherwise results from rich countries’ conduct. “Do no harm” is as good a principle here as it is in medicine.

This kind of reorientation will not be easy. Advanced countries are certain to resist any new commitments. But most of these measures do not cost money, and, as the MDGs have shown, setting targets can be used to mobilize action from rich-country governments. If the international community is going to invest in a bold new public-relations initiative, it might as well focus on areas where the potential payoffs are the greatest.


Dani Rodrik is Professor of International Political Economy at Harvard University’s Kennedy School of Government and a leading scholar of globalization and economic development. His writings are a compelling combination of international and development economics, history, and political economy, and often challenge prevailing orthodoxy about which policies best promote growth. His most recent book is The Globalization Paradox: Democracy and the Future of the World Economy.