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Rodrik_ForeignPolicy - i 8i4 o_o:r o 54 FOREIC~ POLICY T...

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54 FOREIC~ POLICY i i o _o :r o
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Trading in Illusions Advocates of global economic integration hold out utopian visions of the prosperity that developing countries wilt reap if they open their borders to commerce and capital. This hollow promise diverts poor nations' attention and resources from the key domestic innovations needed to spur economic growth. I By Dani Rodrlk senior U.S. Treasury official recently urged Mexico's government to work harder to reduce violent crime because "such high levels of crime and violence may drive away foreign investors." This admonition nicely illustrates how foreign trade and investment have become the ultimate yardstick for evaluating the social and economic policies of governments in developing countries. Forget the slum dwellers or campesinos who live amidst crime and poverty throughout the developing world. Just mention "investor sentiment" or "competitiveness in world markets" and policymakers will come to attention in a hurry. Underlying this perversion of priorines is a remarkable consensus on the imperative of global economic integration. Openness to trade and investment flows is no longer viewed simply as a component of a country's development strategy; tt has mutated into the most potent catalyst for eco- nomic growth known to humanity. Predictably, senior officials of the World Trade Organization (WTO), International Monetary Fund (IMF), and other international financial agencies incessantly repeat the openness mantra. In recent years, how- ever, faith in integration has spread quickly to political leaders and policymakers around the world [see box on page 57]. Joining the world economy is no longer a mat- ter simply of dismantling barriers to trade and investment. Countries now must also comply with Dam R odrlk ~s professor of mternatlonal pohtlcal economy at the John E Kennedy School of Government at Harvard Universzty. a long hst of admission requirements, from new patent rules to more rigorous banking standards. The apostles of economic integration prescribe comprehensive institutional reforms that took today's advanced countries generations to accom- plish, so that developing countries can, as the clich6 goes, maximize the gains and minimize the risks of participation in the world economy. Glob- al integration has become, for all practical pur- poses, a substitute for a development strategy. This trend ~s bad news for the world's poor. The new agenda of global integration rests on shaky empirical ground and seriously distorts policy- makers' priorities. By focusing on international integration, governments in poor nations divert human resources, administrative capabilities, and political capital away from more urgent develop- ment priorities such as education, public health, industrial capacity, and social cohesion. This emphasis also undermines nascent democratic insti- tutions by removing the choice of development strategy from public debate.
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