Jagdish Bhagwati: An intellectual heavyweight

Hal Hill, Contributor, Canberra

The Wind of the Hundred Days: How Washington Mismanaged Globalization; By Jagdish Bhagwati; MIT Press, Cambridge (USA), 2001; 383 pp +xxii; US$32.95 (cloth)

With a book title like this, one might expect the author to have spent time on the streets of Seattle, Prague or Melbourne. But, rather, he has impeccably liberal and international credentials, an author on whom students of neo-classical economics routinely cut their teeth.

Jagdish Bhagwati has been an extraordinarily productive scholar for more than four decades, and is still going strong. Over this period he has been -- and still is -- the world's most influential academic authority on international trade and development issues.

The mark of a great academic is one who can switch effortlessly between 'markets'. That is, somebody who is equally comfortable both with high theory in the classroom and public policy on the streets. Bhagwati is one of those all too rare animals in the economics profession. (He laments this fact in this book and accordingly chides his profession).

He has penned dozens of books and hundreds of academic articles. But, perhaps originating from his early government days in India, he has always believed in the public purpose of economics. And having 'done all the theory', one might say, in recent years he has devoted more of his time to being an energetic and articulate public persuader. Hence this volume, and one of similar genre in 1998 (A Stream of Windows, also MIT Press.) More no doubt are in the works.

This volume covers an enormous amount of territory: international capital flows, the Asian boom and crisis, mixing (or more correctly disentangling) trade and various social issues, the WTO and international trade regimes, immigration and much else. Central to his arguments is the notion that, although his adopted country is one of the most open economies and societies in the world, Washington has "mismanaged" globalization.

A short review cannot do justice to the depth and breadth of issues dissected in this volume, but the following samplers are at least indicative:

* While preaching "free and fair trade" (the latter protectionism in a new guise), "Japan bashing" under the Clinton administration reached unprecedented proportions.

* The fad ascribing everything to culture (particularly in understanding Asian economic development) has little analytical substance.

* The proliferation of free trade areas has "become a pox on the world trading system."

* The argument that "industry policy" has been a key reason for East Asian economic success is difficult to support.

* There is a strong plea for open immigration policies, while the argument for favoring skilled over unskilled migrants in such a program is "morally unacceptable and economically unconvincing".

* The World Bank -- and its president, the "boutique banker" James Wolfenson -- is criticized for losing sight of the fundamental importance of growth as the principal means of alleviating poverty in poor countries.

* There are double standards in the U.S. (and elsewhere of course) on corruption. As one essay is titled: "A friend in the U.S. but a crony in Asia".

* There was a tragic misdiagnosis of the Asian crisis: "I am off the view that the U.S. administration really blew it, (and) may well have presided over (one of) the largest man-made disasters in the world economy.

* Finally, in his 1998 Capital Myth piece in Foreign Affairs -- arguably the most widely read and cited article by a professional economist in the past decade -- Bhagwati asserts that the "Wall Street/IMF/U.S. Treasury" complex contributed significantly to the Asian economic crisis by pushing premature capital market liberalization on these countries.

Here and there one might want to engage in a debate at the margins with the author. Several of the Asian crisis economies had, arguably, opened their capital accounts as much for domestic political and commercial reasons as due to pressure from the IMF et al. Indonesia did so way back in 1971, principally as a means of attempting to control politicians' excesses in the wake of Sukarno's disastrous policies.

Thailand did so in the early 1990s in aspiring to promote Bangkok as a major regional financial center in competition with Singapore and Hong Kong. Moreover, the post-crisis combination of floating exchange rates and open capital accounts (albeit "dirty" in several respects) has worked better than expected in Indonesia, Philippines and Thailand.

Similarly, perhaps a semantic distinction, but I would be inclined to apportion just a little more blame to domestic policy mistakes and regime intransigence in understanding the origins of the Asian economic crisis.

But these are minor quibbles. Bhagwati's writings are characterized by wit (often employed to devastating effect), passion, analytical coherence, and eloquence. If you read just one book on the complex, emotive and highly politicized issues associated with globalization, this persuasive and highly readable volume would be my recommendation.

The book is worth buying just for the masterly nine-page introduction, which summarizes his major arguments. But you will quickly find that this whets your appetite for the 380 pages which follow!

The reviewer is the H.W. Arndt Professor of Southeast Asian Economies at the Australian National University.