Economies around the globe have experienced tremendous growth in the last two decades as globalization became a dynamic element in each globalized economies’ market. With globalization, trade and business can flow from one market to other markets with little or no disruptions, allowing economic growth of enormous proportions. But globalized economies need to develop standard form or structures that every member economy must respect, recognize and follow. By rule of thumb, the most powerful economies should provide most of the structure of the globalized economic community to ensure sustainability and long-term growth.
Global organizations like International Monetary Fund (IMF), World Trade Organization (WTO) and World Bank together with economies of bigger stake help design this universal set of rules to protect and promote the interests of the global economy. This system seems to work pretty fine until the global economic meltdown. To put things in perspective, globalization of economies became the bane of the global economic community, at least according to anti-globalization advocates like Dani Rodrik. This group of economists believed that globalization of economy has penetrated the society deep enough that it is present in social areas where, according to George Somos during an interview with PBS, “where it doesn't really belong”.
Moreover, globalized economies have become too dependent on the financial structures proposed and implemented by global organizations that when one major economy began collapsing, the rest of the globalized economies followed almost instantly. The recent developments in the global economies baffled many of the extremely bright economists around the world since the aftereffects of the global economic meltdown signifies the incompleteness and incompetence of the economic theories they believed and advocated for too long.
Various theories have been presented and many major economic philosophies have been revisited to account for what made the economic strategy pursued by the Washington Consensus failed on a very large scale. Book SummaryOne Economics, Many Recipes by Dani Rodrik argues that the failure of the global economy is it left local economies vulnerable to local changes. By principle, members of the global economy follow, implement, and pattern their economic policies to the policies suggested by global organizations and bigger global economies like US and UK.
The first part of One Economics provides detailed explanation why global policies failed to address local economic changes which eventually led to the global economic failure. The second part of the book establishes the need of context-specific economic policies. While the global economic community received much success with centralized fiscal, monetary, and economic policies, the recent developments in the economy suggest that these policies fail when economic heterogeneity is considered. Rodrik considers Washington Consensus as a set of fundamental economic policies that could not take into account specific economic variations in every economy, hence, making it useless in case-to-case economic situations.
The book’s fundamental goal is to understand and explain why it is important for local economic policies to be developed alongside global economic policies. Rodrik argues that universal set of economic policies would almost always fail to answer the local economic policies required by each economy for two main reasons: first, local conditions vary a lot from each other that universal economic policies often do not address these variations. As Rodrik puts it, “appropriate [economic] growth policies are almost always context specific” (Rodrik 4); second, the book underscores the importance for globalized economies not to rely solely on economic policies drafted and implemented in the Washington Consensus but also to make their own internal economic policies that could address economic-specific concerns.
According to Rodrik, different initial economic conditions require different approaches of economic policies.