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As the "New Economy" Crashes, to What Degree Will Mainstream Economists Change Their Stripes?

These days, establishment defectors from the doctrine of market fundamentalism are growing in number.

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Ultimately, Chang is not against trade or movement toward open markets—if appropriately timed and planned. At the same time, he seems to relish the opportunity to take shots at some of the most hallowed tenets of the corporate globalizers. He argues that foreign direct investment (the holy grail of conventional development economics) is not actually very helpful to poor countries in many circumstances. He reminds us that some of the world’s most efficient enterprises are state-owned (think Singapore Airlines, repeatedly voted the world’s favorite carrier), and that many now-private businesses became world-class firms under state control. And he makes a damning case against intellectually property laws designed by self-interested lobbyists at corporations such as Disney.

Chang is not alone in voicing many of these views. Even some his foils, such as Columbia University economist Jagdish Bhagwati, are critical of overzealous protections for corporations’ intellectual property. And the prevalence of this criticism is part of a wider trend. In the decade since the Asian financial crisis, the accumulating failures of neoliberal mandates have led to a dramatic increase in the number of mainstream economists who are willing to speak out against them. Arguments once commonplace at the protests and teach-ins of the global justice movement—but taboo within economics departments—have moved to far more central places in the public debate.

The increasing prominence of Chang can be considered part of this shift. The more prototypical example of it is his mentor, Nobel Prize-winning economist Joseph Stiglitz, who made a swift transition from being chief economist at the World Bank to being an outspoken critic of market fundamentalism and a persistent thorn in the side of the IMF.

The policy alterations that have accompanied the changing intellectual scene have already proven significant. Witness the changing fate of the IMF: not long ago the institution was the head of a powerful Washington cabal in development policy. To escape its grasp, developing countries have paid off their loans to the IMF early and built up large currency reserves in recent years so as never to have to return to Washington in the event of future emergencies. Today, the Fund’s recommendations are regarded as ideologically suspect at best. The institution thus became a shadow of its former self—and is now desperately trying to use the new financial crisis to reinvent itself. Allied bodies like the World Bank are facing difficulties of their own, and the American electorate has clearly grown suspicious of unchecked deregulation, making the terrain of globalization debate at the start the post-Bush era very different from that seen at the end of the Clinton years.

An Unrepentant Convert?

Another individual that many think of as a defector from the beleaguered Washington Consensus is Jeffrey Sachs, currently the director of the Earth Institute at Columbia University. Sachs first came to prominence in the late 1980s as the wunderkind Harvard economist who, in his early thirties, was called in to fix the imperiled economies of countries including Bolivia and Poland. He treated these patients with what has since become known as “shock therapy”—the all-at-once imposition of a slate of free market initiatives—with controversial results.

In 2005 Sachs reentered the limelight, this time as an anti-poverty crusader, with a book entitled The End of Poverty . It was a staunch defense of foreign aid and of the United Nations’ Millennium Development Goals. It championed the cause of ending extreme poverty as the defining challenge of our generation. The best-selling book’s success has solidified Sachs’ standing in the celebrity humanitarian circles inhabited by the likes of Bono and Angelina Jolie.

If Sachs gives the impression that he has lived a dual life, his distinct identities have each been brought into relief in the past year. On the one hand, he has just released a new book, Common Wealth: Economics for a Crowded Planet . In addition to reiterating his calls for a resolute international effort to address poverty, the book expresses concern about global environmental problems, especially climate change. He argues that in the twenty-first century, “The challenges of sustainable development—protecting the environment, stabilizing the world’s population, narrowing the gaps of rich and poor, and ending extreme poverty—will take center stage. Global cooperation will have to come to the fore. The very idea of competing nation-states that scramble for markets, power, and resources will become passé.” He calls upon global society to “[think] ahead and [act] in unaccustomed harmony.”

 
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