A new
development paradigm should recognise diversity of circumstances, provide
space for policy experimentation, and validate learning as integral to
development. Regionalism can be an important support strategy for such
a paradigm. The rationale for regionalism in this context lies in its
potential to strengthen the bargaining power of the regional grouping
vis-à-vis the global system in order to bolster the claim for the
recognition of diversity and enhance the space for experimentation, while
enriching the learning process through exchange of experience. This concept
note poses questions related to this theme and that of the panel.
Universalism
A notable aspect of the neo-liberal paradigm is its claim to universalism,
i.e. a single over-arching explanation of the way economies work and a
single prescriptive principle for good policies in time and place. The
market economy is both abstracted from society and assumed to be dominant
over society. An extension of the paradigm conflates market economy with
political democracy and good governance.
As opposed to this there is a tradition which I characterise as historical/institutional/structural
(HIS). Economies are seen as rooted in history and social structures and
are the products of evolution over time. Inherited institutions and structures
are not a straight-jacket for the present, but they do condition the responses
of economic agents to policy instruments. Hence what "works"
for one country at one time may work differently in another country at
the same time or in the same country at a different time. Accordingly,
there is no universally applicable prescriptive principle regarding the
appropriate role of market and state. There is no substitute for a close
and detailed examination of specific circumstances, informed by a sense
of humility.
The problem with this approach, of course, is that it is messy. It does
not easily lend itself to formalisation and the kind of rigor that is
permitted by mathematical theorems. And the room for subjective interpretation
is wide. But is our concern with "truth" (however defined) or
with convenience? One is reminded of Sen's observation to the effect that
it is better to be partially right than to be exactly wrong. One also
suspects that the influence of formalism may be as much about power relations
in the production and reproduction of knowledge as it is about concern
with rigor. One of the characteristics of formalism is that it allows
ideology to masquerade as science. The degree of abstraction is so great
and the assumptions underlying the theorems so deeply buried that the
ideology of the market takes on a neutral appearance. And since advanced
mathematical analysis is accessible only to a few, its practitioners are
hardly ever called upon to justify their assumptions and value judgements,
let alone held accountable for their policy prescriptions.
The proposition that a HIS is not amenable to formalisation is also questionable.
It needs to be investigated. A better way to pose the question is, what
are the appropriate criteria by which any analysis of the human economy
is to be validated? What would constitute acceptable procedures for investigation,
the generation and validation of propositions, the derivation of policy
prescriptions, and the monitoring and evaluation of their application?
Surely formalism will be part of the answer. But once again I refer to
the need for humility. We are dealing with the livelihoods and welfare
of people, indeed of their very lives. Recent history is so replete with
examples of the terrible costs of the inappropriate application of mistaken
theories-both of the right and the left-that it should give cause for
sober reflection and contemplation.
It is here, perhaps, that universalism does have a role to play. If trans-paradigm
intercourse is to go beyond a dialogue of the deaf, then there should
be common agreement on rules of procedure. If analysis of the specific
is to minimise the room for subjective judgement and interpretation, then
there ought to be commonly accepted methods of investigation and verification.
But there cannot be any final word on this. What is universally accepted
will itself be the subject of continued experimentation, debate and enrichment.
Universalisation, therefore, may be seen as continuous and unending process
of expansion of consensus on method. Basic to the process are recognition
of diversity, mutual cross-cultural respect, and rejection of dogma in
all its forms.
We know, of course, that what I have called the HIS approach has a long
and distinguished progeny. It dates back at least to Adam Smith through
the 19th century political economists (including Marx) to the 20th century
with Polanyi, institutional economics, economic anthropology and so on.
We also know that at a certain point this tradition became marginalized
from mainstream economics. It is now being revisited as a result of the
collapse of Sovietism and the equally disastrous policy failures of neo-liberalism.
So there is now a window of opportunity, which if fully utilised, can
become a means of escape from the intellectual ghetto.
Learning
A note here on learning. In economics the subject has been treated mainly,
if not exclusively, in the context of productivity growth, technical change
and technology transfer. The focus, therefore, is the firm level. But
what about social learning for policy analysis? What I am proposing here
is that societies, like individuals and organizations, can learn to do
better; but only if they organise themselves consciously for the task.
This goes beyond the learning that comes from repetition and mastery of
a given task, a la learning curve. It embraces the elements of trial and
error, policy experimentation, evaluation, further policy innovation,
and so on in a continuous loop.
This is a highly idealised, if not utopian, model of development and change.
In the real world societies have interest groups that fight for their
own advantage. Still, is it not an ideal worth opposing to universalistic
claims of policy prescriptions often advanced by the IFIs? Certainly,
to this writer it suggests a healthier model for development "partnerships"
between the north and the south. The goal of partnerships, then, should
be to support and facilitate indigenous social learning for the attainment
of mutually agreed development objectives.
Regionalism
What role, then, for regionalism? To begin with, regionalism comes in
different shapes and forms. "Open" regionalism was invented
as part of the model of neo-liberal globalisation. Its alternative is
neither "closed" regionalism nor an outright rejection of globalisation.
I have argued that, especially for small countries, the ideal role of
regionalism is to strengthen the bargaining position of the group vis-a-vis
the global system and to enlarge the space for policy autonomy within
the region. The two are closely linked, insofar as the new dispensation
of the WTO and regional agreements (FTAA, ACP-EU, etc) is for trade agreements
to extend deeply into the sphere of domestic policy and institutions.
How can regionalism help? First, through functional cooperation in extra-regional
relations. The pooling of bargaining power and negotiation resources in
global agreements in trade and finance is one area. Key issues here are
special and differential treatment in trade agreements, timing and sequencing
of trade liberalisation, debt, conditionality, regulation of international
finance, and IFI governance. Functional cooperation will aim to secure
outcomes more favourable to LDCs by preserving and expanding the internal
space for policy-making and social learning.
Second, through intra-regional functional cooperation in the development
effort. This goes beyond the liberalisation of intra-regional markets
that is the prime objective of open regionalism. For instance, a regional
group can cooperate in strategic planning for participation in international
markets, in industrial policy to build up firm-based technological and
managerial capabilities among national firms, in socio-economic economic
policies to empower the poor, in science and technology and research and
development, and in higher education. The greater the technology, capital
and skilled resource-intensity of these activities involved in responding
to the challenges of the global economy, the greater the potential returns
from resource pooling through functional cooperation.