Arnold Kling

Debating Growth Doctrine

Arnold Kling, Great Questions of Economics
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Here is a debate over economic growth in which the two participants, Robert Wade and Martin Wolf, don't even agree on what it is they disagree about. Wolf writes

I would invite you to subscribe to the following three propositions. First, the biggest policy challenge is to accelerate economic growth in poor countries. Second, open markets in the north and FDI make an important contribution to such growth. Third, self-sufficiency is a foolish development strategy.

Wade responds

I agree with your three propositions and have never argued anything different...

At the heart of our disagreement, I think, is the question about how far rich countries in general should go in using the power our superior resources give us (a) to set the rules of the market so that resource power is translated into market power, and (b) to use that power to the maximum when bargaining with people much poorer than ourselves.

Wade's point is that rich countries often demand strong concessions on trade from poor countries while making few concessions themselves.

Wolf replies

I do accept, however, that developing countries have sometimes been forced to accept inappropriate policies: the trade-related intellectual property agreement is an example. I also agree that the north should liberalise in favour of the south and that more aid, targeted on countries with governments that know how to use it, is a moral and practical necessity.

Yet there is one fundamental matter, in this debate, on which we do disagree. Economic growth is, almost inevitably, uneven. Some countries, regions and people do better than others. The result is growing inequality. To regret that is to regret the growth itself. It is to hold, in effect, that it is better for everyone in the world (or within individual counries) to remain equally poor. You come close to saying just that. It seems to me a morally indefensible and practically untenable position.

Discussion Question. The environment of competition and adaptation that is conducive to growth does not lead to equality of income distribution. Does it improve the conditions of the poor as well as the rich, and if so, is that acceptable, or is equality more important than the absolute level of wealth?

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