ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Rich Perspectives on Trade, Globalisation and Development

Liberalisation and Development by Deepak Nayyar, Trade and Globalisation by Deepak Nayyar

Rich Perspectives on Trade, Globalisation and Development

Y Venugopal Reddy

D
eepak Nayyar is deeply committed to academia but, when necessary, has also been willing to serve the government. His contributions as chief economic adviser to the government of India in managing the crisis of 1991, negotiating with the Inter national Monetary Fund in that crisis and laying the foundations for a pragmatic package of economic reforms are seldom highlighted. He is also widely recognised as a successful vice chancellor of Delhi University.

The two companion volumes under review Trade and Globalisation and Liberalisation and Development contain a compilation of 30 of his selected papers published earlier. They have the imprint of not only his scholarship but also of his practical experience in policymaking. A remarkable quality of the essays is the level of detail that is contained in the exposition of theory and the analysis of practice. Though the essays were published at different periods and in a variety of Indian and global fora, they all address themes and issues of relevance to globalisation and development with special reference to India. The compilations make them a valuable and handy reference material.

The volume Liberalisation and Development is in four parts. The first part titled “Theory” has three essays and the reviewer finds, in the opening essay titled “Macroeconomics in Developing Countries”, a concise and convincing exposition of why and how theory and policies in developing economies should differ from the developed ones. As Nayyar says, “even if some laws of economics are universal, the functioning of economies can be markedly diffe rent” (p 22). There is an excellent account of pronounced differences in financial markets, but Nayyar could have emphasised the fact that global financial markets do not treat developed and developing economies symmetrically even when

book review

Liberalisation and Development by Deepak Nayyar

(New Delhi: OUP), 2008; pp xxvii + 422, Rs 795.

Trade and Globalisation by Deepak Nayyar (New Delhi: OUP), 2008; pp xxxi+457, Rs 795.

their macroeconomic frameworks and policies are similar.

Chapter 3 “On Exclusion and Inclu sion: Democracy, Markets, and People” postulates that markets and democracy may not by themselves ensure prosperity for everyone but may, in fact, exclude a significant portion of the people, parti cularly the poor, from the process of development. The exposition is elegant and enjoyable reading, but an unanswered question must be: Is there anything better?

Part 2 of the volume is titled “Development” and the first essay, “Development through Globalisation”, essentially argues that globalisation may deliver some economic growth but by itself cannot promote development in its legitimate sense. There is a statement in the essay which in a way anticipates the lessons of the current financial crisis;

It is also perhaps necessary to think about a new international financial architecture in which a world Financial Authority would manage systemic risk associated with international financial liberalisation, coordinate national action against market failure or abuse, and act as a regulator in international financial markets (p 91).

Other essays in this section transcend the confines of macro and microeconomics to include political economy and economic history.

Parts 3 and 4 of the volume titled “Industria lisation” and “Liberalisation” contain several essays devoted to India. They emphasise the importance of the role of the State in industrialisation, while recognising the limits imposed by liberalisation on the policy space for developing

august 15, 2009

countries. These observations are of particular relevance in India now since there is a better recognition of the importance of public policies that favour the growth of the manufacturing industry in order to ensure large-scale employment opportunities required by the demographic growth

that we are experiencing. However, the role of the state vis-à-vis the market in providing an enabling environment is perhaps qualitatively more important than the one in which it is an active participant in import or in adoption of technology.

Nayyar makes a plea for giving attention to investments that give incomes to the poor in order to generate broad-based demand for industrial goods, and one could readily agree with this view. But in India recent events have shown that the demand for industrialised goods may be met by imports rather than domestic industry, if adequate attention is not paid to growth in productivity in India on par with global trends.

History, Politics and Current Thinking

The volume Trade and Globalisation has four parts, namely, “Economic Theory”; “World Trade”; “Indian Experience”; and “Globalisation and Development”. I found Part 1 on theoretical perspectives particularly interesting, since it captures history, politics and current thinking on free trade, encompassing oft ignored and highly complex areas of trade in services, including international labour movements.

Part 2 contains essays on trade flows and institutional arrangements, especially in the context of unequal partners in world trade. One wonders whether some of the observations in the essays would need to be revisited, not with a view to question the analysis, but with an intent to capture the emerging new realities in the trade r elations between North and South, and between the East and South, with the emergence of growth in the Brazil, Russia I ndia, China (BRIC) countries.

Part 3 has four essays and, as the author mentions, two are on the past and two are on the present. Nayyar has done well to explain how in India, the policies of the past facilitated the impressive performance

vol xliv no 33

EPW
Economic & Political Weekly

BOOK REVIEW

of the external sector in the very recent years. Nayyar’s position on this, with which the reviewer concurs, is summarised by him in the “Introduction”:

The recent internationalisation of firms from India, reflected in the spur in investment and the boom in acquisitions abroad, is perceived as coming of age in the era of globalisation. This is attributable in part to the liberalisation on the capital account. However, it would not have been possible without the managerial and technological capabilities in these firms which have developed over a much longer period of time (p XXV).

It is hard to find in the literature on the subject of capital controls a better analysis than Nayyar’s exposition in Chapter 10. This chapter should be compulsory reading. The reviewer finds a reluctant admission of some of the suggestions made in this chapter in several fora such as the

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recently issued G-20 communiqué on the global financial crisis.

The concluding essay “Governing Globalisation: The Existing System and the Missing Institutions” is of significant contemporary relevance. The section on international financial architecture, in a mere three pages, lists four basic propositions that should govern the debate and discusses five essential elements of reform, and this can be described as a remarkably useful introduction to the ongoing debates on the subject in the United Nations, UNCTAD, Bretton Woods institutions and G-20.

The essays in both volumes are certainly not bedside reading but the time, energy and money spent will be worth every paisa in India, and worth every cent globally. Nayyar is a scholar with impeccable international credentials, who, based in India, works on both development economics and trade theory. Therefore, he is able to feel, experience, and articulate the ground realities while producing sound theoretical expositions. As a reviewer, I must admit that my knowledge of the subjects was enriched by the comprehensive treatment of all relevant ideas and my agreement with his preferences as well as conclusions extends to many, though not all, of Deepak Nayyar’s prescriptions. Scholars, policymakers, and serious analysts of financial markets are well advised to read these volumes to recognise the limits to what has been described as orthodoxy, and to notice the new realities on the horizon of economic thinking and globalisation.

Email: office.dryvr@gmail.com

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Economic & Political Weekly

EPW
august 15, 2009 vol xliv no 33

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