This post is about his recent review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform. Writing for the Journal of Economic Literature, Rodrik's piece Goodbye Washington Consensus, Hello Washington Confusion? (PDF) starts on a positive note:
There are no confident assertions here of what works and what doesn’t—and no blueprints for policy makers to adopt. The emphasis is on the need for humility, for policy diversity, for selective and modest reforms, and for experimentation. ...Occasionally, the reader has to remind himself that the book he is holding in his hands is not some radical manifesto, but a report prepared by the seat of orthodoxy in the universe of development policy.
Rodrik contrasts the World Bank's interpretation of the 1990s with the IMF's, which has increasingly emphasised the importance of institutions and the need for good governance and institutional reform:
What has become clearer to practitioners of the Washington Consensus over time is that the standard policy reforms did not produce lasting effects if the background institutional conditions were poor. Sound policies needed to be embedded in solid institutions.
Moreover, there were significant complementarities across different areas of reform. Trade liberalization would not work if fiscal institutions were not in place to make up for lost trade revenue, capital markets did not allocate finance to expanding sectors, customs officials were not competent and honest enough, labor-market institutions did not work properly to reduce transitional unemployment, and so on. The upshot is that the original Washington Consensus has been augmented by a long list of so-called “second-generation” reforms that are heavily institutional in nature.
The paper also discusses "yet another vision of reform strategy": the United Nations’ Millennium Project, led by Jeffrey Sachs.
The U.N. Millennium Project is based on the view that we basically know enough to mount a bold, ambitious, and costly effort to eradicate world poverty. We have successfully identified all the margins that matter, and we better move on all of them simultaneously. Learning from Reform, by contrast, is an ode to humility. What we have learned, it says implicitly, is the folly of assuming that we know too much. We need to downplay grandiose claims, move cautiously, and concentrate our efforts where the payoffs seem the greatest.
Rodrik outlines "a way of thinking about growth strategies that avoids some of the obvious pitfalls," based on growth diagnostics, targeted policy design, and institionalising reform. There is much good sense here. He concludes:
Learning from Reform is a genuinely interesting document: it represents a mea culpa as well as a way forward. It pushes us to think harder and deeper about the economics of reform than anything else out there. It warns us to be skeptical of top-down, comprehensive, universal solutions—no matter how well-intentioned they may be. And it reminds us that the requisite economic analysis—hard as it is, in the absence of specific blueprints—has to be done case by case. These should be music to any economist’s ears.
I suggest people read the whole book - it is available to download on the World Bank website.