Artisanal Development and Institutions
In the world of development economics, one paradigm has been widely recognized as the model for development – the so-called Washington Consensus. This model operated throughout the 1980s and 90s as the dominant vision of how developing countries could achieve economic growth. It was dominant, however, not because of its intrinsic value as the best model (as I’m sure most readers know, it was and is widely criticized as being biased towards the groups that benefit from neoliberal policies), but rather dominant because it was the paradigm adopted by the institutions with the money – the IMF and the World Bank, most notably. For various reasons (political, theoretical, institutional, etc.) it was believed that the Washington Consensus provided the only model that would achieve economic growth (which would eventually lead, it was argued, to decreased poverty and increased well-being).
The drastic failure of these policies when they were implemented in Latin America and Africa, however, eventually made it clear to all that the Washington Consensus was incapable of living up to its expectations. It couldn’t even achieve the growth levels it promised, let alone the promised derivative rises in the standards of living. Despite some stragglers who retain that their strict neoliberal policies are correct, and it’s merely these “other” cultures who can’t live up to capitalism’s promises, it’s widely recognized today in development economics that the Washington Consensus is a failure (even in its augmented form, which adds institutional reforms to its original trade and financial reforms).
What has become a mystery, then, to development economics is how does development proceed? Now there have been a multitude of answers put forth to this question, but the one I want to focus on here is that voiced by Dani Rodrik (One Economics, Many Recipes; and see here for a Crooked Timber discussion of the book: PDF). To be clear up front, Rodrik’s long-term goal is economic growth, which is itself a debatable aim. Others have suggested a larger set of aspirations such as human development, freedom and overall well-being. For Rodrik, as with most economists, these goals require economic growth to first raise individuals out of absolute poverty, so the goal of growth is simultaneously the aim of providing the necessary conditions for these larger aims. We’ll accept this line of reasoning here, but solely for the purposes of remaining focused on Rodrik’s project, and not because we necessarily agree with it (at least as it's formulated by most economists).
Now, unlike most economists who are well aware of the economy’s influence and power in world affairs, Rodrik explicitly proclaims that economists must become more modest. Despite their usual pretensions to mastery, they don’t, in fact, understand how development occurs and any rigid belief that they do is likely to cause the terrible consequences seen in Latin America and Africa. The first point to be noted with Rodrik’s approach therefore, is that he refuses the position of an authority that would stand outside of the context it’s working with. There is no single universal model of development that must be implemented without regard for the specific circumstances. Or, in more philosophical terms, there is no single form of development that can be forced upon a passive material. Rather each (the development ‘model’ and the country it’s applied to) has its own particular form and substance that must be taken into account.
What can development economists say then? For Rodrik, there are principles that can be followed – such as protection of property rights, guaranteed contracts, competition, appropriate incentives, and sound money. The trick is that these principles don’t map onto a single set of institutions or policies. In certain cases, what may be needed for economic growth is the liberalization of trade, while in other circumstances barriers should be retained (e.g. to protect nascent industries – Rodrik shows that developing countries, contra the principle of comparative advantage, initially diversify their industries rather than focusing on a single competitive industry). In order to implement these economic principles (which form what we might see as a ‘topological essence’ that admits of a multiplicity of actualizations), the individual responsible for development must take into account the singular tendencies involved in the specific situation. In other words, the economist must become an artisan working with the immanent material and its singularities rather than an architect independently modeling and commanding. To bring out the potentials involved in the situation, in line with the economic principles, the economist must have local and contextual knowledge. The artisan must experiment, playing with always uncertain tendencies and their ultimately unpredictable consequences.
One of the concrete examples Rodrik gives of this experimentation is China’s transformation. When globalization proponents speak of its benefits, they often point to the fact that globalization has decreased the number of people living in absolute poverty (less than a dollar a day). While factually true, the vast majority of these people live in India and China, the two most populous countries in the world. India and China, meanwhile, achieved their economic growth not by following the Washington Consensus’ principles, but by creating novel institutions and novel policies. They, in other words, experimented with the immanent conditions posed to them, and directed these tendencies towards the principles which produce sustainable economic growth. In China, therefore, the problem was of shifting from a system without private property to one with. As the experiences in post-communist Eastern Europe and Russia showed, this is not an easy realignment – it’s not at all clear how the previously nationalized industries and land should be delegated to private individuals, leading in Russia’s case to widespread corruption and the creation of numerous oligopolies. In China, on the other hand, land was delegated to families on the basis of their size, and industries were placed under the control of “township and village enterprises” or TVEs. These TVEs generated income directly for the community and so there was an invested interest to keep them profitable and to keep them honest and accountable. These TVEs, therefore, functioned to provide some of the economic principles outlined earlier, yet they operated within a society that found individual property rights to be alien concepts.
In another example, China liberalized its agricultural production, but only at the margins. In other words, the planned quotas were kept intact, but any surplus product could be sold for the benefit of the producer. Again, the ingrained habits and customs of the local population are kept, yet through a novel institutional setup, their potentials are extended into new fields and incited towards economic growth. The key to all of this is that there is not a priori model that could be used to produce these novel institutions, as though it were a matter of adding economic principle A to institutional situation B to get effect C. Each situation is radically singular and requires local knowledge to create novel institutions and policies. They are artisanal rather than architectural.
As a final note of curiosity, I’d add too that these sorts of examples are precisely in line with Deleuze’s thoughts on institutions formulated in his first book, Empiricism & Subjectivity. Contra psychoanalysis’s vision of the Law as limiting, Deleuze sees institutions as providing the positive means for instincts and tendencies to be expressed. They are positive constructions that extend our capacities rather than limiting them. “The institution, unlike the law, is not a limitation but rather a model of action, a veritable enterprise, an invented system of positive means or a positive invention of indirect means.” (46) The TVEs and the marginal liberalization undertaken in China were examples of this sort of positive institution that made possible new habits, new desires, and new material relations – one, moreover, that avoided that dire consequences involved far too often in the economic transitions of developing and post-communist societies.
