nearby and my apologies for those who could not enter the building there are screens in the piazza duomo and in other parts of the city so people will have the opportunity to follow this lecture directly which is the one opening up the festival uh the lecture by amartya sin which we heard one week ago the one which inaugurated the festival uh which will also continue in these three days in trento and roberto amatya sienna stressed that a large part of the economic thinking in a way has neglected the link between markets and freedoms in particular freedom intended not only as uh nominal freedom freedom of choice but as an effective real freedom uh for example an unemployed person might decide to have a job but if they don't find a job they won't be able to make that choice sen uh stressed that the large majority of economic thinking dealt with the relationship between market and well-being uh but not deepening enough the link between market and freedom danny rodriguez the scholar we have uh here tonight who will illustrate his ideas is one of the scholars who most contributed in analyzing the relationship between market and institutions which are there to redistribute proceedings one of the limits to the exercise of freedom is the fact that the relationship between market and well-being often so neglects the distribution of uh revenues and of wealth so uh in the opening of markets uh there are important effects on the distribution of wealth this is the reason why there are institutions which are an infrastructure for the functioning of the markets which are also there to remedy for problems in the redistribution or the unfair distribution of wealth they are there to limit the differences uh caused by the markets danny rodrick wrote important books concerning the relationship between opening up of markets globalization internationalization opening up to trade redistribution he stressed that it is extremely important to have institutions redistributing wealth or guaranteeing social protection and unfairness in particular in the field of liberalization of trades the markets are never alone they need institutions still we have a problem institutions can only be set up following collective decisions or collective mechanisms of decision making which go beyond the choices of individuals we have democracies we have a decision-making processes to set up such institutions today in the light of the different jurisdictions uh the power of those who make uh choices for the community there is a prevalence for national dimension there are many processes and many phenomena today which indeed go well beyond national borders so there is a tension underlying between the collective choices and the national institutions and phenomena connected with globalization which really go beyond national borders so we are uh very glad to have uh uh danny rodrigue here lecturing on this subject there is a need to create uh forms to coordinate the decisions of different countries in order to be able to govern the processes which are happening on a global scale danny rodrigue is a professor of the kennedy school of government in 2007 he received a very important award for his work in the field of economics the political sciences social sciences the bushman prize he has a really impressive resume he is just older one year i am younger by one year but indeed he wrote a lot we have a software to check the impact and the amount of scientific publications it's called publish or perish and we check the amount of work that colleagues do so if you write danny rodrick the software sort of gets jammed and we have a message because he has more than 1 000 publications listed and they are mentioned uh many times in their google score so indeed um these are um internationally reviewed uh journals it's very difficult to have one's article published there so indeed uh that's a sign of a major impact in the field his uh indeed the most quoted book is as globalization gone too far of 97 a book which was quoted by businessweek and put in the list of the 10 most influential books of that decade tonight he is here maybe to speak about the next step in his thinking the future of globalization is the title you have the floor thank you thank you very much tito for that very gracious introduction uh for your invitation um it's wonderful to be in this in this great town in this beautiful hall talking about some of the most burning problems of our day i will try to give you an overview of some of the ideas in my new book which uh has just been translated into italian uh has been in the bookstores i guess in italy for um now about a week or so and try to relate some of these issues to both um how we think about the crisis in which the european union find itself in and uh what it says about the future of globalization of course my title the future of globalization is a teaser i have no idea about the future of globalization um and maybe i should stop here and give those of you who want to leave at this point the chance chance to do so but in any case any time an economist talks to you and promises to sell tell you something about what the future will look like that is a good time to leave the room we have an absolutely terrible record i think it was john kenneth galbraith that said that you know economic forecasters exist to give astrologers a good name um and and and i'm not sure in light of um the last few years whether uh in fact it may not be uh the other way around uh i am i'm known as a as a critic of globalization but what i'm going to try to do here is not suggest that globalization is a bad thing not going to suggest that we should resist globalization i'm going to try to suggest that globalization and capitalism which is very closely allied to it is a set of institutions that is in fact quite malleable uh quite variable and it is in our hands to construct a different narrative a new set of understandings a new conception about what globalization ought to be and what an appropriate form of capitalism for the present century would look like and it's towards the creation of this new narrative this new storyline about what globalization ought to be is towards that i want to present a few ideas but first let me go a little back to suggest how we got here and in particular how our ideas about capitalism market systems globalization has evolved over time just to give you a sense that with what i mean when i say that capitalism is something that is highly malleable highly flexible we've had several versions and i'll give you a very capsule summary of our changing conceptions of capitalism the earliest intellectual construction of capitalism what i call version 1.0 is an idea that goes back to adam smith and adam smith's central insight was that the market the market system and competition are the most dynamic form of uh of an economic engine that we could think of and that markets and competition were a source of generating wealth and material well-being and the simple and to this day textbook renditions of the way that a market economy or a capitalist market economy works presumed that a market economy really requires a very minimal state a very minimal set of governance arrangements for the market in particular the way that adam smith put it you need of course the state to provide for national defense you need the state to provide for a system of protection of property rights so that capitalism can exist and of course you need minimal administration of justice and those are the three things that the state really requires now adam smith in fact had a much more expensive view of the functions of the state which you get if you read his other work and not just the wealth of nations but this minimal view this very thin understanding of what market system required is still the the residue of the smythian system and the textbook version of the market economy that that we have inherited from that initial version 1.0 uh of um of uh of of of capitalism uh this in practice this view of this version of capitalism uh was the view that that underlay the 19th century uh conduct of economic policy where in fact the state had very limited functions collected very little revenue and didn't have an understanding of conducting macroeconomic policy or providing a lot of any social protection it also is the foundation of today's libertarian vision libertarianism is a current of thought that still remains quite strong in the united states and attaches a very very minimal function to what the role of the government ought to be and the basic idea is is that you know the government should do the absolute minimum just get out of the way and markets will take care of themselves in particular they will take care of all of our needs at the same time this is a version this early version of capitalism was eventually succeeded by a more elaborate version what i call version 2.0 the central insight of this version focused on the limitations of markets and what in fact markets required in order to perform all the advertised benefits and this was based on an understanding that markets need a whole range of additional non-market institutions and non-markets mechanisms of governance in order to work well in order to become sustainable in order to be viewed legitimized so markets in that way aren't self-creating you need not just property rights but also a wide range of contract enforcement institutions wide range of judicial institutions to enforce contracts as we have increasingly understood they are not self-regulating in the sense that you need rules and regulations to ensure that employers don't cheat their workers banks don't cheat their borrowers that firms and producers don't cheat their customers and uh that countries uh have the productive structure uh to generate uh sort of new industries and and move uh into into new industries uh that markets don't necessarily generate on their own so you need a whole set of of regulatory institutions and as far as as keynes has taught us markets are also not self-stabilizing they need monetary and fiscal institutions to ensure that they generate adequate levels of employment uh that the business cycle is moderated and ultimately markets aren't self-legitimizing because the economic outcomes that they generate may not always be consistent with the values the norms uh the uh the the customs of a broader social and political community so you need mechanisms of safety net social protection and ultimately of course political democracy as well as an institution that legitimizes markets because ultimately people know that they have the power and the voice to generate the rules that can influence the way or moderate the ways in which markets produce that is why the evolution of capitalism in the present in the 20th century in particular after the second world war um has been the history of a wide range of institutions regulatory institutions redistributive institutions monetary and fiscal institutions and institutions of social and political conflict management which have been the complement of the development of markets and which have been necessary to legitimize markets and essentially one way of of understanding how is it that the socialist revolution uh the communist revolution never came to pass is that capitalism reinvented itself in this version 2.0 it learned to regulate itself it learned to embed itself in these broader social and political institutions in practice in the way that this was practiced in the advanced countries of the world it was a combination of keynes and the welfare state keynes in terms of macroeconomic policy stabilization policy and the welfare state to provide for the social protections and in the newly industrializing countries of the developing world there was a third set of interventions and those were of course import substitution policies or industrial policies to restructure their economies to overcome market imperfections of another kind in the productive sphere now this capitalism version 2.0 was a national system of capitalism not a global one in fact keynes who was one of the architects of the post-second world war global economic system the so-called bretton woods regime understood very well that in order for what today we call kenya's keynesianism keynesian economic policies keynesian moderation of the business cycle keynesian interventions it was very important that the economic system not be thoroughly globalized and in particular it was very important that there be controls on the flow of capital across the world because he understood that if you put all these countries in a globally integrated financially globalized world given the ease with which money can flow in and out of countries and the constraints that that would place on the conduct of macroeconomic policies that the kind of policy that he advocated keynesianism would be incompatible with that kind of a system so famously keynes said that we need capital controls not just as a temporary expedient until the post-war reconstruction is completed but is a permanent element of this new regime similarly in the area of trade relations even though the gat regime the general agreement on tariffs and trade undertook and was successful in generating significant amount of trade liberalization by today's standards it is interesting how unambitious the gat system was in terms of how far it pushed globalization in trade because of course we had whole areas of world trade left out of the gap services wasn't included agriculture wasn't included developing countries weren't included they could do whatever they wanted so it was the rules applied only for manufacturers trade for the advanced countries and even for those countries when certain large sectors got under uh pressure that if that conflicted with prevailing social and political bargains those sectors were taken out of the rules such as agric such as textiles and clothing being the most famous example in the context of the so-called multifiber arrangement so this system the sec capitalism version 2.0 was a national system of uh capitalism uh it existed within a very thin regime of global rules and that left by purpose because that was the whole idea of the bretton woods regime left significant room for maneuver for domestic policy makers policy space an idea that i'll come back to later now for various reasons the post-war bretton woods compromise evaporated it was partly because as the regime was successful some of the main lessons were forgotten and uh improvements in communication and other technologies um sort of furthered a capital mobility so part of it was increased capital mobility part of it was a new way of thinking about the relationship between markets and society something that developed during the 1980s uh something that is sometimes called neoliberalism or market fundamentalism that that basically uh threw away the older understanding and started to push for what i call in this book hyper globalization which is sort of an attempt to attain this textbook understanding of economic globalization where there is no difference between domestic markets and international markets that national borders make no difference whatsoever and this push for hyper globalization was an attempt to basically do away with any regulations that imposed costs on trade and financial integration at the border so these were not just measures at the border like tariffs or restrictions on flows of capital across borders but also any kind of domestic regulations in different areas that might be viewed as increasing the cost of doing business internationally and therefore became a potential targets the there were two elements to this push for hyper globalization one was the world trade organization which was much more ambitious much more expensive in terms of how much it wanted to push the trade liberalization frontier and also how much it went beyond the border into trying to harmonize and regulate rules in terms of patent rules copyright rules industrial policy rules subsidies health and safety rules to the extent that they might impose barriers to international trade and investment and on the other side it was financial liberalization financial globalization the idea that um quite contrary to what keynes had said that the new norm the new orthodoxy became that the flow of capital the flow of financial assets ought to be free rather than restricted i think there was at least two blind spots um that led to this push um one was that one could uh push for this hyper globalization and and worry about the institutional underpinnings to uh catch up later so people who pushed for example for financial globalization for free club capital mobility were often aware that in order for that system to work you needed significant amount of regulatory apparatus significant amount of macroeconomic new macroeconomic tools and regulations to come into play but even though those regulations and tools lagged behind the increase in capital mobility the general response was well it's not capital mobility we should restrict it's just that we should make sure that those institutions and regulations come into being the second blind spot was that this increased attempt to integrate markets would have either no or mostly benign effects on national institutional arrangements and therefore on the working of national democracies so workers and others who were concerned about the problem of an unlevel uh playing field unfair trade which they thought of how can we compete with people when they are employing wherein companies employ workers under labor standards let's say that differ significantly from ours or how can we compete when governments are subsidizing their industries elsewhere how can we compete with firms um that are are ravaging the environment um so this kind of of plausible concern about the lack of level playing field which by the way in a domestic setting doesn't exist because in domestic setting commerce exists within a uniform set of institutions but becomes an important issue in an international setting because international setting you're now trading across jurisdictions with different sets of rules that these kinds of concerns weren't of of of importance that they were simply another form of expression of the principle of comparative advantage that one shouldn't worry about things like corporate tax competition that firms lobbying their governments to reduce the corporate taxes because otherwise they would leave go somewhere else the idea being that this was a good thing by reducing corporate taxes you would have more efficiency and so forth so it's somewhat a view that that the net effect of all of these things in terms of what it did to domestic arrangements domestic regulations and the way that domestic democracy worked was on the whole not either of minimal consequence or not very harmful i think many of the problems of the existing model of globalization are directly the result of that overreaching one direct result of course is that we have created a world trading regime which lacks complete legitimacy the world trade organization which for economists is one of the crowning institutional achievements of the last 30 years is probably the world's least popular organization if you ask the person on the street the the general sense and not a very implausible one at that is that the chain of delegation which goes from the domestic electorate to a bunch of judges in geneva that chain of delegation is way too long and not entirely consistent with our understanding of how a democracy or our democratic accountable decision making ought to function so one key problem particularly faced by the trade regime has been the lack of legitimacy of the system the problem in financial globalization has been rather that we have not managed to create something like the world trade organization that is the equivalent in the financial globalization arena but what that has meant of course is that we have ended up with inadequate regulation and rules and therefore instability inefficiency and a series of periodic crises in finance arising from inadequate regulation globally and inadequate regulation domestically the la the most the uh the most recent of which was of course uh the uh financial crisis that emanated from the united states and spread to other countries after 2008. and with respect to developing countries we had a very interesting development that the period since 1980 was a tremendous success in terms of many countries including most significantly of course china and a few other countries in east and south east asia the period since 1980 has been clearly a period of unparalleled poverty reduction in the world but the paradox here was that the countries that were the most successful in this period in developing and managing poverty reduction countries like china vietnam and a few others were successful precisely because they played the globalization game not by the post 1980 hyper globalization rules but they played the game by the bretton woods rules by the earlier rules as the chinese like to stay we want to keep the window open but not forget the mosquito net so this way you get the fresh air but you can keep the bugs out and china's approach to globalization has been very similar they have not liberalized their trade until they could restructure their economy they joined the world trade organization very late until their trade and industrial policies had had a huge amount of effect on creating the industrial base upon which they could build their globalization success of course they have managed and continued to manage capital flows they manage their exchange rate so it has been this heavy management which has been which are which is incompatible with our existing post 1980 or 1990 version of globalization which actually lies at the root of uh the success of these countries so the fundamental problem of the world economy today is this imbalance is imbalance between the reach of markets markets straining to become global and the scope of their governance the governance remains mostly national so the question that becomes the question about the future of globalization is what does what will capitalism this global version of capitalism 3.0 look like the temptation is to say well um since capitalism 2.0 was one where institutions were nationally based but now markets have become global the temptation is to say that this new version of capitalism should be one where we take our domestic institutions our national institutions our domestic mechanisms of governance and simply globalize those as well along with global markets so we talk about global governance and global governance in a real sense not a thin layer of global governance but real global governance in the sense that we have national governance that governs national markets global governance to global gov to govern global markets so that means truly global regulation truly global standards through truly global safeties and that's truly global macroeconomic management and so forth but of course as soon as i say it you say well this is impractical and it is because it places too much faith on the willingness of countries to give up national sovereignty but i think the more important substantive argument against this conception of our next phase of globalization is that it is also undesirable so the argument my argument against this idea of global governance as the solution to our economic problems is not just that it's impractical that policymakers will never give up on national sovereignty but it is a deeper reason that is also not desirable it's not desirable because democracy as a way of organizing our affairs remains national that the principal legitimate locus of democratic deliberation remains the nation states and that is why the we have a legitimate need for diversity in the types of regulation and the types of institutional infrastructure that markets take so this diversity in national preferences and needs which are expressed through national democratic deliberative mechanisms is not just an inconvenience it's a desirable part of how we have arranged our our our broader life in in terms of the way that we we exercise uh voice and exercise our political rights so the question becomes if different countries have different preferences for example if france wants a little bit more financial stability at the expense of less financial innovation and therefore wants perhaps greater regulation of derivatives than the united states views as appropriate because the united states may value financial innovation more than financial stability shouldn't france or the european union have different rules on derivatives than the united states and if of course they do then it's going to be impossible to talk about a unified world markets in swaps and other kinds of derivatives similarly if developing countries have very different policy needs in terms of industrial policies restructuring policies uh to carry out a structural transformation and diversifying their economies because they're at a much lower level of development earlier in the stage of development is it appropriate necessarily to pigeonhole them with other countries that may not have similar needs and force on them the same kinds of restrictions on their policies on their industrial policies and subsidies that may not be as as if as appropriate now of course the european union is an exception that in many ways we're learning proves the rule because the european union at least one conception of the european union was that what europe was trying to do was try to construct a regional version of what i've called global governance the idea was that if we are going to have a truly unified single market in europe that that needed to be embedded in europe-wide institutions and we got a fair number of those institutions we got the european parliament we got the european commission the european court of justice which has been very important in enforcing the single market we have this uh ongoing process of legislation the akiko minotaur which no one knows how many pages it is now but you know sort of everybody agrees it's more than 100 000 pages it's and of course as some of the european countries have gone even further uh in creating a unified monetary zone the and the european central bank but what the crisis has taught us is that despite all this institution building which has gone much farther than what we experienced in the rest of the world that even that was insufficient that eurozone needed in order to sustain a common monetary area a common financial system common monetary policy also needed a common fiscal policy so they needed a fiscal union that regulations in financial markets had to also have been harmonized but those weren't done i think for the simple reason that it was much easier to transfer monetary policy to a union level organization because that was viewed as largely a technocratic decision it could be delegated to a bunch of technocratic central bankers the ecb but the moment you start talking about the regulation you manage to talk about fiscal policy these are issues with much greater political import and it becomes much harder to agree on what the common rules are going to be it becomes much harder to agree that you are going to delegate these true to truly european institutions and therefore these remain at best taken care of in an intergovernmental fashion where the national government's individual member states still retain prerogatives of uh still become still are the ones that are carrying out these policies and not a union-wide institution the best way to actually see how incomplete the institution building and the building of a political union in the in europe um has been is to compare europe to the united states because the united states after all is a collection of individual states and your united states went through a very similar similar debate and similar period of integration the united states didn't start out as a single political federal entity the whole debate in the constitutional convention of 1787 in the united states was whether the united states would remain a confederacy where each individual state retains significant sovereign powers or where in fact they were going to these states would give up powers to a federal government in washington dc and ultimately was the federalists that won but it took a whole century and ultimately a civil war for that gain for that decision to have actually turned into practical reality for the united states to become a truly federal entity so this is just to say that when we complain about the lack of institutions in europe we have to understand that historically this is a process that takes a very long time and we shouldn't be too harsh on european policy makers for not having been able to complete this integration process the institution and political aspects of this judging from the american example but and in a way the misfortune of europe was having been caught in this crisis which wasn't their doing which came from the united states midway in this process of institution building and institutional integration but what we see in the united states is precisely what the united what europe today lacks if california has a large budget deficit if the state of california has a very large budget deficit and therefore looks like it might be insolvent it might be bankrupt what happens well california shares a common currency with the rest of the united states just like greece and portugal and ireland do but when the state of california becomes insolvent californians individual californians are automatically getting welfare payments checks transfers reduced taxes from the federal system so there is an immediate system of transfers of safety nets that come from the union nothing like this exists in the european union just because the state of california is bankrupt doesn't mean that individual borrowers in california get shot out of credit markets either as long as if you're a bank in california if you have a good balance sheet you can continue to borrow in american credit markets even though the government of california is bankrupt look at greece today just because the greek government is bankrupt no greek bank can borrow why well because it is viewed there's something called country risk sovereign risk greece is still viewed as sufficiently sovereign whereas california isn't and therefore the fact that the greek government is insolvent means no other borrower in greece can access markets at the same time of course in the united states we have a federal reserve that automatically provides for lender of last resort not through a series of ad hoc and highly contentious negotiations californian interests are represented directly in washington in the federal political institutions californians can easily move and job seek elsewhere in the united states without facing language barriers or without facing culture shock effectively the quit pro quo in the united states from the perspective of california versus the federal government is that california the state of california has given up its sovereignty and has accepted the reach of federal laws and regulations and has accepted the limitation that it can never overcome those those laws and regulation of course in return californian residents are given political representation so they actually can stand up for their interests in the common monetary policy in the common fiscal policy and the common regulatory policies so because this is not how the european the eurozone system works the crisis within the eurozone is more costly both in economic terms because you don't have these various mechanisms of assisting parts of the union that are in trouble but also becomes more costly for political terms in political terms because the process of negotiating what's going to happen becomes highly contentious and therefore you have the northerners and the germans complaining about the greek profligacy and why should germans bail out the greeks who had overspent and the greeks complaining about how selfish the germans are and simply bailing out their uh not let the billing bailing out their their own banks the we can see the the the central point that i'm making in terms of the com the necessary complementarity between broader institutions including political institutions and single integrated markets is we can see it precisely in the dilemma that the european union faces today because if the european union is going to get out of this crisis i think it has to make a decision the decision is either it decides to become more of a political union and that's because it has to federalize fiscal policy and it cannot federalize fiscal policy without in some sense building a political community at the same time or if it is unwilling to do that if it's unable or unwilling to achieve political integration that it is going to have to accept less economic union in other words allow greece and the others to actually have the policy instruments that they need in order to reactivate their their economies i will finish by returning back to some of the global issues and summarize my argument by way of a number of general guidelines the first point is to to really drive home the point again that markets need to be deeply embedded in systems of governance in order to work well second that these institutions of governance by the democratic governance and political communities today are organized largely within nation states and they are likely to remain so in the immediate future potentially the european union could be an exception but as we're observing today and as my discussion makes clear even there there is a big question mark third that there is no one way in the sense of how we design these arguments these mechanisms of regulation that the institutional designs that underpin market economies will differ according to the democratic preferences of different jurisdictions that countries democratic countries in particular have the right to protect their own social arrangements and institutions but not the right to impose them on others so this is an important distinction that if you want to protect your set of financial market regulations your labor market institutions your safety nets um and if that requires some impediments to the free flow of goods and services that that is okay but what is less okay is to say that to impose on other countries your labor market institutions your financial market regulations and that this implies uh in turn is that we need to we need to push for a system of international economic governance that is significantly less ambitious significantly falls short from the global governance ideal the and creates policy space uh for democracies uh for the advanced democracy so that they can recreate their own domestic social and political bargains for the developing countries to to have the space to undertake the kinds of of policies that are needed to restructure their economies and diversify their economies and i've emphasized that the importance the normative value of creating this policy space because of the presumption that the constituent units are democratic that the policy outputs are therefore normatively desirable normatively have value of course not all countries are democratic and therefore would would need to think about a a second set of considerations about how do we deal with non-democratic countries i'm not going to go into the detail of that but simply say that in non-democratic countries since we cannot presume that their choices reflect the needs of their citizenry that it would be it would be not uh undesirable uh for to subject those countries to less permissive rules in terms of how much policy space are required so what is the future of globalization i have no idea but i do know that if we go on our current path where we simply presume that we can build these global institutions these global governance mechanisms as implausible and undesirable as that path might be that we are going to be once again finding ourselves in exactly the same set of problems that we have created namely this this dangerous imbalance between the reach of markets and the scope of the governance and we have to figure out a way of bringing those two much more closely aligned to each other and unfortunately there is no way of doing that except for reducing our ambitions on how much globalization we can have so the paradox of globalization is that sometimes less is more thank you very much thank you very much dani for sharing your thoughts so thank you very much uh thank you very much for sharing your thoughts with us and uh thank you very much for highlighting the uh problems uh concerning the european union and speaking about the very difficult choices that europe will have to make in particular uh concerning these steps to be made to integrate to face the public debt crisis now we have a time for some questions from the audience there are some free chairs in the front line for uh the persons have to attend other meetings there are people sitting on the floor please please come up here and feel comfortable so we have time for some questions please ask short questions we prefer questions uh over uh comments lucrezia reichlin is one of the speakers uh on the issue of european central park that's cool i found your uh intervention quite convincing and in a way it's hard to disagree that we need a global governance in particular does it work okay okay fine in particular for the european uh mechanism and integration i think actually your point is one of the points that i would like to make tomorrow when i talk about the ecb but i have two questions uh well first i mean you're talking about what happens in a case of non-democratic states i would say even in the case of democracy we live in imperfect democracy and so it is not obvious that going first for monetary union or financial integration is a bad idea for the dynamic of the evolution of other institutions like fiscal integration governance and so on and the second question is why do you think that the nation is the obvious unit when we talk about the democratic process and of course if you don't talk about the nation or and uh you know at a level more sort of uh gland or a granular level of uh you know disaggregation then you know they you would be quite different what you have to say no uh great great questions uh on on the first uh you're absolutely right that you know democracies don't necessarily work perfectly and and uh and for that reason actually um i didn't have a chance to talk about this but one area which i talk about in the book which i think is important is one area where there is significant value in global rules or regional rules is rules that actually enhance the functioning of democratic deliberation enhance the quality of democratic deliberation at home so you might view for example delegation of monetary policy making to an extra national central bank as a as a you know sort of desirable kind of deliberate delegation because it takes monetary policy making out of the hands of you know policy and we know with all the time inconsistency problems and short-termism that pointer policy might be otherwise subject to that's a good thing we can extend that principle across a number of different areas so for example we might say global enough it would be perfectly desirable for world trade organization to have rules as to sort of how the trade policy making machinery in individual countries ought to satisfy certain normatively desirable standards like accountability representativeness uh you know um adherence to scientific and and economic knowledge and research and so forth so those are all things that i would be good for you know those are where i think the external regime the global regime or the regional regime can make hugely important contributions in the case of the european union i also agree with you in terms of the dynamics and that's why i mean the difference between let's say just to make it very clear within marty feldstein and my view was that marty feldstein said from day one that the eurozone would never work a common currency would never work but i interpreted it like you which said this is a process as long as there is in the back of this a conception that you're integrating at no sort of that this is not where the process stops that this may be you know there's a political conception behind it that it might make sense and it might have still have made sense i think you know with if the american crisis hadn't struck so i agree with you that's why i'm still not down on the process i mean i don't think exante would have said i said that this was a bad thing um on the the the the second question which was um the the nation i agree with with that as well um you know i think often if you if you have i think the nation state is a way of organizing it's sort of like local public goods so if you think that different communities have different um preferences for the type of public goods they want and if the nation states are broadly aligned with those preferences then it's okay for each public each different community or nation to want to have their own type of their own kind of financial regulation for example and that would significantly undercut the argument for why there ought to be a regionally or globally harmonized so the normative value in the nation state is to the extent that it reflects a mass of preferences that might be different from those elsewhere but where that differences aren't huge as presumably they may not be in europe hopefully um then you know there isn't any normative value that attaches to the nation state then then the problem is how do you construct the political community here you have you know very big responsibility for people like merkel who rather than you know sort of telling germans you know the story that that she's telling now is it would be you know at this point if the political union is going to be rude is try to construct a political narrative about how this is the germ of a political union so that would be the the issue but of course that's not how the discussion is being carried out today very short i don't know much about economics but i would i would be very interested in knowing what's your opinion about some major european countries being out of the monetary system let's take uk from your point of view how much sense does that make thank you a quick quick uh quick answer uh you know i think you know the the you know the british had their reasons which was that they have their you know sort of financial institutions and they're that they didn't want to be part of a set of the common rules i think the you know that that i think was probably a wise decision i think the the the more irrelevant this discus the question today is should country like greece actually leave the eurozone and i think unfortunately there is going to become a point where if it hasn't come already that if the kind of vision of a truly political union political european union isn't articulated and the problem that greece faces today isn't fiscalized throughout the european union that i think it leaves very little little option for greece but to um to exit the european uh the eurozone and and um and and depreciate its currency because otherwise uh this existing policy of austerity upon austerity uh is neither economically desirable nor politically sustainable and unfortunately uh that becomes really the only other alternative for greece and of course if greece is going to do it there's going to be at least a few others who will have to be pushed down that that path as well and the only question there is whether if we are going to go down that path whether the exit of greece is done unilaterally at the moment of crisis or it's going to be done in a in a way that's negotiated and and orderly you've been very harsh on the democratic credentials of the wto but what you said may apply to any international institutions from the united nations downwards so is this something that signaling that you don't believe in the democratic credentials of any international institution no i mean again as i said um i mean first of all the world trade organization is very different from the united nations because the world trade organization just to give you a sense is the only international organization that has ever made for example the united states changes policy think about that for a second the united states is sort of obviously the great world's greatest power has never changed anything that it does because of any kind of international decision um and has had to change some of its regulatory policies because of of wto decisions um and of course you know what's true for the united states is true for other countries so the wto has a degree of enforcement power in practice which is orders of magnitude different from any other international uh except for there are a few international climate agreements and so forth that's that's uh that's separate uh so in that sense and that's why it's a big success right if you ask economists what's the un it's nothing but the wto you know their decisions really make a difference now why is it um you know democratic non-democratic i would like to see the world trade organization move in the direction that i suggested which was that that it will have much greater legitimacy to the extent that the rules of the wto are are are geared at enhancing domestic democratic decision-making so enhance the democrat the transparency and the evidence-based nature of domestic trade and industrial policies rather than narrow the space for policy diversity and harmonize all policies so i think there's been too much of the latter too little of the former and the more it is the second i think the more problematic it becomes from the standpoint of of uh democratic delegation so thank you very much for this talk i really i enjoyed it uh i i think you you didn't say enough in favor of globalization i mean obviously the the costs are very apparent and we have a lot of them staring in the face right now the gains from trade starting with manufactured goods agricultural goods moving to services financial products trade and assets obviously the gains from globalization are declining could you comment on that a little bit i mean where do you come down i mean i know where you come from but uh there must be some gains from going somewhere and europe has gained a lot from having more trade there's no question about that within and without i think they're there we really have to look at area by area so you know in the in trade in goods in the 1950s there were huge potential gains from trade equalization because their system was so highly restricted that the kind of liberalization that took place in the 60s and 70s provided very significant benefits but if you look at you know trade in most things including even agriculture today so if you ask the question what are the prospective gains from completing the doha round they're about this big you know they're about you know 0.1 percent of global gdp that's not where the gains are so if you want to look for gains of course you want to look at other areas so you know as you know of course labor mobility would be a huge area where like the global labor regime is roughly where the world trade regime was in the 1950s so if that's you know if you wanted to get some gains that's what you would want to work for and that's where i think would be very desirable similarly in financial i think it's very difficult to make the case at this point that there wouldn't be there would be no losses and significant benefits uh from a regime that is much tighter on cross-border flows so i think there in in trade and finance i think you know prospective gains are relatively small there are lots of service areas in particular labor services where the gains are very large where in fact i would you know want to see with the the negotiations take place i'm sorry in your presentation you said that if california will have a passive usa can help her but how can you think you um all the states all the european states can give their serenity to a international organizer and let them be controlled by him like all the little states of usa will will be done by the u.s well there are different models of quasi-federal regimes and i i wouldn't necessarily say that the u.s one is exactly the right one for the european union nor would i say that this is something that ought to take place tomorrow or next month or in two years but this is what the logic is i mean today you know trisha said that you know the europe needs a common uh finance minister fine yes it does and this clearly does but then what who's going to be the the you know who's go you know to whom will the finance minister be accountable to to berlin you know the moment you start thinking about what the political structure behind that is then you have to think about some kind of a federal political structure so yes you know think about if you want to have a truly a european union cabinet including a finance minister union you know then you need to think about a european parliament that is even has much much more broader powers and a european budget that significantly goes beyond the one percent that it is and so forth and exactly what forms of representation how the election system and the system of federalism i mean these are all architectural questions that that need discussion but i think yes ultimately that's the path it's going to take a long time but if that's going to be the path and that's i think this is the only coherent way of sustaining the single market in in europe uh including financial integration i think it ought to be that goal has to be articulated today that that's you know where we're heading uh professor rodrick you said about the scope of the asymmetry between the scope of markets and the reach of governance and based on your today's speech and based on your previous publications i know that you're concerned not only about the scope of the governments but also the type of the governance who's going to be benefit from that government and who's not and talking about international trade which is a major interest of mine and given the stalemate in the wto negotiations namely the doha round and the proliferation of those bilateral trade agreements so these bilateral trade agreements who are believed to be not in the favor of developing countries and they are actually establishing some kind of many jurisdictions with investors trade arbitration etc so do you think this is a type of the uh globalization 3.0 and i would like to hear your comments on this thank you yeah i i think the trend you're you're mentioning is one that i'm quite worried about and write about in in my book i think you know it is these these bilateral trade agreements or the free trade agreements you know which create as you say which carve out you know sort of extra national jurisdictions for foreign investors and so forth uh aren't aren't imposed by the united states or europe i mean these the the developing countries are dying to get into these arrangements uh in a way so the problem isn't necessarily that these powerful countries are imposing these asymmetric arrangements is that the you know that the developing countries are falling over each other because of you know if i can if i'm allowed to marx this term sort of false consciousness if you will that they have an idea that uh in that there that these trade agreements can be can be a shortcut uh to development that you know you sign these agreements your you know your risk rating uh you know goes uh goes up and and you know you attract a lot of investment everything goes well i mean we've seen time and again these expectations actually not not not really fulfilled so i think the problem here i think is more at the level of national consciousness at the level of what it is that developing countries think they're doing what their growth strategy is and what kind of a role these trade agreements can play i think for some kind of countries it may make sense i think but in many countries they're sort of using this quite inappropriately i think as a shortcut to investment and growth strategies and i think we'll be disappointed yes uh i would like to ask uh what is the and uh will be the impact and uh on global econom economical decisions of the new emerging power as china as india and our aren't the accidental power undervaluing them i mean clearly we're we're moving into a world which is becoming much much more multi-power and the center of gravity in terms of power is moving east and south in particular the role of china is going to be very important i i think one of the interesting things about the new powers china india brazil and so forth is that even though they're very very different countries there's one thing that they share which is that they're very zealous about guarding national sovereignty um and i think so that tells us that in this kind of a new world regime the multipolar world regime that we're going to be moving in uh you know the the arguments that i've made here in terms of understanding that national sovereignty has value uh particularly when it is underpinned by democratic deliberation that that you know this is going to be willy-nilly going to be part of the the global architecture in the new world system that we're moving into so even if this consciousness doesn't exist intellectually it's going i think it's going to be forced on us uh by the constellation of new powers there um so that is also the sense in which the kind of architecture i'm recommending is much more consistent with this shift away from western europe and the united states i think now the the the the flip side of that is that countries like china will have to recognize that if they value their national sovereignty and they want to guard zealously their policy space for their own policies that they need to understand that as systemic players that the industrial countries have similar needs as well so the quid pro quo as will have to be that yes you can have your policy space but we needed to let's discuss how we can create an interface between those that doesn't spill over uh and create two adverse negative effects so these were all very good and difficult questions so let me add a couple of easy ones first there seems to me to be a great absentee in your presentation and i think it's something that people here perhaps are interested in um and these are ngos you know in a way ngos prove capable of uh in a way monitoring following and addressing some of the issues we're addressing fair trade by unfair trade by multinational corporations and and so on so i would like to have your views on this because clearly there is a also initial political accountability there which is a very serious one so that's the first one and the second you were saying rightly so that sometimes political you know economic integration should wait for political integration uh but there are clearly dynamic you know mechanisms where you know to some extent economic integration can create a condition also for political integration a standard example comes from your theories about trade you know the fact that if you open up to trade when you uncover unfold you discover your comparative advantages so then openness to trade becomes something that is more beneficial for the country doing that there are also cases where things may go wrong in case of migration you were just mentioned before i'm there i'm a bit skeptical about your idea of opening more to labor flows because you know we have the history of europe and the other countries that move from a situation where there was much more mobility worker to a situation where we close borders and we are even doing even that more so uh not only that type of integration does not create the support and the constituency for more political integration but things so i wonder whether you know there is some dynamics there that we're missing there are great uh um easy questions um let me just say something about the the ngos i actually do talk in chapter 10 about this one chapter in the book is devoted to the question of you know is global governance really feasible and desirable and obviously one of the mechanisms through which you can generate some kind of a global governance as you suggested is to rely increasingly on these international ngos that provide information that can monitor have various kinds of accountability mechanisms perhaps and so forth and my conclusion sort of having looked at at this is that it's a very very imperfect uh set of mechanisms uh partly because of you know sort of the informational uh you know it's let me let me put it this way the kind of global market integration that these ngos and various other similar movements like in corporate social responsibility or the transparency initiatives the various labeling initiatives and so forth can sustain i think is a relatively limited kind of global economic integration we see this already in a number of different areas for example various labeling initiatives or you know fair trade initiatives turn out to be when you scratch the surface turn out to be in a lot of cases not more than feel good initiatives there are huge problems in terms of accountability there are huge problems in terms of who gets the information how is it conveyed does it actually make a difference in in practice so my general evaluation is without by in the least bit uh wanting to you know devalue the work that these ngos do in particular in putting very important issues on the agenda i am somewhat skeptical that they are a large part of the solution uh that that in some sense we haven't you know we haven't been we haven't come up with real alternatives to real existing democratic political institutions of the classical type um and the various alternatives to it whether it is um these ngos and various codes of conduct or it is various notions of networked governance that is the other kind of of global governance that political scientists have been talking about i'm sort of skeptical that they can take us uh very far well the last two questions uh getting back to our country with us and love ngo are talking about china and we were talking about world trade organization but now many people analyze international economy and policy that talking about beijing consensus is not well spread in the world but spreading so i would like to know about the influence of beijing consensus thank you very much the beijing consensus you know i think that it hasn't had uh i don't know what the beijing consensus is i mean i i see it i i see it being this mentioned but i'm not quite sure what it is i sort of have a sense of what the chinese did and why they may have been so successful in what they did i see very little transferability to other countries in terms of its operational implications i see a lot of transferability in the kind of frame of mind so i think the the pragmatism the experimental nature of policy the willingness to um uh to put up that uh that that guard against the mosquitoes and the bugs uh you know some of the general principles that has that has sort of been behind their specific policies um i i think those are transferable uh but when you talk about the specifics about their you know the township and village enterprises or the special economic zones and then various other you know their institutional innovations i don't think they're particularly transferable so i think what has happened in the last 10 15 years in terms of growth strategies development strategies is that we've moved the real consensus has been that there's no consensus and i think the the danger is that that sort of leads us to a everything goes kind of an approach and my view on that has been that it's not that everything goes there are still some very broad very important principles that good economic policy satisfies and it's important to provide property rights to investors it's important to provide macroeconomic stability it's important to provide market-oriented incentives it's important to orient your economy outwards these are all the kinds of things there are parts of the consensus that you can utter when you get off the plane in a country that you've never been to before if you know somebody asks you what should we do but if you know those are in some sense empty of content because if you say how are we going to provide market-oriented incentives how do we get property rights protection how do we get outward orientation that's where the details are and my analysis suggests that those details are highly context specific and and depend very much on local market conditions and local political considerations and and so there you can't have a consensus really ultimately well i'm not an expert i'm not an expert i'm an entrepreneur who has suffered a lot because of the crisis i read in these days in the newspapers that the financial situation has gone back to the pre-crisis situation we've gone back to pre-2007 so i'd like to understand from you if in two years time we will go back to the bad crisis of 2008-2009 well you're taking me at my word of the title the future and and i i was trying to uh prevent from doing that i mean you know without being too smart about it you know i i do think that we haven't globally we haven't faced up to the to the real challenges that the crisis um has revealed i don't think the nature of regulation of financial markets has been substantially and significantly uh changed and affected in the positive direction either by way of our domestic regulations or by way of our global arrangements so i think it's been mostly tinkering so i don't think it's going to be in two years time because the cycle tends to be around 10 years so you have another eight years i would say on the current path with respect to the european union you know i continue to be optimistic that you know that the crisis i think will elucidate um for policymakers this very stark choice that they that they do face and that there will be an act of leadership um that will be able to move uh your europe or at least those members of the union that want to go in that direction in a significantly more uh politically integrated direction that if that act of leadership takes place actually would be more optimistic about europe's immediate future i know that there are many other questions from the audience but so the topic has been very stimulating and some of these issues will be debated also tomorrow we will have a lecture in the morning by ottaviano on free trade and then there will be a lecture on the crisis and the public deficit by fan hagen and then lucretia reichling who will speak about the new role of central banks so if you didn't have the opportunity to make questions this evening you'll have a new opportunity tomorrow thank you