book review

Free Trade Reimagined: The World Division of Labour and the Method of Economics by Roberto Mangabeira Unger; Princeton University Press, Princeton, 2007; pp 227, US $ 29.95.

the effects of different kinds of trade policy. Indeed, Unger states in the concluding section of his book that it should not be

misread as a polemic against free trade. It is not. Its immediate concern is to propose a change in how we understand the benefits and dangers of trade among countries. The understanding I put forward results in a view of how to build an open world economy without harming some of our most important material and moral interests. If my proximate goal here is to reimagine free trade, my ulterior motive is to argue for a change in the way we think about markets, the division of labour, and the relation of production and exchange to the rest of our social experience (p 213).

1 Overview

The book consists of five chapters and short introductory and concluding sections. The first chapter briefly discusses the main problems with the doctrine of the gains from free trade from theoretical and historical perspectives and offers possible reasons – intellectual as well as political – why the doctrine has such widespread support. Chapter 2 focuses on the shortcomings of the intellectual core of the free trade argument, that is, the doctrine of comparative advantage. Unger’s critique examines various forms of incompleteness in the doctrine that involve the absence of unique assignments of comparative advantage to countries, the failure to examine the limits of the government’s power to shape comparative advantage, and problems arising from the assumption that the world is divided into nation states between which labour mobility is restricted. Unger sees his critique as a broader critique of neoclassical economic theory, for its sham similarity with physics, for the failure of its mathematical models to take time seriously, for its attempt to have an analytically “pure” economics separate from empirical and normative considerations, and for its often unacknowledged sacrifice of this purity for the sake of ideo

logical support of free markets, capitalism and globalisation.

Chapters 3 and 4, containing the crux of the book, present ideas that respond to the shortcomings of the doctrine of comparative advantage, and formalise them in terms of three theses about free trade. First, he argues that there are two types of human activity, the repetitive and the creative, a distinction which goes beyond the Smithian notion of the division of labour and the Fordist idea of large- scale production, and which results in a better understanding of the role of innovation and development. This idea leads him to his first thesis: that free trade is likely to be beneficial between economies which are developmentally at the same level or technologically a great distance apart, and not so between countries which are apart but not too far apart. Restraints on trade are required and likely to foster technological change and development in these intermediate backward countries by encouraging activities promoting innovation. Second, Unger draws attention to the fact that the market economy can take various institutional forms, especially relating to property rights. This leads to the thesis, there is no single way that markets can be organised and in which trade is free: they can exist under different legal and institutional forms, and experimentation with diverse forms is beneficial because it allows selftransformation. Third, he stresses that the organisation of the political sphere plays a decisive role in shaping the character of economic life. This observation leads him to the thesis that pluralistic and participatory demo cracy, which is open to challenge from below and outside, is most likely to create political conditions in which restraints on trade are beneficial because they create suitable institutional arrangements that organise government and policymaking.

Finally, Chapter 5 presents the programmatic implications of Unger’s analysis,

EPW

BOOK REVIEW

development strategies. Unger argues in favour of the following changes: from a system which tries to maximise trade flows to one that “maximises the possibility of coexistence among different development strategies, institutional systems, and forms of social life” (p 180); from the enforced propagation of a parti cular form of the market economy and associated property rights (as exemplified in current international system of the protection of intellectual property rights, and the outlawing of production subsidies) to one that celebrates different arrangements and allows experimentation among them; from a system which only encourages the international mobility of goods and capital to one that also encourages the mobility of labour and allows people to vote for their preferred institutional arrangements through migration; and from one that accepts wide disparities in the rewards and rights of workers between and within countries, to one which links labour standards (in a broad sense, that includes the provision of a living wage) to trade provided that the internationalflow of technology is not restricted, and which reduces the dependency and insecurity of wage labour around the world through experimentation with diverse patterns of ownership.

2 Polyglot Scholarship

As this brief summary suggests, Unger covers a vast amount of territory in just over 200 pages. As such, one cannot expect him to provide detailed discussions of all the issues he raises. Indeed, economists who read this book will be struck by the absence of empirical material, by the brief discussion of theoretical issues and the absence of citation of recent related theoretical contributions on trade, and the generally broad-brush discussion of complex analytical, politico-economic, and policy issues. There are very few references to the literature, and hardly any footnotes! Can one expect such a book to make a significant contribution to the critical literature on free trade?

Unger is not a professional economist. He is a social theorist, a law professor at Harvard University, a leader of the critical legal studies movement, a political activist states at the beginning of the book that this work, a part of a larger intellectual programme which rebels against tendencies prevailing in the social sciences and humanities and which he has developed in a long series of books. Given this, it is difficult not to marvel at his polyglot scholarship, which in this book enables him to skilfully traverse the languages of history, politics, psychology, philosophy, physics and global political economy, but also of economic theory, applied economics and the history and methodology of economics. Moreover, his elegant prose is clear, precise, and occasionally beautiful and poetic. Nevertheless, Unger states that the book stands alone as a contribution on the international division of labour and economic method. It is therefore legitimate to evaluate the book from the narrower perspective of economics.

From this perspective, it is not difficult to find weaknesses in the many arguments of the book. The criticisms of the theory of the gains from trade and comparative advantage, while generally on the mark, are not very well informed in terms of recent theoretical and empirical contributions, and occasionally somewhat muddled, conflating indeterminacies that arise out of higherdimensional problems and from taking into account the dynamics of technological change. The discussion of the problems with the use of mathematics in economics does not take into account the recent advances made in modelling path dependent dynamic processes in e conomics.

The argument in favour of linking labour rights issues to trade is ahistorical (not taking into account the stage at which labour standards improved in the nowdeveloped countries) and does not sufficiently take into account the problems that less-developed countries may face – not least from a further weakening of their bargaining power at the World Trade Organisation – by accepting such a linking [see, for instance, Chang 2008].

Some of the arguments proceed with broad generalisations rather than a detailed and careful discussion of empirical trends and possibilities. For instance, the argument which states that countries that are developmentally close to each

Economic Political Weekly

INDIRA GANDHI INSTITUTE OF DEVELOPMENT RESEARCH, MUMBAI WORKSHOP ON Economic Instruments of Water Resource Management

– Recent Developments

January 9-10, 2009

The Indira Gandhi Institute of Development Research, Mumbai is pleased to announce a two day educational workshop on Economic Instruments of Water Resource Management to be held on January 9-10, 2009. Topics to be covered include, among others, intersectoral competition for water, water rights, allocation models, economics of privatization, rural and urban water supply, market instruments for irrigation management, virtual water trade, and flood insurance. The Speakers are leading national and international experts from Harvard, MIT, University of London, IGIDR, National Institute of Hydrology, World Bank, IWMI etc.

We welcome requests from mid-career professionals, including engineers, scientists, administrators and scholars for a limited number of seats as observers to this workshop. Postdoctoral fellows and early career faculty engaged in water resources studies are also eligible. Local hospitality (meals and accommodation) would be provided for selected applicants. Travel reimbursement (by 3-tier AC train by shortest route) may also be given to those in need. Please apply with a brief CV (and asking for travel support if you need) preferably by an email at waterworkshop@igidr.ac.in. The deadline for submission of the application is October 15, 2008.

Your application will be acknowledged by email. The selected applicants will be notified by October 31, 2008 and are expected to confirm their participation by email latest by November 15, 2008. Please mark your envelopes, fax and email messages with the header “Water Workshop”.

Mailing Address: The Registrar

Indira Gandhi Institute of Development Research (IGIDR),

Gen. Vaidya Marg, Santosh Nagar, Goregaon (E), Mumbai 400 065. INDIA

Tel: (022) 2840 0919/20/21; Fax: (022) 2840 2752/28416399

Sage

september 6, 2008

EPW

Economic Political Weekly

BOOK REVIEW

other or very far apart can benefit from free trade with each other, while countries an intermediate distance apart, is questionable. The debilitating results of Bretton-Woods imposed trade liberalisation on employment and industrialisation in some of the poorer African countries do not support the notion that countries can invariably gain from trade. Moreover, the ability of bottom-up participatory demo cracies to be able to flexibly revise their institutions and policies to maximise their benefits from international interactions appears to be wishful thinking, without any discussion of the potential problems and specific forms of such democracies. Diversity may seem like a good idea because it can promote experimentation and flexibility, but how, given existing national and global power structures, will it be able to allow substantive differen tiation which allows the selection of better institutions. Indeed the survival of the “fittest” may not lead to socially desirable outcomes.

3 A ‘Think Piece’

But perhaps a book such as this one can only frame broad questions and provide general guidelines for further work – as a “think piece”, if you will, which will spur further work on the issues it raises. On this score the book does well. Unconstrained by the often stultifying protocols of mainstream economics, the book can serve a liberating purpose. It broadens the debate on free trade to bring in broad political economy issues about the nature of institutions and the state, and raises big questions about the diversity of market systems and conditions which favour institutional revision. The arguments in favour of diversity and participatory and bottom-up democracy are particularly enlightening. In addition to these broad observations, the book makes some very useful specific contributions. Two examples of this are worth noting.

First, the dualistic view of the human mind is extremely insightful. Unger’s d iscussion of this is worth quoting at length both for what it says and also for how it says it.

In one aspect, [the mind] is modular and formulaic. The mind is modular in the sense that it consists in separate parts, defined by their distinct functions and embodied in

Economic Political Weekly

EPW

september 6, 2008

different regions of the brain…The mind is formulaic…in the sense that these parts act repetitiously according to formulas … In this modular and formulaic aspect, the mind is like a zombie. It acts under the compulsion of orders. It exhausts its life in repeated moves …[In its second aspect the mind] … exhibits … totalising, surprising, and transformative qualities. Here the mind has ceased to be zombie-like. It has become a spirit…In this second aspect, the mind enjoys the characteristic powers of recursive infinity, nonformulaic initiative, and n egative capability. By its power of recursive infinity, it uses finite elements (of language, of thought) to infinite combinations. By its power of nonformulaic initiative, it makes moves that it does not yet know how to repeat or to bring under a formula. By its power of negative capability, it gains in strength, and adds to insight, by doing more than the habitual, organised settings of its actions and thoughts will countenance (pp 101-02).

The distinction between these two types of activities is probably not as tight as Unger makes it seem – many repetitive tasks require innovative interventions when the process of repetition breaks down or requires modifications due to changes in circumstances, and innovation also involves repetitive activity – but it is analytically very useful for drawing attention to the kinds of activity that need to be promoted to foster innovation and technological change, broadly defined. It provides a useful way to look behind the equations incorporated into trade and growth models which assume differential rates of learning by doing and spillover effects in particular sectors and to understand the consequences of trade policy on innovation and development.

Second, Unger provides some very useful characterisations of mainstream neoclassical economics. In particular, he stresses its strategies of “purism” (the insistence “on the full rigour of the distinction between the analytic operations of economics and the empirical or prescriptive starting points that must be supplied to it from outside”, page 61) and of “pretension” (which “sacrifices purism for the sake of programmatic potency…It characteristically urges the benefits of markets, of capitalism, of globalisation, and above all of free trade”, page 61) is very insightful.

The often unacknowledged and sleight of hand switches – perhaps unconsciously

– between these strategies undoubtedly explain both the intellectual dominance and resilience of neoclassical economics and its ability to shape the world in a particular methodologically flawed and often devastating ways. Unger is on the mark in pointing out the illegitimacy of these strategies, based on the method of optimisation and the omission of the in stitutional prerequisites of market e conomies.

4 Overall Assessment

Despite the questions that can be raised about many of its arguments, overall, Unger’s book deepens and broadens the debate on free trade and is therefore well worth the attention of academic economists and policymakers. It deepens the debate, for instance, by using the dualistic conception of the human mind and it broadens it by raising questions about the heterogeneous nature of institutional arrangements for market systems, and the desirability of diversity for development.

In fact, the book itself provides an illustration of the force of these ideas. First, it shows the power of innovation by going beyond the routine activities of assumption modification of many academic econo mists. It can only be hoped that these innovative ideas will chip away at doctrinaire and dogmatic views on the virtues of free trade and help to increase the pragmatic opposition to it, which takes seriously the specific characteristics of particular countries and of the opportunities and constraints that they face. Second, it shows that diversity in method can produce new ideas and insights. While formal analytical and empirical methods may have a comparative advantage in analysing some kinds of issues, the more literary approach that this book follows has it in others. What is more, this comparative advantage may even be dynamic and change over time.

Email: adutt@nd.edu

References

Chang, Ha-Joon (2008): The Bad Samaritans, Bloomsbury Press, London.

Dutt, Amitava Krishna (2006): ‘Globalisation, Trade Liberalisation and Conflict: A Southern Perspective’ in B N Ghosh (ed), Globalisation and the Third World: A Study of Negative Consequences, Houndmills, UK and New York: Macmillan/Palgrave.

Fuller, Dan and Doris Geide-Stevenson (2003): ‘Consensus among Economists: Revisited’, Journal of Economic Education, Fall, 369-87.