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Prescription for Success

T.C.A. Srinivasa Raghavan

By Peter Blair Henry
Basic Books, New York, 2013, pp. 220, $26.99


Other things being the same, does economic success, like lightning, strike countries randomly? Or can the probability of being struck by it be significantly enhanced by governments? Peter Blair Henry, Dean of the Stern School of Business in New York, says yes, it can. His prescription for success is simple, old as the hills and eternally valid: discipline in policies. And, although he doesn’t mention it explicitly, one must assume he means consistency as well.   For a modern economist, Henry writes with surprising lucidity. And not only does he give a sensible message, he also provides a panoramic view of global experiences. Even better, the whole thing is garnished with a sprinkling of the current thinking on the subject. For that reason alone, the book should be made compulsory reading for all politicians in developing countries. They can appear well read and well-informed on TV chat shows.   Henry makes an important point to which the developed countries ought to pay heed. This is that they can learn from the Third World—his phrase, not mine—some of the key lessons that enable countries to do well. ‘Given the glacial pace of First World movement on issues of international economic coordination and governance emerging economies have begun applying pressure through their newfound power of the purse.’ But interesting as this observation is, it needs more substantiation not least because economic power is still overwhelmingly in the hands of the First World, in financial as well as technological terms. Add to this old boy networks and the Third World doesn’t look quite as robust, especially when lack of unity in the pursuit of national interest comes into play.   Also, as we have seen in the case of, say, South Korea, entry into the rich countries’ club creates what can only be called an existential confusion in the minds of the erstwhile poor. The former poor not only forget their very recent status very quickly, in copycat policies but they also start making the mistakes of the rich very quickly.   The Magic Potion It is now widely agreed that, unless India rapidly enhances the rate of growth of its GDP, it will fall irretrievably behind the rest of the world. Traditional constraints have now been replaced by a new constraint, namely, determining the optimal trade-off between efficiency and equity. And there lies the rub. Henry says that all the countries that ...

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