On January 15, ISET had the privilege to host a living economic legend when Professor Erik S. Reinert visited the institute to participate in the Georgian-language launch of his book, How Rich Countries Got Rich, and Why Poor Countries Stay Poor. His work, which was originally published in 2007, has now been published in over twenty languages and remains one of the most widely-discussed economic works of recent years.
The main message of the book is that neo-classical economics damage developing countries, mostly via adherence to the theory of comparative advantage of David Ricardo, an English economist of the XIX century. The theory posits the virtues of trade irrespective of the nature of the goods traded. Based on a long intellectual tradition started by the Italian economists Giovanni Botero and Antonio Serra, Professor Reinert stated that the country which trades increasing returns goods – e.g. high-end manufacture – has advantages over the country which trades diminishing returns goods – e.g. commodities.
Since the Renaissance, Professor Reinert said, successful countries – including England and the United States – have first protected their nascent manufactures and only opened themselves to the world markets after securing their own positions. Citing Friedrich List, a 19th-century German economist, Professor Reinert suggested that protectionism is therefore important and that free trade is only mutually beneficial among countries of the same level of development.
These ideas were naturally very relevant to the Georgian audience since Georgia remains a developing country reliant on trade with its developed partners. Professor Reinert also highlighted the poignant fact that some countries – such as Georgia, Ukraine, and Hungary – were in fact richer under Communism, due to the fact that dictatorships are willing to disregard international economic and financial norms outlined by bodies such as the World Bank and the IMF. Therefore, he stated, the West has in fact built an incentive against democracy; the industrial policies of dictatorships can be more economically beneficial than adherence to established international standards.
ISET is deeply grateful for being given the chance to host Professor Reinert’s book launch, as well as to the Professor for taking the time to give his presentation and host a question and answer session afterward.