By Simon Johnson.
This post draws on issues discussed in class #6 of Entrepreneurship without Borders, a course at MIT Sloan. The syllabus and other materials are available here.
The US has a long and generally successful track record of using “economic statecraft” to advance its positions and values in the world. We helped rebuild Europe and Japan after World War II, with a judicious mixture of aid and access to the US market. Similarly, as the Iron Curtain fell after 1989, the US stepped in with targeted financial support and general encouragement to converge on the European Union’s political and economic institutions. The International Monetary Fund (IMF) and the World Bank, where the US has a big voice, have also played positive roles in many instances over the past 70 years.
No policy is perfect or without controversy. But surely this approach is better than relying primarily on military power in the way preferred by former dominant powers – think of Rome, the Ottomans, or even the British Empire (where there was some commerce, but also a lot of coercion.) But can we continue to apply the same economics-first approach to the next frontier for economic development – women’s rights? Whether Janet Yellen becomes the next Chair of the Federal Reserve will provide some insight into the answer to that question. Continue reading