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Notes 249 Currency Undervaluation,” Cato Journal 28, no. 2 (2008): 313–40; and Andrew Berg and Yanliang Miao, “The Real Exchange Rate and Growth: The Washington Consensus Strikes Back?” (IMF working paper, WP/10/58, March 2009). Ridha Nouira and Khalid Sekkat find weaker results in “Desperately Seeking the Positive Impact of Undervaluation on Growth” (unpublished paper, University of Brussels, Belgium, September 2010). 11. Rodrik, “The Real Exchange Rate and Economic Growth.” 12. Eswar Prasad, Raghuram G. Rajan, and Arvind Subramanian, “Foreign Capital and Economic Growth,” Brookings Papers on Economic Activity 1 (2007): 153–209. 13. Ibid.; Rodrik, “The Real Exchange Rate and Economic Growth.” 14. Dani Rodrik and Arvind Subramanian, “Why Did Financial Globalization Disappoint?” IMF Staff Papers 56, no. 1 (Spring 2009). 15. Ricardo Hausmann, “In Search of the Chains that Hold Brazil Back” (HKS working paper no. RWP08-061, Center for International Development, Harvard Kennedy School, October 31, 2008), http:// papers.ssrn.com/sol3/papers.cfm?abstract_id=1338262. 16. M. Ayhan Kose, Eswar S. Prasad, and Marco E. Terrones, “How Does Financial Globalization Affect Risk Sharing? Patterns and Channels” (unpublished paper, IMF, June 2007). 17. This need not be the case always, of course. Some governmentimposed constraints (“red tape”) are easier to fix than others (e.g., inefficient courts). 18. Dani Rodrik, “Normalizing Industrial Policyy,” and Rodrik, One Economics, Many Recipes, chapter 4. 19. See Rodrik, One Economics, Many Recipes, chapter 4. 20. Rodrik, One Economics, Many Recipes, chapter 4. 21. There is a good case to be made that the prohibition on subsidies has little economic rationale, independently from the developmental argument I am making here. After all, subsidies are trade creating (unlike import barriers), and a country that subsidizes its tradables provides the rest of the world an economic “gift” to the extent that the subsidy results in greater supply and lowers world prices. The WTO’s approach to subsidies is mercantilist and overly influenced by the interests of competing producers. 250 22. Oversight over currency practices is usually thought of as being the province of the IMF. But Mattoo and Subramanian have argued that the WTO is a much more suitable organization for this purpose, since what is at stake are imbalances in trade flows and the WTO actually has the capacity to make its rulings stick. Aaditya Mattoo and Arvind Subramanian, “Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization” (Peterson Institute working paper, Washington, DC, January 2008).The discussion here suggests that any move in this direction should have as a direct quid pro quo the weakening of the discipline on subsidies. Notes to Chapter 4 1. Despite the immediate success of the New Deal programs, President Roosevelt quickly backed down and promised the nation that “a balanced budget [was] on the way.” In 1938, he slashed government spending for fear of inflation, although unemployment shot up to 19 percent. See Michael J. Sandel, Democracy’s Discontent: America in Search of a Public Philosophy (Cambridge: Harvard University Press, 1996). 2. See UNEP, “Renewable Energy: Generating Power, Jobs and Development,” Our Planet, December 2008. Also see Alex Bowen and Nicholas Stern, “Environmental Policy and the Economic Downturn” (working paper no. 18, Centre for Climate Change Economics and Policy; and working paper no. 16, Grantham Research Institute on Climate Change and the Environment, 2010). 3. This chapter is not principally about the Bretton Woods conference or the system it engendered. For an insightful review of the life and death of the Bretton Woods system set in the evolving international monetary system, see Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (Princeton: Princeton University Press, 1996). Also see Eric Helleiner “The Contemporary Reform of Global Financial Governance: Implications of and Lessons from the Past” (working paper, no. 55, UNCTAD, Geneva, 2009); and Michael D. Bordo and Barry Eichengreen, eds., A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (Chicago: University of Chicago Press, 1993). For a radical-revisionist perspective on the Bretton Woods system, emphasizing the role of economic and political ...

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