Interview with Grzegorz W. Kolodko, author of Truth, Errors, and Lies: Politics and Economics in a Volatile World

The following is a Q&A between Grzegorz W. Kolodko, author of Truth, Errors, and Lies: Politics and Economics in a Volatile World and William R. Brand, the book’s translator.

William Brand: This is an exceptionally wide-ranging book that looks far into the past and the future, taking a global view, in the geographic and cultural sense, of economic development, where we are today and where we could be heading. What led you to confront the challenge of telling such a big story?

Grzegorz W. Kolodko: When I asked someone whose judgment I rely on about what I should write next, the reply was: "Tell people why things are as they are." At first this struck me as trivial, but then I realized it was the most difficult challenge I’d ever been given. What is the situation around us—in our family, workplace, country, and world, seen from the economic, cultural, social, and political viewpoints—really like? And why? Why has the world changed so much? Most important, how will it keep changing into the future? I’m fascinated by where the world is going, but this is impossible to explain without knowing where we are at the moment. In turn, we can’t explain the present without knowing where we come from. Therefore I regard myself as a traveler in four dimensions. I try to take my reader on a journey of the imagination deep into the past, and into the foreseeable future.

I like to say that economics and the social sciences ought to be as simple as possible, but no simpler. In this book I have tried to approach these issues in a scientific-model-shaped way that is nevertheless grounded in concrete, comprehensible realities—a complexity of issues combined with a simplicity of explanations. I point out the interaction between culture and politics, technology and the economy, the environment and business, money and happiness, the past and the future, America and China, wisdom and stupidity, strategy and chaos, Europe and Africa, religion and competitiveness. The feedback and causal relations between these events and processes are what is fascinating in our interdependent world.

WB: What can you contribute that others cannot?

GWK.: My books and research articles have been published in 25 languages in over 40 countries. Some of my theoretical contributions—even the ones that many of my academic peers characterize as "heterodox," which I treat as a compliment—have been well received. However, I’ve also had the chance to try my hand as a policy-maker. Perhaps because I was lucky to be in the right place at the right time, things turned out pretty well during my four stints as finance minister of Poland, and as deputy prime minister. I was at the epicenter of the great systemic transformation of the last two decades. I have advised other emerging markets in Eastern Europe, Russia, China, and Vietnam, and have made working visits to the United Nations, the World Bank, and the IMF, where they asked for my advice. And I travel. As the Polish proverb goes, "I’ve eaten bread [and not only bread] in more than one kitchen." I have explored almost 150 countries, getting as close as I could to the lives that people lead. These journeys were just as intellectually provocative as my scientific research and political activity. The three perspectives of interdisciplinary social theory, formation of economic and political policy, and extensive travel have given me a view of this volatile world that some people have been kind enough to refer to as unique.

WB: This book is titled Truth, Errors, and Lies. In a nutshell, what are these errors and lies?

GWK.: When you watch TV or read a newspaper and come across someone making an assertion you’re sure is untrue, ask yourself: "Are they in error, or deliberately lying?" It’s the same whether they’re an ignoramus or a Harvard professor, a dictator running a Central Asian emerging market or the governor of an American state, a journalistic apologist for a one-party regime or a columnist from a respected newspaper in a democratic country.

If they’re mistaken, it’s a pity, especially among professionals. Yet we can still discuss things in a sensible way. People can commit errors in the public arena because they don’t know all the underlying facts, or draw the wrong conclusions from the facts through illogical reasoning. This is forgivable; to err is human.

If they’re lying, we have a different problem. Why do politicians, along with economists, ecologists, sociologists, political scientists—and market analysts—lie? Sometimes it’s for ideological or dogmatic reasons, but much more often it’s because they’re lobbying for a special interest group, even if they don’t say so. In short, they lie for ideology or they lie to collect a fee. Lies like this cannot be forgiven.

It’s not always easy to separate truth from untruth and errors from lies. But it’s absolutely essential to do so in our quest for a better future.

WB: Could you give an example of a mistaken view that strikes you as particularly widely accepted, and perhaps also particularly dangerous, in terms of its effect on the prospects for world development?

GWK.: Take the myth that the free market is a cure-all for economic challenges and a recipe for sustaining Western prosperity or for rapid development in emerging markets. This costly misperception has led to the recent world financial and economic crisis. The sooner leaders—and economists—understand that the only chance for sustained and equitable growth is a positive synergy of the invisible hand of the market and the visible brain of the government, the better. Interestingly enough, it’s been utilized with a great success in China, in a more murky way in Russia, and with mixed results elsewhere in emerging and transition economies. In the United States a great struggle is going on to get this synergy right. This is the contemporary American Civil War. We can hope that the intelligent option wins out. But this is only a hope. 

WB: You describe yourself as "heterodox." What makes your views heterodox?

GWK: The so-called common wisdom of the economic mainstream doesn’t fit real life. Life is far more complex, yet still explainable. Orthodox thinking is based on "assumptions"—one of the most frequent terms in economic models. My heterodox reasoning is based on the observation of reality.

Things happen the way they do because many things happens at the same time. There is always—always, I repeat—a concrete, specific coincidence or overlapping of factors that make something happen or set a process in motion. To understand these multiple factors, you must observe them through various intellectual windows or from various perspectives—Keynesian, monetarist, neo-institutional, futurological.  You have to know how to move—that is, to think—in a multitrack way. It’s difficult but exciting.

A heterodox scholar is not closed in by one set of ideas and methodology, not a slave to any a priori doctrine or orthodox dogma. “Heterodox” implies a nonconventional progressive approach. In this world of the complex interdependence of culture, politics, economy, finance, and the environment, being orthodox is a waste of time. It can be good in religion (although I’m not sure it always is), but it’s utterly erroneous in contemporary social sciences. The future belongs to heterodoxy.

WB: The original Polish version of this book was a bestseller, and it has already been published in countries like China and Russia–where you frequently lecture, just as you teach and lecture at leading American universities and institutions. Does the American perspective on the present situation differ from the way they see things in Europe, Russia, or China?

GWK.: In China more than a few people see the United States as a threat. And the other way around. Both Chinese and Russian economists believe that the state has responsibilities. Aside from a few naïve market fundamentalists, they expect the government to be active in economic and social matters and expect much more from the state than their Western colleagues do. In China or Russia they blame high unemployment on government policy and have higher expectations that the government will do something to fight it.

W.B: At the moment you can hear people in the United States saying that the main effect of globalization has been to send American jobs out of the country.  How would you respond to such a view?

GWK: Globalization is a multifaceted process. It’s a balancing act between the additional gains it makes possible through liberalization and integration on a planetary scale, and additional costs. Globalization does not absolve the government of responsibility for the economy. It requires a strategy to maximize the gains from new opportunities and minimize the costs of new risks.

From an international perspective, the United States has taken better advantage of globalization than any other country—except for China. America does business and makes money everywhere, and those profits have contributed significantly to American prosperity over the last quarter of a century.  When things go wrong, we shouldn’t blame the problems on the outside world. The fault is more likely to lie with special interest groups, mistaken economists, and above all lousy policy coming out of Washington and New York.

What about Chinese foreign aid in places like Africa? Is it a contribution to development or a cynical way of buying influence over mineral resources?

The "cynical" aspect of foreign aid lies in the ridiculous way it is being presented in parts of the Western media and, unfortunately, in some political, business, and academic circles. Foreign aid is an investment. China is protecting its own interests, the same way the U.S., U.K., Japan, Germany, and other countries do. Is it cynical when North America invests in South America? Why is it a good thing when Western European firms invest in Eastern European emerging markets? China needs mineral resources for its rapid economic development, and in a smart way—that is, with strategic planning that takes account of its own long-run national interests—is putting its own money into foreign investment without borrowing from others.

China can now afford to provide more credit and financial assistance to developing countries than the World Bank. Here again, we have the intertwined game of politics and economics. At the moment when China can offer more, poor countries in Africa need more foreign capital because they don’t have enough savings of their own. It would be better for the rich part of the world to cooperate with China on our shared future than to be bystanders spitting out unjustified (and unproductive) criticisms.

WB: Could you point to one country that’s getting it right in terms of development at the moment?

GWK: One? Why one? There’s a range of them from wealthy Denmark to postcolonial Ghana, from postcommunist Slovenia to impoverished Bhutan. Among large economies, the gold medal over the first decade of the twenty-first century goes to Brazil. They’ve applied heterodox policy consisting of a multitrack, socially oriented growth model instead of the neoliberal orthodoxy. This has been beneficial for both business and the working poor, for Brazil’s Wall Street and its Main Street. This is what I refer to in my book as the “new pragmatism.” The fact that countries are so different is the reason they should act in unorthodox ways.

WB: What role does a country’s culture play in development?

GWK: Culture is no less important than technology. It is a decisive force behind people’s motivation. It creates priorities, shapes social relations, and determines how decisions are made. Economic policy and business strategy boil down to a permanent process of decision making. Often, more depends on culture than on interest rates, tax rates, or exchange rates. However, the latter are relatively easy to measure, so economists like them. Culture is hard to measure, so economists don’t like to consider it as a crucial factor of development. Yet economic analysis divorced from the cultural context is crippled, and it’s a short step from wrong economics to misguided policy.

WB: Do you think that right now, in 2011, the United States is missing any chances to create the kind of growth that would, for instance, reduce joblessness?

GWK: I’m afraid that the United States is not taking advantage of the aftermath of crisis to put the development process on the right track. American cohabitation—Democrats in the White House and a Republican majority in the House of Representatives—doesn’t make necessary structural reforms, re-institutionalization, or re-regulation any easier. But beyond the two- or four-year electoral cycle, on the scale of decades, the country needs not just commitment to the right policies and regulatory environment, but also changes to the triangle of values, institutions, and policies in ways I describe in my book. This must happen in America as well as in other countries. The alternative is failure. The U.S. can continue to be the great success story, but not if it sticks to the erroneous neoliberal (or, in American jargon, neoconservative) policies of the last two or three decades. In such serious times, thinking in terms of parties—any kind of "party"—is an unaffordable luxury. This is the time to be progressive and pragmatic, both domestically and globally.

WB: For quite a few years, and especially since 2008, we have been hearing talk of decline. Do you think that people in, let us say, 2030 will be looking back on the good old days of 2011, or will they scratch their heads about all the mistakes we were making? Can you identify key decisions that could determine whether the coming decades are as good as they could be?

GWK: Within ten or twenty years there could be an Even Grander Crisis, to use the phrase I’ve coined in Truth, Errors, and Lies. This could happen if orders come from the bridge to "stay the free market course and ignore the state." It may happen if there’s another worldwide financial crisis, perhaps originating in China or sparked off by a stupid currency war, conceivably coinciding with a climate crisis and the loss of control over migration from countries that remain poor. Not to mention the jokers in the pack like nuclear terrorism. Such events, including even the nastiest ones, can occur simultaneously. If they do, we’ll be in dire straits and 2011 will look wonderful in hindsight.

But there is a positive alternative to such a bleak scenario: new pragmatism and more balanced planetary progress. After two decades of equitable growth and sustained development the world of 2030 could breathe, work, and walk forward more easily, in which case 2011 will be remembered as one more year in the regrettable past.

So why not change course? American actions are crucial, but to an increasing degree things depend on China and other big emerging markets, on the decisions and policy coordination of the G-2, G-8, G-20, and the G-193. But first things first. We need a theory to lay the ground for practice. Do we have one? I’m sharing my proposals. Second, we need intellectual, political, and business leaders capable of acting pro publico mundiale bono. Do we have them? We might find them, if only we look in the right direction. Third, we need time, a lot of time. 2011 is merely another blink of the eye in our long quest for a better future. We might get there.

I don’t have a philosopher’s magical stone for the salvation of the world and civilization. However, I do have certain thoughts, which I share on the pages of Truth, Errors, and Lies: Politics and Economics in a Volatile World, pointing to a sensible way forward. It must rely on post-GDP economics, since we are already in the post-GDP world. It must be heterodox. It must be eclectic. Albert Einstein said that thinking has a big future. I argue that interdisciplinary thinking has a great future.