Learning to Learn: Undoing the Gordian Knot of Development Today

Author(s): Charles Sabel and Sanjay Reddy

Source: Challenge, Vol. 50, No. 5 (SEPTEMBER-OCTOBER 2007), pp. 73-92
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 ShakingUp
InternationalDevelopment

to Learn
Learning
theGordian
Undoing Knotof
Development
Today
Charles Sabel and Sanjay Reddy

Theauthors, in development,
specialists argue
thatwhattheycall dirigisme-an a priorisetof
foreconomicdevelopment-has
requirements led
tothepreeminenceofthestrong and theexclusion
oftheweak.Theyadvocatea learning-centered
approachtodevelopment, whichin turnemphasizes
thecontributions
ofbothdemandand supplyto
economicdevelopment
theworldoveris a partially
successful
andpartially
failedexperiment.Urgentquestionsaboutitsmeansreverber-
Development
atemoreand moreoftenwithbroaddoubtsaboutitsgoals.
Itsdeep flawis itsdirigisme:
theassumption, commonto nearlyall
development theory,thatthereis an expertagent-the stateforthe

CHARLES SABEL isprofessor of¡aw and socialscienceat ColumbiaLaw School.SANJAYREDDY

is an assistantprofessor
of economicsat BarnardCollegeand theSchool of Internationaland
PublicAffairs at ColumbiaUniversity.

vol.
50,no.5,September/October
Challenge, pp.73-92.
2007,
©2007M.E. Inc.
Sharpe, All reserved.
rights
ISSN
0577-5132/
2007 +0.00.
$9.50
001:10.2753/0577-5132500505 Challenge/September-October 2007 73

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Sabei and Reddy

dogmatist andorthodox left,theInternationalMonetary Fund(IMF)or

otherguardians ofmarket orthodoxy fortheright-thatalreadyseesthe
future ofdevelopment andcantherefore issueinstructionsforarriving
there.Whether throughcelebration ofthedevelopmental stateorby
adulationofa cosmopolitan, technicalelite,thisdirigisme has led to
unholyallianceswiththepowerful and theexclusionoftheweak.
Conceptually, dirigisme is expressedas a setof theoriesof there-
quirements ofeconomicdevelopment underspecificconditions: a list
(different,again,fortheleftand right,and underconstant,confus-
ingrevision,it seems,byboth)oftheinstitutional prerequisites for
growth.In practice,thedirigistementality presentsa set of policy
recipesfordetermining howinvestment fundswillbe allocated,tax
ratesset,and currency conversion managed.
Itis theserecipesthatsuppressthediversity offormsoflife,byde-
finingwhichendsofhumankind are"feasible"and accrediting some
sourcesofknowledge whilediscrediting others.Sucha straitjacketed
conceptionoftheorderofthingsdiminishes theattainment hereand
nowofhumanpotential, andaccentuates thepropensity to misapply
technologyand ideas,withtoo oftendisastrousconsequences-dis-
covered,andadmitted, too late.No wonderdevelopment bydirigiste
stagesandrecipesseemstomanytobe morean invitation tocollective
self-abnegation thana reliablepromiseofregeneration.
Is therea wayforward? In thisprogrammatic notewe proposethat
a commonthreadconnectsthe emergentalternatives to develop-
mentorthodoxy: the enhancement of the conditionsof individual
andcollectivelearning. Thisapproachto development highlights the
existenceofunresolvedproblemsandthenecessityofproblemsolv-
ingin everysphere.The enhancement oftheconditionsoflearning
can be thekeyto improving performance, resolvingdeadlocks,and
overcoming blockages.Byexpandingthespaceofeffective freedom,
innovations in theconditionsoflearningcan makepossiblethedis-
coveryofnewinstitutions thatbetterservethediversity ofthegoals
thatwe mayhave.Thisis trueateverylevelatwhichcommondilem-
masandcollectiveproblemsolvingoccur-fromtheglobalcommons
to thelocal enterprise.

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 Learning to Learn

Thelearning-centered approachto development avoidsthedirigiste

pretension thatthepathway ofdevelopment has a clearandpredeter-
minedform.Becauseit emphasizesthatlearningis a collectivebut
indeterminate processthatisbestadvancedbycollectivearrangements
thatrecognizethisindeterminacy, it also avoidsthe pretensionof
dirigisme to a privileged insightconcerning, andcapacityto execute,
theconditions ofadvance.Thelearning-centered approachrecognizes
thefundamental andpervasive incompleteness ofourperceptions and
cognitivecapacitiesas humanbeings,and ourneed forone another
to partiallyovercomethisincompleteness. Byemphasizinglocal ex-
perimentation on theone side and theneed to correctlocal results
by interlocalexchangeand review,the learning-centered approach
does justiceto boththelimitsof our knowledgeand our collective
abilityto betterit.
Seen anotherway,learningto learnrelaxesapparentconstraints
both in the sphereof practicalproblemsolvingin whichit takes
place and in the othersthatadjoin it. The reciprocalrelaxationof
constraints, withinand acrossdomainsand levelsof economicand
sociallife,enablesa progressive unblocking ofunrealizedpotential.In
economiclife,itprogressively transforms theoperativerulesofeach
sphereofproductive andtherelationbetweenthemicro-and
activity,
themacroeconomy, revealingcertainhardchoicesto be falsedilem-
maswhileputtingnewproblem-solving challengesin theirplace.
Byitself, ofcourse,theapproachwe suggestwillnotovercomethe
dualismofdevelopingeconomies,whichis manifested in theindus-
trialdomainbytheseparationofa fewadvancedfirmsconnectedto
worldmarkets froma massofvastlylesscapableproducers struggling
to survivein thevigorousbutunder-resourced informal sector.Nor
will it alone solvetheproblemof corrupt,oftenpredatory govern-
mentsthatbattenon themiseries ofdualism.However, itdoessuggest
commonwaysto unleashthecreativepowerof both the advanced
and informal sectorsand to improvegovernment performance, so as
progressively to advancea processofdevelopment.
In the note thatfollows,we firstpresenttwo examplesof the
learning-centered approach.The firstindicateswhy,undercurrent

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Sabe/ and Reddy

conditions,thereneed not be a hardchoicebetweenrelaxationof

constraints of supplyand relaxationof constraints on demand.The
second indicateswhythis reciprocalrelaxationcan be advanced,
not subverted, by a publicsectorthatundertakes learning-centered
reforms. Thenwe illustrate twowaysin whichthelearning-centered
approachmightbe extended. Thefirst
illustrationsuggests howjointly
addressingsupplyand demandconstraints at the level of national
economiescan promptreconsideration ofthefunction andapproach
ofkeyinstitutions- theIMF and theWorldBank-thatconstitutean
essentialpartofthecontextfornationaldevelopment decisions.The
second,moretentative still,suggestshow one innovationin demo-
craticparticipation mightbe reconsidered in thelightof learning-
centeredproblemsolving.
In keepingwitha compellingidea-open,nonproprietary software
development- considerwhatfollowsnotas an effort to layfoundation
stonesofa newcathedralofdevelopment thinking, butratheras an
offering in thebazaarofcollaborative workon a themethatconcerns
us all. Refineand multiply theexamples-or counterthemwithoth-
ers.Betteryet,developtheoverallargument- or rejectit in favorof
a betteralternative (we trust)to a faileddirigisme.

Not Such a Hard Choice After All? The Straitjacket

of Supply and Demand in the National Economy
Undercurrentorthodoxy, a government oftencomes acrossfiscal
limitsto its developmentstrategy, whichare in turngroundedin
politicallimits.A government thatwishesto augmentdomesticde-
mandoftencannotdo so directly, because-tenuouslysupportedin
civilsociety-it facesobstaclesto increasingtax revenues.Moreover,
thelimitedcredibility of its development programraisesthe spec-
terthatdebt financewill be inflationary. This worryis reinforced
by international financialinstitutionssuchas theIMF,whichplace
severeexternalconstraints to financeby
on theabilityof treasuries
borrowing. In parallel,on the"supplyside;/a statecannotencourage
supply-side innovationwithoutarousingthe suspicionof "picking

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 Learningio Learn

winners"(and so encouraging rentseekers)or simplyof lettingthe

bureaucracy runamok.
An alternative, learning-centered strategy loosensthesupplycon-
straintsof individualsand firmsby fostering the developmentof
theircapabilitiesto learnand to do, and enhancingtherewardsto
such learning.In the mostfavorableoutcome,the increasein the
capabilitiesofagentswillin turnfosteran increasein demand,as it
willease theaccessto resourcesof thosewho havepreviouslybeen
shutout-first triggering an expansionofthedemandforinvestment
goodswithwhichto makeproductive use ofnewenergies,and ulti-
matelyforconsumption goodswithwhichto realizeimprovements
in standardofliving.
Mechanismsof thisgeneralsortare familiarfromtheoriesof un-
balancedgrowth.A fairlyrecentexampleof a virtuouscycleof sup-
ply-induced expansionin demandis providedbyChina'sexperience
in theyearsafter1978,duringwhicha rapidincreasein agricultural
productivity generated byinstitutional reform andmarket liberaliza-
tionin agriculture becamethetrigger foran upwardspiralofnational
growth. Sucha virtuouscycleis characterized bythereciprocal break-
ingoftheconstraints ofsupplyanddemand,as theentryofnew"sup-
ply-side"marketparticipants pursuingmarketopportunities newly
opened to them in turn augments the demand forgoods produced
by others.This is not an applicationof the static
(and false)Say'slaw,
by which supply is deemed to
"automatically" generatecorrespond-
ing demand. What is doing workis, on thecontrary,
the continuing
the
disequilibrium- dynamics ofdemand callingforthoutputsupply
and supplygenerating input demand-occasioned by the expanding
circleof marketparticipation undera progressively moreinclusive
patternof economicdevelopment. In thebestcase,sucha virtuous
cycleis characterized bya feverofself-reinforcing and self-fulfilling
positiveexpectations, whichprovidestheslow-burning fuelforpro-
longedand sustainedgrowth.
Historically,unbalancedgrowthstrategies have typicallymeant
dangerousleaps in the dark.The same limit-breaking designedto
touchoffvirtuouscirclescouldeasilyleadtoself-defeating "greatleaps

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Sabei and Reddy

forward" or,lessdramatically,
continuingdisruptiveturbulence
that
eventuallyallowspowerfulinterests to offerthemselves-at
a hand-
someprice-as theforcesof stableprosperity. Whatwe highlightin
contrastis thepossibility
thatbreakthroughs can comenotthrough
vastinitialdevelopmentalgamblesinvolvingwholesectors,
butrather
bya myriad ofsmallimprovementson thesupplysidecomingtogether
to generatea markedrelaxationofconstraint on thedemandside.

An Example- Credit, Learning, and Industrial

Development
Creditworthiness is one crucialandconspicuouslinkbetweenmicro-
structural improvement andtherelaxation ofmacro-constraints. One
ofthemostimportant oftheconditions thatfacilitates
thereduction of
supplyconstraints isthebroadening ofaccesstocredit.Increased access
tocreditisinturnmadepossiblebytheincrease inthecreditworthiness
ofindividual agentsthattakesplacewhenobservable determinants of
productivity such as physicalinfrastructure, establishedskills,and
theconditionsofindividualand social learningareenhanced.
Forinstance,all elsebeingequal,thebetterable a firmis to detect
andcorrectdefectsin itsinternalorganization, training, and linksto
suppliers orcustomers, thegreateritschancesofsuccessandhenceits
creditworthiness. Ata veryhighlevelofgenerality, thisis an empty
tautology;and underconditionsofgeneraland enduringstability, it
is irrelevant(becauseexistingfirms willhavedone justaboutall the
error-correction detectionthatcompetitive survivalrequires).
Butundervolatilemarketconditions,wherethe compositionof
demandandtechnology changeabruptly andcontinuously, thisabil-
ityis a precondition forcompetitive adjustment. Itis seenas suchby
manypotential customers andsuppliers, whoaretherefore keentorate
andcontinuously monitorthecapacitiesoftheirsuppliers (especially
thecapacityto respondto queriesaboutperformance). Hence,among
otherthings,theexplosivediffusion of certificationunderISO and
othernormsthatsignalthiscapacity.
Similarly,in volatilemarkets, thebetterable a lenderis to assess

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 Learning to Learn

theabilityoffirmsto makethesekindsofsuccess-enhancing selfas-

sessments, theless likelyit is to makebad loans,and thegreaterits
creditworthiness. Thisincreasedcreditworthiness means,of course,
thatlendersthemselves canborrowmorefromotherfinancial institu-
tionsand increasethevolumeoftheirloansto (creditworthy) firms.
Whether tofirms ortofinancial thisis capacity-based,
institutions, not
collateral-based,lending.Wecan thinkofitsgeneralization through
theeconomyas thevulgarization ofventurecapital.
Theupshotis thatas firms(increasingly) learnto reducetheirfail-
ureratesandfinancial institutions learnto identify
(increasingly) the
learningfirms, improvement ofmicrostructuralconditionsenlarges
the returnon investment of a developingeconomyand so relaxes
macroeconomicconstraints, even in the presenceof hard-money
centralbanks.
Theeffects ofsucha learning-based increaseinbusinessinvestment
wouldlikelybe multipliedby linksbetweeninvestment and private
consumption, and betweendomesticand foreigninvestment typi-
cal ofdevelopingeconomies.Anexampleis consumercredit.Where
financialinstitutions doubttheircapacityto assessthecreditworthi-
nessoffirms, theyare likelyto throwup theirhandsat theprospect
ofassessingthecreditworthiness ofindividualconsumers thosefirms
employ. So itis no surprise thatforthisreason(and,ofcourse,others),
loansforconsumerdurablesareoftenavailableonlyatusuriousrates.
Animprovement in somelenders'capacityto assessthecapabilities
of firmsshouldtherefore increasetheirown or theircompetitors'
willingnessto lendon morefavorableterms,firstto theemployees
and familiesof capablecompanies,thento employeesand families
connectedto capablesuppliersofsuchfirms, and so on.
Otherlinkagesfollowfromthe circumstance thatworkshopand
residencein manysmall-scale, developingeconomies arein thesame
place:thelittlefactory is literallydownstairsornextdoorto thesmall
home,and the industrialparkis partand parcelof the residential
community. In thesecircumstances, growthin industrialopportu-
nitiesand productivity can increasethevalue of theassetsheld by
individuals,and in turnrelaxthecreditconstraints thatlimittheir

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Sabei and Reddy

consumption, as well as theirinvestmentin theirown capabilities.

Theselinkagesareonlyexamplesofthemechanisms thatcanunderlie
a virtuouscycleofcreditand capability.
To situateand reviewthe argumentso far:Viewsof economic
development dividebetweenthoseasserting thatthepoor are poor
becausetheylackthecapitaloftherich,and thoseasserting that,as-
setendowments aside,thepoorlacksomecognitiveor dispositional
attribute(productiveskills,long-termhorizons,self-confidence, so-
ciability)thattheyneed to enrichthemselves. Asset-based viewsin
turndividebetweenthosebenignlyassertingthattoday'spoor are
justfollowing a sequenceofaccumulationthatwillmakethemrich,
as itdidthecohortsthatprecededthem(each in itsturn),andviews
malignlyasserting theexistenceof low-equilibrium traps,in which
thelackofassetsis a self-perpetuatingbarrierto accumulation.
Theargument wehavebeenpresenting emphasizes holisticcapabili-
tiesratherthanphysicalor financialassets.This is, afterall, a story
aboutthelearning- orknowledge-basedeconomy. Butunliketheusual
cognitiveviews,itclaimsthatrichandpooragentsareendowedwith
thesamecognitivefacilities,andthattheyface,thoughfromverydif-
ferent startingpoints,thesamecontinuingcognitivechallenge:the
collaborativeelaborationof a workableresponseto a tumultuously
changingworld.Asin themalign,asset-based views,trapscan occur
(andbe overcomebypubliclearning).But,as wewillsee next,andas
withall elsein thistumultuousworld,thesetrapsmustbe identified
and transcended locally.

Why Bad Government Isn't Necessarily a Straitjacket

Mostdevelopingcountries beginwitha smallbase ofadvancedpro-
and oftenimitative
ductivecapabilityand a vastsea ofdisorganized
productiveactors.Localizedingenuitythrivesin makingthe most
ofavailableopportunities butitis
throughadaptationand arbitrage,
to open thedoorto themostremunerative
ofteninsufficient oppor-
tunitiesin theworldsystemofproduction, whichremainmonopo-
lized by a fewcountries.One measureof thisinternational
pattern

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 Learningto Learn

of unequal capabilityis thatforyears,manydevelopingcountries

had failedevento takeadvantageof theirexisting opportunitiesfor
remunerative exports(consider,forinstance,thepreviouslyunused
garmentexportquotas of certaincountriesunderthe multifiber
agreement). Anothermeasureis thattheoverwhelming majorityof
researchanddevelopment activityis undertakenin therichcountries.
How are thesepatternsof international and intranationalabsolute
and relativedisadvantage to be overcome?
Putanotherway,iftheeconomicactorswho knowthattheyneed
to learn,and how to do it,will alreadybe learning,who exactlyis
goingto be encouragingall thisself-examination by the non-self-
Government
starters? mightbe thegoadand tutor.Butgovernment,
we noted,is ofteninefficient or even predatory. Can a realistically
knowledgeable- thatis, quite ignorant- and easilycapturedgovern-
mentencouragethe type of micro-learning thatsimultaneously
relaxesmacro-constraints?

the VisibleHand: The Example of Industrial Innovation

Vivifying
Considertheproblemsinvolvedin makinggovernment an effective
catalystforenhancingthecapabilitiesof firmsto becomesustained
innovatorsandself-improvers. Threeproblemsseemespeciallydaunt-
ing.Thefirstisthatfirmsandothereconomicagentsdo notknowwhat
theydo notknowaboutwhichroutinesneed to be alteredand how.
Theyhaveto discoverthattheyhaveerrorsto detectin a specificdo-
mainbeforetheycanactuallybeginto identify andfixtheirproblems.
Government knowsevenless aboutthesethingsthantheagentsdo.
How,giventheselimitations, can thepublicauthorities createincen-
tivesthatencourage therightkindoflearningandmakesurethatsuch
learningbecomesaccessibleto all who need it as a publicgood?
Thesecondproblemarisesin case it is possibleto addressthefirst:
Howcan government ensurethata programencouraging constraint-
relaxinglearningis not hijackedby specialinterests and turned,as
oftenhas been thecase withsimilarly ambitiousinitiatives, to par-
ticularpurposesat thecostoftheprogram'sends?

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Sabei and Reddy

Thethirdproblemwaitsjustaroundthecornerfromthefirst two.
Supposeincentivesare setproperly, and theprogramis immunized
against"self-dealing." Whatwillensurethatresources go to theweak-
estactorswhoneedto learnthemostaboutlearning? Weconsiderthe
questionsin turn,with(scant)illustrations fromthegoods-producing
sectorrather thanthefinancialsector(simplyforconvenience).
The samegeneralenvironmental conditionsthatmakelearninga
condition ofsurvivalformanyfirms suggest thatthemotivational part
of thefirstproblemis not as hardas it looks.Firmsknowthatthey
needto learnto learn:theircustomers areadvisingthemto,andtheir
mostsuccessful competitors aredemonstrating thebenefits ofheeding
theadvice.(Recalltheproliferation of ISO standards.) Atessentially
all levelsin theeconomy, fromtheinformal shopto thecutting-edge
supplier, manyactorsknowsomeonelikethemselves whois learning
to getahead.
The problemsthat firmsface in correctingtheirroutinesare
typicallycompanyspecific-the exactsequenceof reforms needed
to reducerejects,cutdesigntimes,and so on- whilethetechniques
forestablishing suchsequencesaregeneraland widelyavailable(Pa-
reto-chart analysis,five-why, and many,manyothers).On balance,
therefore, firmshave moreto gain fromexchangesof information
(visitsto "model"enterprises, customer-supplier forums, trainingin
standardproblem-identification techniques,forstarters) thanthey
haveto fearfrompeerdiscussionof theirproblems.Giventhisdis-
positionto beginlearning,thegovernment's task,at leastforsome
tranche ofleadfirms, is closerto theeasyjob offacilitating theactors'
coordination (creating a forumfortheirinformation exchanges)than
thehardone ofchangingtheincentives theyface.Once theprocess
begins,moreover, theinformation it producesmakescorrectionof
initialmisstepsrelatively easy.
Thegrowing"third-generation" literature on globalsupplychains
providesan empiricalwarrantforthisview.The earlywritingson
customer-supplier relationsunderconditionsofglobalizationfound
thatsupplychainsweredominatedeitherby largeproducers(e.g.,
GeneralMotors)or largeretailers (e.g.,TheGap). Eitherway,control

2007
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 Learning to Learn

overthedesignoftheproductandtheorganization ofitsproduction
was firmly in the handsof advanced-country firms,withdevelop-
ing-country suppliersrelegatedto theexecutionof tasksconceived
elsewhere and powerlessto changetheirsituation.
The secondgenerationof writingsnotedthe emergenceof large
and capablefirst-tiersuppliersin industries suchas apparel,athletic
footwear, and assemblyofcomputers and mobilephones.Thesesup-
pliersare oftenbased in (advanced)developingcountriessuch as
SouthKoreaorTaiwan,operatein stilllessdevelopedcountries(such
as Indonesiaor China),and do indeedexertgreatinfluenceon the
designand productionstrategies oftheiradvancedcustomers.
The mostrecent,"third-generation" writings documenttheemer-
gence,muchlowerdowninthesupplychain,ofsmallbutcapablesup-
pliers.Whether operating intheagro-industrial sectorin Chile(tomato
growing andprocessing) orin thegarment sectorin India,thesefirms
exercisegrowingautonomyin dealingswithpresentcustomers who
valuetheirinitiative.Moreimportant, theycan findmorecooperative
partners incasecurrent clientspersistin demanding completecontrol.
Sometimes, theselow-tier but autonomoussuppliershave acquired
at leastpartofthecapacitythatsecurestheirindependencethrough
participation in government programs orpublic-private partnerships
aimedpreciselyat increasing theirinternalmanagerialcapacityand
theirabilityto meetinternational standards.
Noticethatthecombination ofgeneralpurposesolutionsandfirm-
specificproblems meansthatthediffusion oflearning(tolearn)is not
subjectto thesamefallacyof compositionthattripsup manykinds
ofdevelopment strategies.Lendingmoneyto a smallcooperativeto
startproductionof broomsworksso long as thereare fewbroom
producers. Extending theprogramcan ruinit.Enablingmanysmall
firms to gainthesamegeneralskillsto improvetheirrelationsto spe-
cificcustomers athomeand abroadis notsimilarly Put
self-limiting.
anotherway,thisis a programforgeneralizing wealth,notcreating
zero-sumcompetitive advantage.
Thesolutionto boththeproblemofmakingwhatis learnedintoa
publicgoodandtheproblemofself-dealing liesin theprecisenature

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Sabei and Reddy

oftheservicesto be providedlearningactors.Verygenerally, we just

saw,thegoal is to getand keepfirmslookingfortrouble,typically
by givingtheman opportunity to learnsomethingthatpointsto a
problemand correctionat once. Subsidiesof thispeculiaractivity
createdisincentives fortheusualkindsofself-dealing. A subsidythat
reducesthe cost of lookingforimprovements is valuelessunlessa
firmis actuallyinterestedin improving andcanbe empowered in this
taskthroughthesubsidyprovided.Forexample,a subsidizedvisitto
a competitor's plantin a distantindustrial townis as unappealingas
an unsubsidized tripifa managerthinkshe has nothingto learn,or
thathis firmcould notbenefitfromnew knowledgeifitwerethere
forthe taking.Indeed,underthoseconditions,even a freetrip-a
junket-wouldbe a cost,as it reducesthetimeavailableforworking
downthelistofurgenttasks.Whereasa subsidyto laboror finance
costscan easilybe divertedto covera partofthefirm'songoingex-
penses,subsidiesto look fortroubleare onlylikelyto be valuableto
and attract firmsthatwoulduse thehelpforthepurposeintended.
Suchsubsidiesfurther mitigate theaccountability problemby en-
couraging transparency in a waythatmakeslearningpublic.Looking
fortroublemeanscomparingone's activities withthoseofothers.It
is reasonableto askpotentialbeneficiaries ofprograms thatencour-
age learningto demonstrate theirintentionsby beginningto take
stockof theircircumstances, or sayinghow theyintendto do so.
Aftertheyhavedone some looking,it is reasonableto ask themto
saysomething abouttheproblemstheyfoundand whattheyintend
to do aboutthem.Conversely, actorswhogiveno indicationofbeing
able to takeeventhefirst stepstowardsomekindofself-analysis are
unlikelyto benefitfromprogramsthatencouragethemto do just
that,andactorswhocannotsaywhattheylearnedfromsomekindof
comparative self-studyprobably didnotlearnverymuch.Betweenthe
disincentives theyoffer to normalsubsidyhunters, andthe(partially)
self-policingdocumentation thattheyeasilyelicit,programs thataim
to relaxmicro-andmacro-constraints byencouraging learning,with
government actingas a catalystwherenecessary, are feasible.
Can theseprograms also be directed toveryweakfirms? Trulyweak

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 Learningio Learn

companiescannot,unaided,undertake thekindofself-diagnosis that

startsbootstrapping learning.Withoutsomekindof help-training,
exposureto firmslike themselveswho are takingself-diagnostic
steps-theyaretypicallyexcludedfromactivitiesthatmightbenefit
themas muchas, ifnotmorethan,thebetterendowed.The fateof
thesecompanieswillhelpdecidewhether developingeconomiescan
generateanything likean inclusiveprosperity.
Fromthesegeneralconsiderations, itis possibleto sketchthekernel
of a two-leveleconomic-development framework thatencourages
constraint-relaxinglearning- offeredonlyas an example.Atthe"top,"
a benchmarking committeeoftherelevantgovernment entitiesand
qualifiedprivateactorscollaborateswithpotentialusersto establish
theinitialsubstantive and proceduralcriteriaforparticipation and
definestheinitialmetricsby whichapplicationsare to be ranked.
Atthe"bottom,"projectgroups-whosememberscan be publicor
privateentitiesorpartnerships ofboth-competeto presentprojects
thatscorehighlyundertheemergentcriteria."Top" and "bottom"
are in quotationmarksbecausetherelationbetweenthemis cycli-
cal, not hierarchical:one entityproposesa framework foraction,
the otherrevisesthe proposalin enactingit,the firstrespondsto
therevisions, and so on. Lead actorsdominateearlyprojectrounds;
weakeractorscome to theforein laterones. Aftereach round,the
selectioncriteria,benchmarks, and institutionalarrangements are
adjustedto reflectimprovedmeasuresofperformance and a richer
operationalunderstanding of success.Thereis thus public learn-
ingas wellas learningbyprivateagents.Becausetheimplicittheory
of economicdevelopment- expressedin the operationallyapplied
selectioncriteria-is revisedin lightof themeanschosento pursue
them-thepooled experienceofactualprojects-we can call thesear-
rangements "experimentalist."
In actualpractice,at leasttwo variantsof such a framework are
emerging intheworld.In thefirst,thetwo-tier structure justdescribed
operatesfirstat theregionallevel.Thuswithineach regionor state
ofa federated politythereis a framework-defining "top"and a proj-
ect-proposing "bottom."The performance of theregional-selection

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Sabei and Reddy

mechanismsare thencomparedin lightof theperformance of the

projectstheyadvance,andthisbenchmarking andassociateddialogue
producein turna nationalframework forrevisingtheregionalselec-
tioncriteria.Alternatively, projectsand frameworks can be grouped
by industry or sector,withhigher-level frameworks emergingfrom
comparisons amongthese.
Keyfeatures ofbotharrangements arethetransparency andlearning
theyfosterthrough competitive butinformative comparisons. Theas-
sumptionofdirigisme is turnedupsidedown:thereis no hierarchical
centerwitha claimto definitive knowledge. Insteadofa hierarchical
subordination oftopto bottom,thereis a reciprocaland continuing
redefinition of both.Insteadof a center,hierarchical or otherwise,
thereis a polyarchic, comparativeexchangeamonglike "locales."
Similarframeworks couldbe establishedto encourageand publicize
learningbyfinancialinstitutions thatlendto firmsor consumersor
both.(Theyarealsobeingappliedtotheincremental butcumulatively
transformative reorganization of publicadministration in advanced
and developingcountries.)
logic,thesesimplemechanisms
In a fractal-like havepossibleparal-
lelsat everylevelofscale.Learningto learnfacesparallelchallenges
andcanhaveparallelforms atthelevelsofthevillageandoftheglobal
commons.To illustrate, in thenextsectionwe exploreproposalsfor
cognatereforms oftheinternational financialinstitutions.

How the InternationalEconomic Order MightLearn

The dominantorthodoxyhas adopted a strenuouslyrestrictive
interpretation of good economicsense.Two decades of orthodox
economicreforms haveled to littlesuccessful
development, and still
lessgrowth in understanding oftheconditionsthatfoster innovation
andprosperity in individualcountries. Thislastis hardlysurprising.
For,as we saidat theoutset,orthodoxy's coreassumptionis theidea
of an establishedmenuof alternatives alreadyknownto workthe
worldover.Assumingthatthereis nothingto learnis a good wayto
ensurethatnothingis in factlearned,even amidsttherichlessons

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 Learning to Learn

thrownup byactualexperience. The existinginternational financial

institutions havebeen inhospitableto learningto learnin at least
twoways.First,theyhavetoo oftendemandedthatcountriesadopt
institutionalarrangements thatarenotconduciveto learning, causing
themto neglecttheresulting sourcesofgrowthin favorofpurported
staticefficiency.Second,theyhave themselves failedto be arranged
in a mannerthatfosters progressivelearningabouthowtheyshould
betterorganizetheirownactivities andpromotegrowthanddevelop-
mentin countries.
Asatthemostbasiclevelofeconomiclife,learning to learnrequires
thedevelopment of new relationsbetweenactorsand new rulesto
governtheirrelations, so as to enablethemto shiftfromstereotyped
individualrole-playing to activejointdiscovery. Accordingly, both
newrelations andnewrulesgoverning therelations betweendevelop-
ingnationaleconomiesand lenders,suchas theWorldBankand the
IMF,arerequired.Thenewrelationsmustovercometherigidities of
traditionalformsof conditionality, allowingdevelopingeconomies
to findtheirownwayto virtuouscycles,butnotbe so lax thatpolicy
mistakes in one country orregioncan endanger thestabilityofothers.
Thealternative international economicarrangements mustbe oriented
toward thefacilitationofexperimentation andmutuallearning. In this
respect,theroleoftheinternational financialinstitutions is to serve
as knowledge centersand intermediaries, and as dialogicpartnersin
theprocessoflearning.In thisfunctiontheycan be mostsuccessful
iftheyarepluralized,in numberand in form.
International financemustbe flexibleto facilitate strategicexperi-
mentation andlearning innationaldevelopment. Butitmustalsopres-
entconstraints ifitis to offereffectiveincentives fortheefficient use
ofresourcesandenforcea necessary minimumoforderand stability
in theinternational financialsystem.The New BrettonWoodsmust
combinethebreakupoftheexisting monopoly ofknowledge andfunds
withtheestablishment of a rule-based regimewithinwhichautono-
mousanddecentralized actorscan fosterpluralizedends-undertaking
tasksofmonitoring and disciplining. Webelieve,informed byreflec-
tionon learningto learnat thedomesticleveland on observation of

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Sabei and Reddy

therecentvicissitudes oftheinternational financialsystem, thatthese

goalscan be reconciledto a greater degreethanso farimagined.
Startby analogicallyscalingtheargumentfortheiterative relax-
ationof supplyand demandconstraints fromthe domesticto the
international level.Justas financialinstitutions, givenhard-money
centralbanks, are a crucial
partofthe macro-environment fordomestic
firms, so foreignbanksand theinternational financialinstitutions
arecrucialto themacro-environment ofdomesticeconomies.Justas
firmscan increasetheircreditworthiness by learningand financial
institutions can learnto recognizesuchimprovements, so domestic
economicinstitutions-and thedomesticeconomyas a whole-can
increasetheircreditworthiness by encouraging thenew interplay of
productionand finance.In theirturn,international financialinsti-
tutionscan recognizeand credittheseincreasesaccordingly. Finally,
justas statescan use experimentalist frameworks to fosterconstraint-
relaxinglearningdomestically, so internationalfinancial institutions
can use experimentalist methodsto achievethisresultglobally.
Thissuggestsa decentering or "polyarchization" and flattening or
"de-hierarchization" of theIMF and WorldBankalongthelinesof
thelearning-to-learn institutionsjustcontemplated. A federation of
institutions shouldreplacethecurrentworld-spanning, peak orga-
nizations.Thesedevelopment banks,adoptingdiversedevelopment
theories,shouldhaveresponsibility forencouraging andrecognizing
the capacityof domesticeconomieslearnto learn.Reservefunds
woulddevelop,in consultation withtheirsisterdevelopment banks,
conditionality requirements consistent withrespectand encourage-
mentforthis kindof capacitybuilding.Projectselectioncriteria
and conditionality ruleswouldbe compared,and harmonized when
deemedappropriate bytheconstituent actors(banksand fundsand
theirmembergovernments).
Ata minimum,this kindof decentering would maketranspar-
ent,and so publiclyinformative and in some measureaccountable,
practicesalreadypresentto a degreein the international financial
institutions.Anyfunctioning realinstitution incorporates elements
oflearningto learnas an essentialpartofitsapproachto theworld.

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 Learning to Learn

However, institutions differin theextentto whichtheyinstantiate

andfoster thiscapacity.Theinternational financialinstitutions must
deepenand broadentheircapacityto learn.Atthe maximum,this
decentering mightactuallytransform the international economic
institutions fromadvocatesofossifieddoctrines concerning thedeter-
minantsofgrowth to partners in a moreflexibleprocessofdiscovery
ofwhatthosedeterminants are. In thecourseof thistransition, the
international financial institutions mustshiftfrombeingmonopolists
tobecominga congeries offederated agenciesabletocorrect whatthey
learnfromtheirown experience withwhatis learnedin others.
Whatofthehardcaseofcoordination ina ramifying financial crisis,
wherethefailure offinancial institutions,perhapscausedoraggravated
bytherepudiation ofsovereign debt,threatens to cascade,imperiling
theworldeconomy?Herethefederated banksand fundswouldhave
to act as one to haveanychanceof successat all. Buttheneed for
occasionalconcerted actionneednotcreatean autonomy-destroying
regress,inwhichtheneedforunityin somemomentslegitimates the
suffocation ofindependence atall theothers.On thecontrary, thegoal
shouldbe to presstheprinciple ofjointor federated decision-making
forward to covertheperiodsof crisisas wellas normalcy, withhard
decisionsbeingtakenafteropen reviewand debateby the actors.
(PerhapstheU.S.FederalReserve- notas itexistsbutas originally con-
ceived-couldbe a partialmodel.)In anycase,here,too,theeffect of
formalizing federated decisionmakingwouldbe to maketransparent
and accountablea stealthy, oftenpanic-stricken processthatmixes
collaboration andcollusionin ineffective and manifestly illegitimate
The
ways. long-term goal should be topool learning aboutthe response
to financial crisesin a waythatimproves whatthetemporary "center"
does in responseto globalthreats, and howitdecidesto do it.

Development and Democracy

Whyshouldwelearnhowto learn?One reasonto favorexperimental-
istarrangements
is thattheymayenableus to bettersolvetheprob-
lemsthatwe face.Wecan haveconfidencein suchan outcomeboth

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Sabei and Reddy

becausethepracticalefficacy ofexperimentalapproachesmayalready
be observedin theworldaroundus, and becausesucharrangements
arecloserin spiritandformto theinherent requirements ofproblem
solvingunderconditionsofuncertainty.
A deeperreason,though,is thatdemocracyfavorsand is favored
by experimentalism. This is truebecauseexperimentalism requires
and
openness, opennessrequiresdemocracy. Itis also true
because to
flower,
experimentalism requiresthebreakdown ofsocialboundaries
tocommunication andthepresence ofa workableprocedural equality.
Thesearealso amongdemocracy's commitments and consequences.
In turn,thedemocratic idealis one ofindividualand collectiveself-
Thesevaluessupport
andself-construction.
decision,self-imagination,
theexperimentalist spiritand challengeitsalternatives.The natural
languageof experimentalism is democracy.Perhapsdemocracywill
nowdiscoverthatitsnaturallanguageis experimentalist?
Weconcludebytentatively exploringsomepossiblelinksbetween
thelearning-to-learnapproachto development and somepromising
innovations in democratic participationand problemsolving.

Learning and Democracy- The Example of Participatory

Budgeting
Participatorybudgetingis a democraticreform thathas caughtthe
attentionof progressivelymindedpeoplethroughout theworld.As
practicedfamouslyin PortoAllegre,Brazil,participatory budgeting
involvesthe sustained of
engagement large numbers of personscom-
prisingtheentireaffected in sustaineddiscussionofhowthe
citizenry
allocationofpublicmoniesamongalternatives suchas buildingroads,
schools,sewagesystems, and otherinfrastructureprojectsshouldbe
undertaken. On one view,participatorybudgeting is a breakthrough
in democratic activismwithpotentialapplicationto a broadrangeof
publicproblems.On anotherview,itis an important innovationbut
to enablinglocal publiccontrolofthecli-
limitedin itssignificance
entelismthathas vitiatedmuchpublicspendingon infrastructure.
Mightsomeofthemethodsofparticipatory budgeting be used to

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 Learningio Learn

makelearningto learnmorebroadlyaccessibleand accountablethan

it typicallyhas been?Afterall, projectsto improveerrordetection
andcorrection in firmsor financialinstitutions, eveniftheyinvolve
theworkforce andgovernment orpublic-private partnerships,arenot
thestuff ofnormaldemocratic politics.Indeed,theyarelikelyto seem
morea technocratic innovation thanan expansionofdemocraticca-
pabilities.Is theresomewayfordeliberation aboutprojectselection,
and the issuesof developmentstrategy it raises,to contribute
to a
broaderpublicdiscussionand to be animatedbyit?
Is theresomewaythatparticipatory budgeting mightbe generalized
(throughincipientinstitutions of learningto learn)so as to extend
itsreachintobroaderquestionsof development? An exampleof an
areaofconvergent concernis landuse andthelicensingpracticesthat
determine it.Shouldthevastagglomerations ofsmallfirmsin many
developingcountries'cities-someofthevanguardofthe"thirdgen-
eration"ofsmall,autonomoussuppliers- be clearedto makewayfor
largenationaland multinational firmsor gentrification? Or should
theyandtheirsurrounding communities be provided thecombination
ofpublicinfrastructure andbusiness-support servicesthathelpmake
enduring connectionsto theoutsideworld?Can theelaborationofa
processformakingsucha decisionitselfbe a provinggroundforthe
integration ofnewformsofdemocratic participation andlearningto
learnas a development strategy?

Learning and Democracy- Self-Expression and Coexistence

Thereis a complexand confoundedrelationbetweentheexpression
ofselfand thepursuitofmaterialuplift.Developmentis notyetex-
tricablefromWesternization. It is confoundedas a conceptand as
an ensembleofpracticesbyitsrelationship to a particular
historyof
doing.The confounding givesriseto an ambivalentresponseto the
program ofdevelopment. Theeffort tobreakfreeofthisconfounding
leadsmostoftento ineffectual rageorparody.Thesearchforformsof
development thatare self-expressingand self-actualizing
is anxious,
active,and unfulfilled.

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Sabei and Reddy

The lensof learningto learnofferstheinitialelementsof an ap-

proachto thisproblem,althoughitcannotoffera determinate solu-
tionto it.Wheretheconstraints createdbya dirigistevisionpreclude
theflourishing ofdistinctformsoflifeand thwart theexpressionof
theapproachoflearningto learnoffers
self-identity, in contrast
new
degreesof freedomwithwhichto createnew institutional arrange-
mentsthatfoster bothself-expression andproblemsolving.Arrange-
mentsthatfoster learningto learnmakeitpossible,in thesettingof
theworldand of nations,to discoverby experiment how to belong
to a modernworldsocietyand yetto be oneself.
Democracy'schallengetodayis to findwaysin whichself-deter-
minationand self-expression, bothforindividualsand forsocieties,
can be made compatiblewithpracticaladvance.We proposethat
experimentalism offerssucha means.
Thismuchis certain:Ifdirigisme is a treacherous
guideto develop-
ingan economy,it is theoutright enemyofdemocraticrenewal.For
thatreasonalone,tobe democrats today,we mustalso be experimen-
talists,learningto learn.

Toorder call 1-800-352-2210;

reprints, States,call 717-632-3535.
outsidetheUnited

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