Posts Tagged ‘bad samaritans’

In ‘Bad Samaritans’, Ha-Joon Chang takes a historical approach in attempting to answer the question, how do poor countries become rich? Chang provides his answers ┬áby looking closely at how today’s rich countries constructed and managed their economic and industrial policy. He traces the history of the UK, US, the Scandinavian countries, and other more recent rich countries, such as Japan and Chang’s native South Korea. The result is an important work with conclusions that sharply contradict the current neoliberal free market orthodoxy peddled by rich countries and international organizations today.


It should be stated right from the outset that Chang is no ideologue: he is no diehard lefty, no commie fundamentalist, no anti-capitalist iconoclast. He simply calls it as he sees it, and is refreshingly honest – and entertaining – in his commentary on the current of the economic ideals prescribed by the rich countries, and how they differ so starkly from the policies that they themselves pursued in their infancy.


Chang challenges orthodox policy recommendations in a number of different areas. He looks at tariffs, subsidies and protected industries, and the idea that they should not be tolerated in the name of free trade; he looks at the destructive tendencies of unregulated capital flows and foreign direct investment, and finds that the benefits they provide are often incidential and modest, far outweighed by the damage they usually cause; he examines the idea that public enterprise is inferior to private and finds the evidence to be wanting, and in certain important circumstances contrary; he looks at the concept of intellectual property, and how it has often been taken too far, leading to a stifling of creativity; and so on.


Chang’s conclusions, as mentioned, frequently and consistently go against neoliberal doctrine. He argues that free trade is antithetical to a poor country’s development. He details the history of how rich countries used such trade barriers as tariffs and subsidies for key industries liberally, and were crucial to their development of industries that could compete at the international level. Without them, he states, these rich countries would not be where they were today. He also tackles the almost religious obsession we see today about private enterprise at all costs (see my earlier post on this topic, inspired by Chang’s chapter on this in the book).


One particularly interesting chapter is on intellectual property rights. While not against them in principle (or even in practice), Chang warns of the dangers of over-protection, and how a scenario has arisen in the developed world where the criss-crossing of property rights has actually led to a stifling of creativity. An important innovation may often involve the violation of a number of very simple processes that have nonetheless been copyrighted. He also argues that poor countries are impeded by international copyrights – and that the rich countries all violated or did not protect international copyrights in their development.


Ha-Joon Chang writes in a style that is both understandable to the layman, yet thorough and comprehensive enough to be convincing for non-economists and economists alike. He makes important examples using humor, such as the idea that his son should not go to school but rather enter the job market at the age of six, because free trade demands it.


Chang has written an illuminating and important book, and I cannot recommend it strongly enough. Through simple, historical examples and balanced and non-ideological language, he tells the story of how rich countries developed, and how the game has changed today to deny today’s developing countries the opportunities to develop in the same way. Nonetheless, I have a number of criticisms of Chang’s work.


– There is a growing recognition amongst serious economists that GDP is a limited measure of economic well-being, and reliance on this measure obscures other important elements of economic prosperity. Chang recognizes this limitation of GDP in this book…and promptly forgets about it. Throughout the book, he compares GDP growth rates of countries under different policies and regimes as proof of their success or failure. His main metric in the book, consistently and throughout, is GDP. While it does not significantly detract from his arguments – we all know that rich countries by and large have lower poverty and inequality than their poorer counterparts – but we will never move beyond GDP as the main measure of prosperity of important economists such as Chang if do not chip away at its superiority in their works.


– Chang paints a picture of industrial policy as being central to development, as opposed to more ‘micro’ elements as health, education, and credit for the poor. He acknowledges their importance, but dismisses the idea that they alone will magically lead to development. And he’s right, without doubt, that a country needs overarching economic objectives, such as investing in research in certain strategic sectors. But nonetheless, and related to the point above, I would have liked to see a greater discussion of greater health and education and better individual outcomes as an ends unto itself. A detailed discussion is probably beyond the scope of the book, however.


– Ha-Joon Chang does not discuss the environmental importance of a proper development strategy, and this is important. He contrasts how the rich countries developed with the options open to the poor countries today, but does not look at the changing ecological realities today. He advocates a policy of manufacturing and industry, but does not provide solutions, or even suggestions, of how this may be possible without us trashing the environment (as the rich countries did over the decades and centuries) and pushing the world over the precipice. This is important: it’s all well and good arguing that the poor countries should be allowed the same developmental opportunities as the rich had, but we have to be responsible. Economics as a discipline has consistently failed to recognize humanity’s place in the world and its role in maintaining ecological balance; this has to change. Development policy must be formulated with the ecology and the environment in mind. If this means a new paradigm of development, then so be it. Ha-Joon Chang does not touch on this.


Despite these criticisms, this book is a must-read for pretty much anyone. If for no other reason, read this book and understand that mainstream economics does not have all the answers. Neither does Chang, but after reading this book, a non-economist would have a better appreciation of economics as a discipline (and that it is not a science, but rather, has evolved to serve certain interests).