Bad Samaritans by Ha-Joon Chang
By Antoine Cerisier.
Ha-Joon Chang is a South Korean economist currently teaching at Cambridge University, as well as a follower and friend of Nobel laureate Joseph Stiglitz, whose main areas of interest are development economics and international trade. His books have had considerable impact in the developing world: Rafael Correa, the current Ecuadorian president, cited Dr Chang as his main influence for economic policy. Bad Samaritans was released in 2007 and was Dr Chang’s most successful work to date, receiving numerous accolades from the press and from renowned scholars – including Noam Chomsky and his mentor Joseph Stiglitz.
The scourge of neo-liberalism
The first few chapters of Bad Samaritans assess the ‘official’ history of globalisation, as narrated by free trade economists and most international institutions. According to this mainstream view, the United Kingdom was the first country to adopt free trade policies in the early 19th century – largely inspired by Adam Smith’s influential theories. The benefits of trade liberalisation were so apparent that most Western countries followed suit and started to liberalise their trade and domestic economies as early as 1850. The so-called ‘Golden Age’ of globalisation lasted until 1914 and the start of the First World War. In a context of increased tensions and economic downturn, states turned their back on free trade and adopted more protectionist measures – the ultimate sin which, according to liberal scholars, contributed to the outbreak of the Second World War. Thankfully, trade was liberalised again after 1945 with the help of the Bretton Woods system and the creation of the General Agreement on Tariffs and Trade (GATT), now called the WTO. This trend was confirmed in the 1980s with the rise of neoliberalism; and in today’s world, in the words of a free trade economist quoted by Dr Chang, you’re either neoliberal or “neo-idiotic”.
Dr Chang rejects this fairytale and argues there are several major flaws – and lies – in the official history of globalisation. For instance, during the ‘Golden Age’, the United States was the most protectionist nation on the planet; high tariffs allowed American industries to prosper and be protected from international competition. This leads us to the book’s most powerful argument: Western states have been consistently “kicking away the ladder from which they have climbed” by deterring developing countries from using protectionist measures which have been beneficial to the West – and sometimes still are. The author denounces this hypocrisy and reminds us that trade barriers and state intervention were instrumental for the emergence of competitive industries in his home country, South Korea. Protectionism may not directly trigger economic development, but both can certainly coexist, as economic history has taught us. Dr Chang deplores this dishonest rewriting of history as it can be used to justify harmful policies. The remaining chapters are dedicated to other preconceived ideas criticised by the economist. He defends public investment and state enterprises as powerful tools for economic development both in the West and in the global South; admits foreign direct investment (FDI) is beneficial but only if it is well regulated; and rejects the idea that some nations or cultures are in essence more capable than others. The book’s conclusion remains optimistic but calls for major changes in the international system as regards trade and state intervention.
Dr Chang’s book provides a fresh perspective on international development, addressing the root causes rather than the symptoms. His argumentation is precise but still rests on specific and sometimes amusing examples. For example, I discovered that British writer Daniel Defoe, the celebrated author of Robinson Crusoe, was also a distinguished economist advocating protectionism and state intervention as early as the mid-18th century. In fact, Bad Samaritans prolongs the old debate on trade and state intervention, which already involved Alexander Hamilton, Daniel Raymond and Adam Smith in the early 19th century; more generally, Ha-Joon Chang adds his name to the long list of globalisation critics.
Despite largely favourable reviews, the book has been criticised in the Financial Times and The Economist – as one might expect. Critics argued that empirical evidence usually supports the main argument put forward by free trade economists, namely that trade liberalisation is good for growth and development. In a 2002 journal article entitled “Growth is good for the poor”, Dollar & Kraay concluded that free trade triggers growth and helps alleviate poverty in the global South. Nonetheless, as Chang would respond, it is probably the opposite: states are more willing to liberalise trade once they reach a certain level of economic development. A more convincing argument came from The Economist. The journalist admits that the East Asian example can illustrate the use of protectionism and state intervention in the economy. However, such policies were not particularly successful in other parts of the world, perhaps due to Asia’s high levels of education and relative political stability. In any case, as I argued in a recent contribution to this blog, unimpeded trade and one-size-fits-all approaches usually do more harm than good. In that regard, Bad Samaritans is a good wake-up call for all those interested in economic development and international politics.