Don’t do as I do, do as I say. The West and the rest’s prescription for the world’s developing economies is simple: just establish the Western institutional architecture of democracy, an independent judiciary and bureaucracy, private property rights, the rule of law, an independent central bank and market economy and then use these to drive through policies of liberalisation of trade and investment, privatisation and deregulation. The West’s enforcers, the World Bank and the International Monetary Fund, are confident that these twin institutional and policy bundles will deliver sustained growth, development and economic take-off.
Ha-Joon Chang, who was born in Seoul, South Korea, and is now Reader in the Political Economy of Development at Cambridge University, has put this model to the question in a series of books including 23 Things They Don’t Tell You About Capitalism. Here, in a new edition of Kicking Away the Ladder, he uses an historical perspective as a focus.
Chang makes three assertions. First, the economic histories that claim this model as the one followed by developed economies during their own successive industrial revolutions are plain wrong. Second, that even today the model is flawed and fails to deliver. And, third, that this prescription is a deliberate ploy to keep the poor in their place by kicking away the ladder that would enable them to climb up.
Chang assembles a wealth of evidence to back his first assertion. Free trade was the exception, not the rule. The North’s victory in the American Civil War was as much a victory for infant industry protection on behalf of the North’s manufacturers, at the expense of the South’s plantation holders, as it was for freedom over slavery for the black community. Tariff protection was rampant and commonplace and focused on where the competition threatened across Europe, while until late in the 19th century German factories were churning out counterfeit “British” goods at rates that would put any East Asian entrepreneur to shame.
Until the mid-19th century, technology transfer was through “live machines”, such as the skilled workers poached from Britain. As a result, in 1719, suborning became illegal and the individuals concerned lost their rights to land and goods in Britain and their citizenship if they didn’t return home within six months of being warned to do so by any accredited British government official.
In the United States, a change of administration in Washington sees seven or eight thousand friends, donors and diners replace those of the previous administration and clumsily take hold of the levers of power as the independent bureaucrats look askance. As for democracy, well, it didn’t arrive in the US until 1965 with the Voting Rights Act, while in the United Kingdom it was not until 1950 that multiple voting for Westminster was abolished for university graduates. As for the House of Lords, no self-respecting European Union election observation mission would give a clean bill of health or countenance a system with a second chamber comprising the remote offspring of royal mistresses, high officials of the established church and the cash cow beneficiaries of political patronage.
As for the second, there is copious evidence that the World Bank’s model is more of a hindrance than an asset. The success stories are among those states which rejected, rather than bought, the model. While sub-Saharan Africa remains mired in worse poverty than ever, Japan and South Korea, following a path of state aid, tariff and non-tariff barriers and infant industry protection, joined the developed economies decades ago and, more recently, China and Vietnam – both ignoring the strictures of the IMF – are on the verge of doing the same.
It’s only the third assertion that’s in question. The real problem is that these people are true believers and missionaries rather than hypocritical cynics. Like those members of the Harold Camping cult who believed the world was going to end on May 21, the response to failure is not to accept that theory or theology is at fault but, rather, to blame the victims. Camping blamed poor maths. He announced he was five months too early. Armageddon is rescheduled for October 21.
As they say, there are none so blind as those who will not see. The problem here is that the particular set of intellectual blinkers Chang exposes leaves billions of people in deep and grinding poverty.
