I just read Ha-Joon Chang’s excellent Bad Samaritans for the second time. It is an attack on neo-liberal policies that claim that the best thing developing economies can do is open themselves up to globalization and all will be well. As Chang shows, this results in undeveloped countries remaining undeveloped. He points out countless examples, but one will suffice. Japan protected their auto industry for decades while it struggled. Today, of course, cars are the first thing that Americans think of with respect to Japan. But had Japan simply embraced free trade, Toyota would today be at best a subsidiary of GM. And more likely, it would just be a long bankrupt company.
But the book is at its best when it is talking about American history, where it notes we were “the most protectionist country in the world throughout the 19th century and right up to the 1920s.” The Antebellum era is particularly telling. In addition to the issue of slavery, there was another big divide between north and south: protectionism. The north was trying to industrialize and get its manufacturing economy to fulfill its potential. So it was in favor of high tariffs, especially against England. The south, however, wanted to keep tariffs low so that they could cheaply sell their cotton to England. As Chang writes, “Many Americans call Abraham Lincoln, the 16th president (1861-5), the Great Emancipator—of the American slaves. But he might equally be labelled the Great Protector—of American manufacturing.”
It’s curious, because in as much as there is any difference of opinion about globalization between the two parties, it is now the Republicans who are the free trade warriors. Of course, the situation has changed. Then America was developing technologically. Now, we are an advanced country and we should have relatively free trade. Our domestic employment problems are due to income inequality and the over-valued dollar, not free trade. Of course, what is now presented as free trade are mostly just agreements to push our excessive patent and copyright systems onto other countries.
This gets to the core of the book, which is about how powerful countries harm weaker countries. They do this by forcing them to make neo-liberal changes to their economies. These changes are supposed to spur growth, but they don’t. Chang notes:
The poor growth record of neo-liberal globalization since the 1980s is particularly embarrassing. Accelerating growth—if necessary at the cost of increasing inequality and possibly some increase in poverty—was the proclaimed goal of neo-liberal reform. We have been repeatedly told that we first have to “create more wealth” before we can distribute it more widely and that neo-liberalism was the way to do that. As a result of neo-liberal policies, income inequality has increased in most countries as predicted, but growth has actually slowed down significantly.
Chang focuses on how historically countries that got ahead economically would “kick away the ladder” so that other countries couldn’t follow in their footsteps. And that is what neo-liberal policy is in the modern world. But this is much like the racist underpinnings of conservative policy. It could be that the advanced countries are really doing this to keep the weaker countries down or it could be just that they really think these are the right policies. As with the racist charge, it doesn’t really matter to me. The policy is bad and should thus be changed.