Following the Footsteps of Joseph Stiglitz: Learning Economics with Ha Joon Chang

THE BOOK IN 100 WORDS 

“It’s like writing a book on self-made men, with the first chapter opening on Henri Ford II"

- Ha Joon Chang about T. Friedman’s “The Lexus and The Olive Tree”

  Bad Samaritans describes the economic practice of the rich countries in the past 200 years and exposes their hypocrisy. How today’s “free trade” mantra in the international scene was yesterday’s extremely protectionist rationale; how neoliberal historians revise their manuals at will and how their success stories and poster boys (Chile, the US, Hong Kong, the Toyota Company, etc.) are the proof of the exact contrary: historically, economic development is - to a very dominant extent - the result of infant industry protectionist policies.

  This book is a true manual of intellectual self-defense against the comparative advantage theory that tells developing countries to focus primarily on what they do best in order to achieve economic success. Ha Joon Chang offers the most rational response to followers of TINA (from Margaret Thatcher’s famous “There Is No Alternative”).

BOOK DESCRIPTION: A FEW WORDS ABOUT THE AUTHOR

“Within months the book’s expose of northern double standards was being quoted extensively by developing country delegates at the talks”

                                                                                  - Duncan Green, Head of Research for Oxfam GB

  Ha Joon Chang is a young (born 1963) and brilliant Korean economist from Cambridge University who has worked all his life on Development Economics. He has worked for the World Bank, the Asian Development Bank as well as for Oxfam and some UN agencies. He is said to be one of the most quoted economists among critics of today’s version of globalization.

  He is not far left, in fact he is rather discreet about his political affiliations, but as far as economics are concerned, he is rather straight forward in this book. He is very respected among other economists - in fact his mentor is the very famous Nobel Laureate Joseph Stiglitz. Politically one can assert that he is at least Social Democrat, and Economically it follows that he is Keynesian, as you may have already guessed from his pedigree.

  So, what we have here is an author that has the best credentials for any mainstream standards - I didn’t mention that he’s also received very prestigious awards - but without the stigma of being a “red economist”. He is also known for having written many books of popularization of economics (in my view in economics popularization always means it’s written in its real language).

  His most famous book before this one was Kicking Away the Ladder: Development Strategy in Historical Perspective (2002) for which he won the Gunnar Myrdal prize, which is a book that prepares the work for Bad Samaritans (2007).

BOOK DESCRIPTION: WHAT THE BOOK SAYS

“it is a very common clever device that when anyone has attained the summit of greatness he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him”

                                                                                                                                  - Friedrich List (1789-1846)

  In this book, HJ Chang mainly explains, by providing very concrete examples and images for everyone to understand, how rich countries push down the throat of developing countries economic policies that are the mirror image of what they themselves have followed. He refers to this as “Kicking away the ladder” (a phrase borrowed from F. List and also the title of his 2002 best selling book).

  Chang exposes not only the double standards at work everywhere, but also the revisionism of economic history as well as the idiocy of the attempts to explain success and failures of certain economic policies in terms of culture and nationalistic sentiments.

BOOK DESCRIPTION: HOW IT SAYS IT

“In my book I have Isaac Newton, Jonathan Swift, Deng Xiao Ping, Henry Ford, Cicero, Gordon Brown, etc. But have you ever read an economics book with Tom Cruise in it?”

                                                                         - Ha Joon Chang, book presentation at the New America Foundation

  This is, in my view, the most important aspect of this book.

  Ha Joon Chang is a very pedagogic scholar, which can be attested by the organization of his book. Chang devotes 9 chapters to his thesis. The 2 first ones are a description of the neoliberal version of economic history contrasted with the real history of economic development. Chapters 3-9, the main chapters of this book, deploys a mixture of economic theory, history and contemporary evidence to turn much of the conventional wisdom on its head. You’ll be surprised learning things like:

- stealing ideas is sometimes a good things

- a company running a deficit for 17 years might be a good thing

- soft budget problems also applies to private businesses

- a bad economy is not necessarily related to corruption

- Intellectual Property Rights may allow you to claim property ideas that are 2000 years old

- once upon a time Germans were seen as "ill-disciplined” and “thieves" and the Japanese were describes as "too independent"

- etc.

PERSONAL OPINION: WHAT THIS BOOK DOES WELL
 

“Lucid, deeply informed, and enlivened with striking illustrations, this penetrating work could be entitled ‘Economics in the Real World’”

- Noam Chomsky

  Ok, obviously I am very enthusiastic about this book. Now, what is it that makes it so special?

  As I mentioned above, it is very pedagogic. Each chapter from 3-9 is devoted to one clear subject that treats one economic aspect of international and domestic economics in the field of state intervention (in the US you would call it government intervention, I guess). There are 7 chapters devoted to: free trade theory / foreign investment / pubic enterprises / intellectual property / fiscal and monetary policies / corruption / cultural explanations.

  Now, what I find extraordinary in this book is that it has a double head fake; it deploys solid arguments to defend its thesis, but it also has a double secondary effect: it teaches you economics (“in the real world”) and empowers you as an activist.

  When I read Robin Hahnel’s ABC’s of Political Economy I was impressed by how effective and empowering this pedagogical tool was. But it was intended to do just that, very explicitly. On the other hand, the pedagogical quality of Bad Samaritans is more indirect. You think you are reading  a book for the general public, but slowly and surely one gets to learn more technical “hardcore” economics, against anyone’s predisposition towards economics.

  In conclusion, you will find it amazing, I am sure, to realize that after reading such an entertaining book that even contains one chapter devoted to Daniel Defoe, the author of Robinson Crusoe, a reference to a scene in the movie Mission Impossible 3 in chapter 7, etc. that not only you have learned something very valuable in development economics, but also that you have done it in the most academic way.

  At the end of this book you should be familiarized with the Bank for International Settlements (BIS) capital adequacy ratio, the Trade Related Investment Measures (TRIMs) agreements, allocative deadweight loss, brownfield vs greenfield investment, duty drawbacks, you name it!

PERSONAL OPINION: WHAT THIS BOOK MISSES

Not a PhD dissertation. Is that a bad thing?

  This book is not intended to be comprehensive on all issues. This limitation is a technical one recognized by the author. Rather, you must imagine the best lecture on every topic I mentioned above: It is thorough, it does make you want to know more and it certainly gives you more than hints as where to start from. It contains a great Index and more than 300 very useful footnotes with loads of bibliography to further your research.

  One other limitation of the book is that it does not intend to explain the origins of such “bad” policies. In this regard this book is rather apolitical. But as far as I am concerned, I don’t mind that these policies are treated like “foolish mistakes” rather than serving special interest. This feature isolates the thesis of the book from considerations that would blur its content. It is one limitation but to me it is again another quality.

  At last, the one very noticeable missing feature has to do with environmental policies. Although it is possible for him to stick to his subject without dealing with issues for which he would have to develop a whole other book. This, to me, does not affect the quality of this work and would perhaps be beside the point.

PERSONAL OPINION: PARTICIPATORY PERSPECTIVE

“Mozambique’s economic miracle: How to escape poverty

Mozambique takes on the Big Boys

Nuts and Volts

June 28th, 2061 / MAPUTO

From The Economist print edition

Tres estrellas anounces a big breakthrough in fuel cell technology”

                                                                                           - Ha Joon Chang, fictitious article from Bad Samaritans

  What can be said about this book from a Pareconish point of view?

  Well, I’d rather see it from a broader activist point of view in fact. This book offers some solutions as to what to do with regard to economic policies with the developing countries. In fact, the books opens with a prologue called “Mozambique’s economic miracle” which is a fictitious article from June 28th 2061 in The Economist print edition which not only guarantees from the start the unorthodox, public-oriented aspect of the book and its author, but also represents a wonderful effort of imagination of a possible future, using his knowledge of foreign economies and more particularly Mozambique’s to stimulate our imagination.

  Now, having said that, I shall repeat that Chang is not a radical by our standards (at least that I know of). He is more of a very left leaning social-democrat, with Stiglitz next on his right.

  But once this aspect is understood, this book contains not only very valuable pedagogical material for activists around the world - as I have insisted in this review - but also some guidance as to what steps to take next regarding an economic improvement for both developing countries and domestic societies.

  The main limitation from a pareconish perspective would be that, by not addressing more thoroughly the structural problem of our political sphere in this capitalistic system, it fails to provide some answers as to how to get those results done. Its value from a strategic point of view is very incomplete but in fairness to Chang, it was never the intention in this book.

EXERPT FROM THE BOOK

(Would you buy this car? ) 

  "Chapter 1: The Lexus and the Olive Tree Revisited", pp 19-20.

  "Once upon a time, the leading car maker of a developing country exported its first passenger cars to the US. Up to that day, the little company had only made shoddy products - poor copies of quality items made by richer countries. The car was nothing too sophisticated - just a cheap subcompact (one could have called it 'four wheels and an ashtray'). But it was a big moment for the country and its exporters felt proud.

  Unfortunately, the product failed. Most thought the little car looked lousy and savvy buyers were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US market. This disaster led to a major debate among the country's citizens.

  Many argued that the company should have stuck to its original business of making simple textile machinery. After all, the country's biggest export item was silk. If the company could not make good cars after 25 years of trying, there was no future for it. The government had given the car maker every opportunity to succeed. It had ensured high profits for it at home through high tariffs and draconian controls on foreign investment in the car industry. Fewer than ten years ago, it even gave public money to save the company from imminent bankruptcy. So, the critics argued, foreign cars should now be let in freely and foreign car makers, who had been kicked out 20 years before, allowed to set up again.

  Others disagreed. They argued that no country had got anywhere without developing "serious" industries like automobile production.They just needed more time to make cars that appealed to everyone. The year was 1958 and the country was, in fact, Japan. The company was Toyota, and the car was called the Toyopet [see photo above]. Toyota started out as a manufacturer of textile mahcinery (Toyota Automatic Loom) and moved into car production in 1933.(...)"