Bad Samaritans, by Ha-Joon Chang

Bad Samaritans is the name Ha-Joon Chang gives to the rich world in this book about globalisation. Like the Good Samaritan of the gospels, they want to help the poor. It’s just that they don’t know how, and their actions actually make things worse. The policies that the rich world imposes on the developing world are meant in good faith, but often hold them back.

Chang argues this from an unusual perspective. As a Korean born in 1963, he has lived through a development story of his own. At the time, per capita income in South Korea was just $82, half that of Ghana. The country had been wrecked by the war with North Korea, losing half its industry and three quarters of its railways. It exported fish, tungsten, and wigs, and was considered a lost cause by the development agencies. By 1981 however, an aggressive development drive had raised per capita wages to $1,000. With an economy based on electronics and manufacturing, South Korea is now one of the world’s richest countries. “How privileged I was as a development economist” writes Chang, “to have lived through such a change.”

Having seen it first hand, Chang knows how a country can succeed, the kinds of policies it needs to nurture its industries and open to the global markets. Korea protected its young industries fiercely by imposing high tariffs on imports. State-run businesses and subsidies allowed manufacturing to develop without the pressure to return immediate profits. Tight controls were placed on foreign exchange.

The point of the book is that ideology has overtaken history, and those policies that worked for Korea are now forbidden. Protectionism is frowned on by the global community and its institutions, the IMF and the World Bank, but it is essential for early stages of development. In fact, “practically all of today’s developed countries, including Britain and the US, the supposed homes of the free market and free trade, have become rich on the basis of policy recipes that go against neo-liberal economics.”

The result is a book that overturns a whole series of assumptions about neo-liberalism, with a mixture of history and economic theory. Privatization for example, is a key policy demand of the IMF, but Chang points to a string of highly successful state owned businesses, like Singapore Airlines. Other many big businesses that were originally nationalised to give them a head start – like Renault. Plenty more private businesses have been taken under state control temporarily, banks most recently. The point is, state ownership allows countries to develop industries that otherwise wouldn’t get a chance. A striking example is EMBRAER. Nobody would have taken a Brazilian aircraft manufacturer seriously – stick the the beef and timber – but EMBRAER is the world’s third largest aircraft company, built by the government and then privatised when it was ready. “The general lesson is clear” says Chang. “Public enterprises have often been set up in order to kick-start capitalism, not to supersede it, as it is commonly believed.”

Elsewhere, Chang argues against tight patent controls, and for allowing more sharing of ideas. Pharmaceutical companies lamented the reverse engineering of HIV drugs for years, until a recent agreement. But the US compulsorily overturned patents on anthrax drugs in 2001 after a scare, demanding an 80% price cut. It’s one of many double standards in the book, one rule for rich countries and one for the poor. One of the more extraordinary of these is the IMF requirement that developing countries balance their books. As we well know, rich countries feel no compunction about running humongous deficits, but poor countries are forbidden to do so as a condition for loans and debt relief.

Perhaps my favourite chapter is the one on culture. Something I hear regularly is that Africans are lazier than Westerners, and are poor because they won’t work hard. Chang rummages through the history books and finds a 1903 book that describes the Japanese of being “lazy and utterly indifferent to the passage of time”. Another traveller wrote off the Koreans in 1911 as “sullen, lazy and religionless savages”. There’s a similar sentiment in Mary Shelley’s Frankenstein, where a character complains that “the Germans never hurry”. Nobody would accuse these cultures of laziness now. Chang’s point is that people often make assumptions about people they believe are inferior, and we are too quick to blame culture. India is a booming economy, but not so long ago economists spoke of a ‘Hindu rate of growth’, saying Hindu culture was fatalistic and not conducive to innovation or enterprise.

“The history of capitalism has been so totally re-written that many people in the rich world do not perceive the historical double standards involved in recommending free trade and the free market to developing countries” says Chang. He’s not the only one saying so. Joseph Stiglitz and Erik Reinert have written similar books – not anti-free trade, but calling for it in the right places and times. Liberalisation is a consequence of mature markets, not a means to them. Enough countries have disregarded the IMF and succeeded that the message is slowly creeping through, and the collapse of the money systems of the developing world have cast doubt on neo-liberalism’s free for all. Perhaps there’s hope we can be good Samaritans yet.