books development economics

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.

12 comments

  1. Mr. Ha Joon Chang previously wrote a historical analysis of economic development that effectively refuted the Washington Consensus, titled ‘Kicking Away the Ladder’. It should probably be read in conjunction with his more recent work.

    (The title refers to a comment by Friedrich List, regarding the British promotion of free trade. It is worth quoting in full:

    ‘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. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.’ (The National System of Political Economy, Book Four, Chapter 33; italics mine). )

    So it remains open to question whether the policies are actually promoted in good faith.

    1. Yes, it’s hard to say how much of it is deliberate. Whether you think the IMF’s policies are malicious or not probably depends on what country you live in. I think Chang’s point is that most people implementing the policies are ill-informed and badly taught, rather than scheming against the developing world. I studied a bit of economics at university, and it certainly never stepped outside of the neo-liberal paradigm.

      But that’s not to say that somewhere along the line, there aren’t people who are fully that these policies hold the developing world back and keep all the wealth for the West, and choose not to say anything. I’m sure there’s a conspiracy of silence about it, the same way there is about climate change or endless economic growth – keep quiet as long as it benefits us.

  2. Chang comprehensively misunderstands the word ‘Culture’ by conflating the meaning of that concept(s) with what can best be described as jingoistic stereotyping and good old racism. He seems to think that Culture and outside xenophobic intolerance are the same thing. They are not.

    I think this is made abundantly clear in Chang’s own examples. His citations of ‘lazy Germans’ and ‘thieving Japanese’ or another writers take on Koreans in 1911 as being “sullen, lazy and religionless savages” serve to highlight the paucity of his understanding Culture. It is pretty clear that we cannot regard these assessments of different people in any objectively reasonable manner. What these statements say is more indicative of the character of the speakers than that of the people under scrutiny since we are clearly dealing with pretty outlandishly obvious biases here.

    So, passing lightly over that, we have to define Culture a little more clearly -something Chang does not bother to do. Culture is not a standalone ‘tent pole’ that can be easily separated from a host of other factors. Rather it is more akin to the tent itself… Culture is an amalgam of a persons religion, education, social status, social customs, the communal intellectual achievements, it’s a groups openness -or otherwise- to outside influences and it’s trade practices, it’s tradition and derived behavior patterns. And how/to what extent these things are conveyed to the next generations. I can go on to add more tho this such as a groups political influences, but that becomes a even more complex discussion, so this will suffice. Simply put, culture is the total sum of a person’s life experience as shaped by some or all of these influences.

    A culture is not what somebody outside that group thinks of those in the group as Chang so effortlessly claims. It is quite incontestably absurd to think that these pat descriptions from outsiders hold any merit as to the character of those under scrutiny So putting aside this overtly simplistic view of Culture I think one must admit that it is equally absurd to think these factors are not mirrored in a ‘cultures’ economic endeavors. An groups economic activity is part of the larger output of a country, people, community and can no doubt -as Chang shows- be curtailed or enhanced by outside factors (IMF, World Bank etc…) but to attest that , for instance, an American state and an Indian, African or Australian state’s views on economic issues are simple direct equivalences of each other is overly optimistic , if not naive.

    Chang in my view, is guilty of same ‘but they want what we want’ attitude that he and others so vehemently -and often quite rightly- criticizes in America’s foreign policies. When he claims that all people want to have a place to live, safely , security and a future for their children he is quite right, however he still has all his work ahead of him as to argue the different people attempt to achieve those goals go by the same route.

    It is of note see how specific and impressive Chang’s statistics and data on various economy’s are, and his analysis of this is the work of an economist of note. But on the understanding of the nuances of Culture he seems surprisingly vague and in doing so I think he dismissed a vast and hugely interesting subject -deserving of more reasoned insights- in an appalling superficially way. I recently had an argument with someone about this and we ended on an ‘Argument from authority’ type conclusion. Sure Chang has a PHD in economics but that does not mean he has unassailable insights into the social economic and cultural aspects of this debate, and it is a pity this lapse occurred because it undermines the point of his thesis. Arguably he should simply have left the chapter on culture out of his book.

    1. As a cultural studies graduate I’m always happy to debate the scope of what culture is, but I don’t think Chang would think of himself as an expert at all. He writes from a development economist perspective, and is interested in those things that hold back development. One of them is simplistic views of others, prejudiced opinions about other cultures and their work ethic that make it possible to apply one rule for us and another for them.

      That was particularly problematic during the colonial era of course, but persisted right into the 90s as groups like the IMF told African countries not to bother with industry and focus on raw material exports instead.

      Chang also goes for humorous examples, and there by looking for extremes he does risk oversimplifying, but I certainly didn’t think it undermined the book.

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