Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

While other books (linked below) have focused on the evils done in our name, this is the first book I have seen that dissects economic history in order to demonstrate the hypocrisy of the current regime that bullies lesser developed countries with the IMF-WTO-World Bank interlocking conditionalities. The author comes down solidly in favor of protectionism, foreign investment controls, state-owned enterprises, avoidance of privatization, not allowing patents to clash with the public interest, the need to defy the marketplace and respect the role of manufacturing, and the influence of culture (and changing the culture through government direction). This is a nuanced book that trashes the neo-liberals while speaking truth to power. On any given prescrption, the author will say "it depends" and avoid leaning to one extreme over another. He touches on democracy as not necessarily good for developement, and corruption not necessarily bad. Other books that I respect as much as this one: The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It The End of Poverty: Economic Possibilities for Our Time The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing Paperbacks) Confessions of an Economic Hit Man The Shock Doctrine: The Rise of Disaster Capitalism Manufacture of Evil: Ethics, Evolution, and the Industrial System Open Society: Reforming Global Capitalism The Pathology of Power - A Challenge to Human Freedom and Safety Blessed Unrest: How the Largest Movement in the World Came into Being and Why No One Saw It Coming The Unconquerable World: Power, Nonviolence, and the Will of the People See also my varied lists.

Ha-Joon Chang categorizes Bad Samaritans as: 1. Opportunists: Those who advocate implementation of destructive policies in poor countries as a condition of bailing them out of financial trouble, with the intent to exploit and prevent them from becoming future competitors. 2. The ideologues: This group is genuinely convinced neo liberal economic policies are necessary to promote economic wealth. They are more difficult to contend with, as "self righteousness is often more stubborn than self interest." 3. Conformists: Neither opportunist, nor ideologue, conformists are just too lazy to challenge the conventional held beliefs that contribute to the economic failure of poor countries. The author's hope is to convince this group in particular, which in his opinion comprises a majority of Bad Samaritans to combat the status quo of neo liberal ideas. The author's intent is to dissuade Bad Samaritans from advocating and imposing destructive policies towards poor countries through the IMF and the World Bank. These destructive policies are borne out of neo liberal ideas for building and maintaining successful economies, including low inflation, small government, private enterprise, free trade, friendliness towards foreign investment etc. Mr. Chang accuses rich countries of hypocrisy, as most of them practiced virtually everything they now preach against to aid them in their colossal success. This "do as I say, not as I did" attitude has been primarily responsible for the decline of the 3rd world. While Chang agrees that the co-existence of state protectionism with economic development may not prove cause and effect, he puts the bourdon of proof on free market economists to explain how free trade has helped rich countries get rich when history clearly shows otherwise. Chang uses numerous examples of the checkered pasts of economic titans of today, e.g. the United States, England, South Korea, and to what extent they manipulated markets to their advantage with high tariffs, government interventionism and protectionism, ignorance of intellectual property rights etc. to attain their supreme status. And once on top they kicked the success ladder away, and instead, imposed ill conceived policies on poor countries suitable only for strong, mature economies. Mr. Chang advocates a level playing field; a playing field where poor countries should be allowed to impose high tariffs, ignore intellectual property rights, control foreign investment, implement state owned enterprises, utilize government protection and subsidies etc. to nurture their "infant industries" until they can stand on their own and not be crushed by established global competitors. Therein lies the author's biggest fallacy: To what degree should poor countries be allowed to engage in unfair practices, and who decides when it is time to scale down? Rich countries of today have committed many atrocious acts unrelated to economics that aided their ascent to the top, e.g. pillaging and

"Free Trade" has been progressively wrecking America's economy for at least two decades. Meanwhile, economists in our colleges continue, almost without exception, to warn of protectionism while extolling the writings of Adam Smith and David Ricardo - written long before today's gross wage imbalance between Asia and the U.S., instant communications, and fast, economical international transportation. Finally, a Cambridge economist, Ha Joon Chang, brings facts and common sense to the debate - aided considerably by the free-trade ignoring successes of his native country, South Korea - eg. Samsung, and Pohang Iron and Steel. (And then there's Toyota - started out in textiles, was protected by auto tariffs, and now the world's #1 auto manufacturer and teacher of advanced management techniques.) "Bad Samaritans," as Chalmers Johnson points out, refers to "people in the rich countries who preach free markets and free trade to the poor countries in order to capture larger shares of the latter's markets and preempt the emergence of possible competitors." They are saying "do as we say, not as we did" and take advantage of others who are in trouble. He also points out that all of today's rich countries (INCLUDING the U.S.) used protection and subsidies to encourage their manufacturing industries - anathema in today's economic orthodoxy and contrary to the WTO, IMF, and World Bank. As a result, third-world nations' growth rates have fallen to less than half of that recorded in the 1960s (1.7 percent instead of 4.5 percent). As for corruption being incompatible with high growth, Chang points to Zaire vs. Indonesia. Both suffered from murderous corruption, yet the former's living standards fell two-thirds while Indonesia's tripled. The difference was that corruption funds in Zaire fled to Swiss banks, while those in Indonesia remained in the country to help create additional jobs. "Level playing field" rhetoric is often used to justify WTO and IMF prescriptions. Chang, however, reminds us that this is inconsistent with our practice of segregating sports by size and age, and that it is similarly unrealistic to expect eg. Honduras to compete evenly with the U.S. Chang also points out the strong agricultural subsidies in Europe (milk), the U.S. (corn), and Japan (rice). The good news is that these subsidies keep farming viable in those areas and the nations involved more independent; the bad news is that U.S. corn is exported to Mexico - making economic survival impossible for their farmers and driving them to illegal immigration into the U.S. Free-trade reduction of tariff revenues also plays undermines national budgets in poor countries because they lack efficient tax collection capabilities and tariffs are the easiest taxes to collect. Combined with free-trade-caused damage, the struggling nations are left far less able to fund health care and education for their citizens. Still another Chang insight is his pointing out that pursuit of copyrig

Ha-Joon Chang(C) demonstrates that the standard neoclassical international trade theory (model) applied by the economists at the World Bank(WB),the International Monetary Fund(IMF),the Import-Export bank,the World Trade Organization(WTO),and advocated by Thomas Friedman, is basically an artificially constructed ,purely mathematical,blackboard and chalk model that generally ignores major,relevant variables and necessary political and social prerequisites,as well as the time it would take to implement these kinds of institutions.The current collapse of Kenya is precisely the type of failure that results from the gross ignorance of the economics profession of the ancient wisdom of Adam Smith.The so-called " miracle" of Kenya was a chimera from the beginning. The absence of these institutions(overlooked,ingeneral,by C) doom the application of the model from the beginning.The theory works only if certain prerequisites are in place .For example,necessary prerequisites are (1) the existence of political,corruption free legal,governmental, and political institutions that enforce contracts impartially and uphold the rule of law, and (2) the existence of an independent,impartial,corruption free judiciary that will apply the law fairly.These necessary prerequisites do not exist in China,India,Africa,Mexico,South America,and Central America.They have evolved and are functioning effectively in the First World countries of the West and Japan.These institutions are barely present in the Second and Third World.These countries can be regarded as "infant" countries.C extends the argument based on the protection of infant industries to the protection of infant countries in chapter 3.The standard free trade prescription can only apply to " grown up"(1st world)countries. C overlooks,in general,the extremely important policy discussions carried out by Adam Smith on pp.434-439 of the Wealth of Nations that support his overall position (1776;Modern Library (Cannan)edition).Smith (a) supports retaliatory tariffs if there is any probability greater than 0 of changing the policy of the offending country;(b)supports revenue tariffs ; (c)would dismantle protectionist tariffs carefully, in very slow gradations, in order to prevent the collapse of those industries that are being opened up to imported goods,and (d) recognized that a 100% free trade policy is a pipe dream, given the social and political realities of any society. I recomend this book.C can easily get a full 5 stars from me by explicitly connecting his analysis to the wisdom of Adam Smith.Adam Smith would fire all the economists at the WB ,WTO,and IMF for gross incompetence and negligence.