Kicking Away the Ladder

Among heterodox economists, Ha-Joon Chang is a heavyweight. His winning of the Leontief Prize (awarded by the Global Development and Environment Institute) and the Gunnar Myrdal Prize (awarded by European Association for Evolutionary Political Economy) reflects well his impact. This book has attracted a lot of attention and has been referenced by figures such as Joseph Stiglitz, Noam Chomsky, and Robert Pollin. By now it is a classic and everyone interested in the debate about development should read it. Whereas Chang's later book "Bad Samaritans" was consciously aimed at a wider lay audience, this book is more focused on detailed case studies. The arguments are essentially the same. All industrialized countries developed using various mixes of activist government (industrial, trade, and technology) policies and the fact that some policies (e.g. very open trade regimes and absence of industrial policy) are appropriate for mature industrial economies at the technological frontier does not mean that those policies led to their development or should be used in the developing countries now. Chang argues, very reasonably, that development experts and policy makers should pay more attention to the historical record and its implications rather than abstract ahistorical models. He covers in great detail the different kinds of policies that were used by the currently rich countries to catch up and reach economic maturity. Furthermore, he describes their long and arduous institutional development. The meticulousness of his research is very impressive and gives a good picture of the change with regard to issues such as the social safety net, banking and finance, labour regulations, democratic participation, legal systems, etc. This book may not seem as radical now because some mainstream economists have moved in a similar direction and made similar arguments. Dani Rodrik of Harvard and Joseph Stiglitz of Columbia are good examples. The repeated failures of the Washington Consensus policies made it extremely hard to defend and its mainstream critics could no longer be ignored. However, one cannot dismiss the possibility that this book (among others) has also contributed to the shift in mainstream discourse. If it is certainly worth reading. If it ends up sparking your interest in arguments informed by the German Historical School, consider reading Erik Reinert's "How Rich Countries Got Rich...", too (in fact, his name appears in Chang's acknowledgments before any other).

In this pioneering book, Ha-Joon Chang, Assistant Director of Development Studies at Cambridge University, explores development strategies in theory and practice. First, he studies how the developed countries became developed using active industrial, trade and technological (ITT) policies. Then he looks at the role that social institutions play in economic development. Finally, he proposes some lessons for the present. He shows how Britain was the first country to perfect the art of infant industry promotion. Then he looks at the USA, which still has subsidies for its farmers, quotas for textiles, huge state spending on military R & D, trade sanctions against many other nations, and state funding for R & D in the pharmaceutical and biotechnology industries - all protectionist measures. All the developed economies used active ITT policies, yet they now promote free trade for all, claiming that it will benefit all. Renato Ruggiero, the first Director of the World Trade Organisation [WTO], said in 1998 that this world order has `the potential for eradicating global poverty in the early part of the next century'. But free trade policies have failed: they haven't delivered the promised growth. Free trade harms the less developed countries' national manufacturers and thus their prosperity in the long run. A study of 116 countries showed that their GDP per head grew 3.1% a year with 1960-80's interventionist policies, but only 1.4% with the post-1979 Thatcherite policies. This study also proved that the quality of a society's institutions is not the key to growth; so does the similar slowdown in the developed countries since 1979. The World Bank and the IMF impose conditions that they say will ensure that `good governance' aids economic growth, but good institutions are the result, not the cause, of economic development. Chang shows how the developed countries' states have vested interests in keeping poor countries as providers of cheap raw material and labour, in preventing them from emerging as rivals. The WTO restricts developing countries' ability to pursue active ITT policies. The WTO is a modern version of the unequal treaties that Britain and others imposed on China and other semi-independent countries in the 19th century. The developed countries' states are indeed kicking away the ladder to stop others climbing up after them. They say, `Do as I say, not do as I did'. But today we too need active ITT policies to get us out of the slump.

This book is a must read for all Ministers of finance and economic development in the third world. Policy makers in the third world should read this book over and over. Also all libraries in the research department of central banks in third world countries should have this book. Third world policy makers can definitely use this book as the starting antidote for the `developmental advice' that emanates form teams of economists who descend from the IFIs. This book would be required reading for my students (at New College of Florida) in development economics.

This is a book I intend to reread a year from now. I believe it has changed my perspective regarding international politics and developmental issues, so from now on I'll try and interpret facts through the perspective Chang provided. Meanwhile, I'll try and follow some of the bibliography he suggests to see if I can mitigate some of my doubts. If you believe you're a neoliberal, this book is for you. It will challenge some of your most basic beliefs - and what could be better? You might be able to disagree with him entirely, but I'm sure that reading this book will sophisticate your thoughts in the matter and throw some doubts where there was none. Too bad this is not the best-seller it could have been.

According to Michael Lind's book review in Prospect (Jan 2002), this book is "the most important book about the world economy to be published in years." And the author received the 2003 Myrdal Award for this book, which is awarded annually to a great academic achievement in the field of development/institutional economics following the late Swedish economist's name Gunar Myrdal who was a Nobel Prize laureate. Prof. Ha-Joon Chang of Cambridge argues in this book that developed countries used some measures for promoting their economy in their earlier days of development, which they are now blaming for making the economies of developing country worse and the world economic order unfree. The author reverses this logic. According to his arguments, policy-suggestions from such arguments of developed countries are in fact making the economy in developing countries lag behind and its development impossible, and such a rule of game in the world economy now can be rather unfair to them because developing countries even are often punished due to their using of the very same methods which developed ones used in the past.As a critique of neo-liberal market fundamentalism, this book is very iconoclastic because it gives readers a sophisticated understanding of the real history of industrial development as well as pleasure of reading an academically original and creative work. This book is above all analytical in terms of using the method of historical comparisons. Some comparisons may be too bold. But its creativity and integrity in organizing the research overcome the limits of bold comparison.