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

By Ha-Joon Chang

Book Overview

"Lucid, deeply informed, and enlivened with striking illustrations." -Noam Chomsky

One economist has called Ha-Joon Chang "the most exciting thinker our profession has turned out in the past fifteen years." With Bad Samaritans, this provocative scholar bursts into the debate on globalization and economic justice.

Using irreverent wit, an engagingly personal style, and a battery of examples, Chang blasts holes in the "World Is Flat" orthodoxy of Thomas Friedman and other liberal economists who argue that only unfettered capitalism and wide-open international trade can lift struggling nations out of poverty. On the contrary, Chang shows, today's economic superpowers-from the U.S. to Britain to his native Korea-all attained prosperity by shameless protectionism and government intervention in industry. We have conveniently forgotten this fact, telling ourselves a fairy tale about the magic of free trade and-via our proxies such as the World Bank, International Monetary Fund, and World Trade Organization-ramming policies that suit ourselves down the throat of the developing world.

Unlike typical economists who construct models of how the marketplace should work, Chang examines the past: what has actually happened. His pungently contrarian history demolishes one pillar after another of free-market mythology. We treat patents and copyrights as sacrosanct-but developed our own industries by studiously copying others' technologies. We insist that centrally planned economies stifle growth-but many developing countries had higher GDP growth before they were pressured into deregulating their economies. Both justice and common sense, Chang argues, demand that we reevaluate the policies we force on nations that are struggling to follow in our footsteps.

• Format: Paperback
• Language: English
• ISBN: 1596915986
• ISBN13: 9781596915985
• Release Date: January 2009
• Publisher: Bloomsbury Publishing
• Length: 288 Pages
• Weight: 0.73 lbs.
• Dimensions: 0.8" x 5.7" x 8.2"

Customer Reviews

Preaching to the wrong audience

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

Time to Update Economics

"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

4.5 Stars-A return to the wisdom of Adam Smith

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.