“How do ideological concoctions grip the human mind with so little help from reality?”
“Chang says that ‘many people’ will find the book disturbing—Chang says that the book challenges ‘historical myths and overly abstract theories’ and also makes you consider the morality of harming poor economies.”
“Human ideologies will often contradict reality and will often even contradict themselves—sometimes there’s a lot at stake and it’s no exaggeration to say that the quest to tame ideological unreality will determine whether the human experiment continues much longer.”
Ideology fascinates me—you can look at a given ideology, see how the ideology benefits certain interests, and ask how much that ideology actually makes contact with reality.
And you can ask yourself how human beings can come to believe—in such a terrifying and deranged and depressing manner—ideologies that diverge so strikingly from reality. I’m not on a high horse regarding ideology, since I’m an ideological creature like anyone else—I’m just asking about how human beings in general come to adopt fantastical and unrealistic and deranged ideologies.
How do ideological concoctions grip the human mind with so little help from reality?
Ha-Joon Chang has two books—Kicking Away the Ladder (2002) and Bad Samaritans (2008)—that address the issue of how much market ideology makes contact with reality. I just want to use this short piece to give readers an idea of what Chang argues in these two books.
I took the following notes on the 2002 book:
the developed world is applying “great pressure” to get developing countries to “adopt a set of ‘good policies’ and ‘good institutions’ to foster their economic development”
the recommended policies “include restrictive macroeconomic policy, liberalization of international trade and investment, privatization and deregulation”
the recommended institutions “include: democracy; ‘good’ bureaucracy; an independent judiciary; strongly protected private property rights (including intellectual property rights); and transparent and market-oriented corporate governance and financial institutions (including a politically independent central bank)”
“there have been heated debates on whether or not these recommended policies and institutions are in fact appropriate for today's developing countries”—“many of those critics who question the applicability of these recommendations nevertheless take it for granted that these ‘good’ policies and institutions were used by the developed countries when they themselves were in the process of developing”
“is it really true that the policies and institutions currently recommended to the developing countries are those that were adopted by the developed countries when they themselves were developing?”
“‘How did the rich countries really become rich?’”
“The short answer to this question is that the developed countries did not get where they are now through the policies and the institutions that they recommend to developing countries today.”
“aren’t the developed countries, under the guise of recommending ‘good’ policies and institutions, actually making it difficult for the developing countries to use policies and institutions which they themselves had used in order to develop economically in earlier times?”
Chapter 2 “deals mainly with what these days are called industrial, trade and technology policies (or ITT policies for short)”—“ITT policies have for a few hundred years stood at the centre of controversies in the theory of economic development” and Chang’s view is that “differences in these policies separate the countries that have been more successful in generating growth and structural change from the others”
Chapter 3 looks at institutions that “include: democracy; bureaucracy; judiciary; property rights (especially intellectual property rights); corporate governance institutions (limited liability, bankruptcy law, auditing/disclosure requirements, competition law); financial institutions (banking, central banking, securities regulation, public finance institutions); social welfare and labour institutions (child labour laws, institutions regulating adult working hours and conditions)”
Chapter 4 asks whether the developed countries are “preventing developing countries from adopting policies and institutions that they themselves used” and are “trying to ‘kick away the ladder’ by which” the developed countries “have climbed up to the top”—Chang argues in this chapter that “the current policy orthodoxy does amount to ‘kicking away the ladder’”
infant “industry promotion (but not just tariff protection, I hasten to add) has been the key to the development of most nations” and “the exceptions have been limited to small countries on, or very close to, the world’s technological frontiers”—we prevent “the developing countries from adopting these policies” and this “constitutes a serious constraint on their capacity to generate economic development”
regarding institutions, Chang’s “main conclusion is that many of the institutions that are these days regarded as necessary for economic development were actually in large part the outcome, rather than the cause, of economic development in the now developed countries”
it’s true that some of “these institutions may even be beneficial for most, if not necessarily all, developing countries”
regarding institutions, the controversy is over (A) “the exact forms that they should take” and (B) the degree to which “some of the institutions demanded of the developing countries are irrelevant or harmful” when you consider developing countries’ “stage of development” and the cost of running these institutions
“What this book is about to say will undoubtedly disturb many people, both intellectually and morally.”
“Many of the myths that they have taken for granted or even passionately believed in will be challenged, in the same way that many of my own assumptions were challenged in the process of researching it.”
“the historical facts about the developmental experiences of the developed countries should be more widely publicized”—this “is not only a matter of ‘getting history right’, but also of allowing the developing countries to make informed choices about the policies and institutions that may be appropriate for them”
we need to throw out the “historical myths and overly abstract theories” that blind “many theoreticians and policymakers”
we need to achieve “a better understanding of the role of policies and institutions—especially the latter—in economic development”
the developed countries should allow or even actively encourage the “‘bad policies’” that have been so effective for development—we need a “very different” approach regarding “international development policymaking”
we should allow “developing countries to adopt policies and institutions that are more suitable to their stages of development and to other conditions they experience”—this “will enable them to grow faster, as indeed was the case during the 1960s and 1970s”
this “will benefit not only the developing countries, but also the developed nations in the long term, as it will increase the trade and investment opportunities available”—that “the developed countries are not able to see this is the tragedy of our time”
So Chang argues in the book that the developed world recommends to the developing world certain things—in terms of policies and institutions—that the developed world didn’t itself use in order to get rich.
Chang says that “many people” will find the book disturbing—Chang says that the book challenges “historical myths and overly abstract theories” and also makes you consider the morality of harming poor economies.
I also took the following notes on the 2008 book:
“In relation to the developing countries, the neo-liberal agenda has been pushed by an alliance of rich country governments led by the US and mediated by the ‘Unholy Trinity’ of international economic organizations that they largely control—the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO).”
these “governments and international organizations are supported by an army of ideologues”—“these various bodies and individuals form” together “a powerful propaganda machine, a financial-intellectual complex backed by money and power”
this “neo-liberal establishment would have us believe that, during its miracle years between the 1960s and the 1980s, Korea pursued a neo-liberal economic development strategy”, but the “very different” reality was that the “Korean economic miracle was the result of a clever and pragmatic mixture of market incentives and state direction”—Korea “took markets seriously”, but “the Korean strategy recognized” that markets “often need to be corrected through policy intervention”
“Korea is no exception”—“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 the orthodoxy of neo-liberal economics”
“there are certainly some people in the rich countries who preach free market and free trade to the poor countries in order to capture larger shares of the latter’s markets and to pre-empt the emergence of possible competitors”—these people “act as ‘Bad Samaritans’, taking advantage of others who are in trouble”
“many of today’s Bad Samaritans do not even realize that they are hurting the developing countries with their policies”—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 free market to developing countries”
“history is written by the victors and it is human nature to re-interpret the past from the point of view of the present”—“the rich countries have, over time, gradually, if often sub-consciously, re-written their own histories to make them more consistent with how they see themselves today, rather than as they really were”
the “result is that many Bad Samaritans are recommending free-trade, free-market policies to the poor countries in the honest but mistaken belief that those are the routes their own countries took in the past to become rich”—“self-righteousness is often more stubborn than self-interest”, so the people who mean well “may be more of a problem than those knowingly engaged in ‘kicking away the ladder’”
chapters 1 and 2 “will show how many things that the reader may have accepted as ‘historical facts’ are either wrong or partial truths”
“Britain and the US are not the homes of free trade”—“for a long time” Britain and the US were “the most protectionist countries in the world”
few countries have succeeded without “protection and subsidies”
for developing countries, free trade “has rarely been a matter of choice” and was “often an imposition from outside”—most developing countries “did very poorly under free trade”, whereas “protection and subsidies” have proved to be much more effective
the “best-performing economies have been those that opened up their economies selectively and gradually”—neo-liberal “free-trade free-market policy claims to sacrifice equity for growth”, but the reality is that “growth has slowed down in the past two and a half decades when markets were freed and borders opened”
chapters 3 to 9 use “a mixture of economic theory, history and contemporary evidence to turn much of the conventional wisdom about development on its head”
“Free trade reduces freedom of choice for poor countries.”
“Keeping foreign companies out may be good for them in the long run.”
“Investing in a company that is going to make a loss for 17 years may be an excellent proposition.”
“Some of the world’s best firms are owned and run by the state.”
“‘Borrowing’ ideas from more productive foreigners is essential for economic development.”
“Low inflation and government prudence may be harmful for economic development.”
“Corruption exists because there is too much, not too little, market.”
“Free market and democracy are not natural partners.”
“Countries are poor not because their people are lazy; their people are ‘lazy’ because they are poor.”
the final chapter (A) presents a “very bleak” picture of what the future will look like “should we continue with the neo-liberal policies propagated by the Bad Samaritans”; (B) presents “key principles, distilled from the detailed policy alternatives that I discuss throughout the book, which should guide our action if we are to enable developing countries to advance their economies”; and (C) explains optimistically “why I believe most Bad Samaritans can be changed and really made to help developing countries improve their economic situations”
it “may seem pointless to try to convert those Bad Samaritans who are acting out of self-interest”, but “we can still appeal to their enlightened self-interest”—it’s “actually in the long-term interest of even the most selfish Bad Samaritan countries to accept those ‘heretical’ policies that would generate faster growth in developing countries” because more growth means that the “Bad Samaritan rich countries” can exploit “a vastly bigger market”
it’s “much harder to persuade” ideologues, but these ideologues can “overcome their previous convictions” in response to “new turns in real world events and new arguments”
many “Bad Samaritans go along with wrong policies for the simple reason that it’s easier to be a conformist”—it’s simply easier to “accept what most politicians and newspapers say”, it’s simply easier to blame poverty on corruption and laziness and profligacy, and it’s simply easier to regard your own country as having “always been the home of all virtues”
a “more balanced picture” could induce the path-of-least-resistance conformists to “change their ways”
the “rich countries did not behave as Bad Samaritans on at least one occasion in the past”, namely the period “between the Marshall Plan (announced sixty years ago, in June 1947) and the rise of neo-liberalism in the 1970s”—we have the “moral duty to learn from that experience” because the “developing world has never done better, either before or since”
So Chang argues in the book that there’s cynicism behind the neoliberal agenda but that there’s also sincerity—the latter flourishes in a bubble in which history “has been so totally re-written” that people don’t “perceive the historical double standards”.
Human ideologies will often contradict reality and will often even contradict themselves—sometimes there’s a lot at stake and it’s no exaggeration to say that the quest to tame ideological unreality will determine whether the human experiment continues much longer.
Ha-Joon Chang's writings on neoclassical "good" policies for developing countries are the best. In my decade in the World Bank, it became that the policies that were supposedly "good" for developing countries were mainly good for the developed countries to economically colonize them. I have not written much on the topic of how "globalizaton" paves the way for colonization but here is my piece on the World Bank's promotion of "investment climate": https://www.ellerman.org/investment-climate-for-who/