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How Rich Countries Got Rich ... and Why Poor Countries Stay Poor Hardcover – September 1, 2007

ISBN-13: 978-0786718429 ISBN-10: 0786718420

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Hardcover, September 1, 2007
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Product Details

  • Hardcover: 320 pages
  • Publisher: Carroll & Graf (September 1, 2007)
  • Language: English
  • ISBN-10: 0786718420
  • ISBN-13: 978-0786718429
  • Product Dimensions: 9.5 x 6.5 x 1.4 inches
  • Shipping Weight: 1.7 pounds
  • Average Customer Review: 4.9 out of 5 stars  See all reviews (21 customer reviews)
  • Amazon Best Sellers Rank: #1,615,145 in Books (See Top 100 in Books)

Editorial Reviews

About the Author

Erik S. Reinert, author of Globalization, Economic Development and Inequality: An Alternative Perspective(2004), is Professor of Technology, Governance and Development Strategies at Tallinn University of Technology, Estonia, and President of The Other Canon Foundation, Norway. He is one of the world's leading heterodox development economists.

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Customer Reviews

4.9 out of 5 stars
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I agree with most of the arguments exposed in the book.
MADC
The prevailing economic policy is wrong, and it creates and perpetuates poverty, according to Erik Reinert in this book.
John Gibbs
Every Political Science and or Economics major must read this book.
vanur

Most Helpful Customer Reviews

85 of 95 people found the following review helpful By Serge J. Van Steenkiste on November 12, 2007
Format: Hardcover
Erik Reinert masterfully uses experienced-based economics to demonstrate how rich countries got rich. Economic growth and welfare in rich countries originated not in unrestrained international free trade, but in conscious and deliberate industrialization policy that progressively shaped a particular form of economic structure (pp. xx, xxiv, 9-10, 47-48, 65, 79-83, 88, 98-100, 115-20, 177, 198, 246-49, 288-89).

Reinert's greatest merit is to clearly show how economic development really works (pp. 39, 52, 305-08):

1) A country first industrializes behind a wall of tariffs, direct subsidies, and/or patents and is then slowly and systematically integrated economically with nations at the same level of development (pp. 17, 22-24, 56, 84, 88, 134, 171, 210, 235, 268-69, 273). The United States followed the example of England to industrialize behind a protectionist wall for about 150 years based on Adam Smith's Wealth of Nations (pp. 23-25, 31, 58, 212). The Marshall Plan to reindustrialize Europe after WWII was built on the same logic (pp. 63, 89-90, 179-81, 241, 265-66).

Countries already wealthy need very different economic policies from those of countries still poor (p. 81). An aspiring poor country needs to tax "bad" trade, i.e., exports of raw materials (read agricultural or mining products) and imports of industrial products (pp. 17, 21, 62, 78). Perfect or commodity competition is for the poor, resulting in price-driven diminishing returns, no industrialization, and immigration to the rich world (pp. 8, 18, 62, 71, 133, 149-201, 245, 280-81). Unlike development economics, palliative economics do not radically change the productive structures of poor countries but instead focus on easing the pains of economic misery (pp. 63, 179, 211, 239-70, 282, 296-97).
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27 of 30 people found the following review helpful By William Podmore on October 31, 2008
Format: Paperback
Erik Reinert, Professor of Technology, Governance and Development Strategies at Tallinn University of Technology in Estonia, has written a most remarkable book. He has shown that the free trade creed - the free movement of capital, deregulation and privatisation - doesn't work. As Keynes wrote, "the worse the situation, the less laissez-faire works."

The American economist Paul Samuelson won a Nobel Prize for `proving' that under free trade prices paid to capital and labour tend to be the same across the world. But in the real world, free trade has led, not to the levelling up of world wages and the end of poverty, but to growing inequality and poverty. Half the world lives on less than $2 a day. In many countries, real wages peaked 30 years ago.

Reinert proves that the mode of production determines social forms, and that the technology and mass production of industry are the key to economic growth, not capital, property rights and the rule of law. Industry also has good economic, social and political effects. As he writes, "Creating and protecting industry is creating and protecting democracy."

But how can countries build industry? They need to protect their infant industries and to subsidise their industries.

Countries need to have an industrial policy that provides work for their educated people. Otherwise Western countries, outsourcing their education costs, will take them away - education for migration.

For example, 82% of Jamaica's doctors practise abroad and 70% of university-educated Guyanans work abroad. Their remittances fund consumption and dependence, not investment and industry.

It is better to have an inefficient industry than no industry at all.
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31 of 35 people found the following review helpful By Augustas B. on June 20, 2008
Format: Hardcover
Erik Reinert's "How Rich Countries Got Rich ... and Why Poor Countries Stay Poor" is in many ways similar to Ha-Joon Chang's "Bad Samaritans". It argues that rich countries acquired their wealth by protecting their manufacturing industries in their infancy and allowing them to mature. Poor countries are thus poor because they are not allowed to industrialize using infant industry protection and industrial policy. However, Reinert goes about his argument in a very different way than Chang. While Chang mostly his book into neat chapters dealing with pieces of conventional (neoliberal) wisdom (development comes through free trade, some countries are not developed because their culture is unfit, privatization is good in itself, etc.), Reinert structures everything around the dualism of economics: the "Standard Canon" that currently dominates and the "Other Canon" which is what Reinert advocates.

According to Reinart, the "Standard Canon" ("Ricardian" economics named after David Ricardo) has completely lost touch with reality. On one occasion he quotes Milton Friedman according to whom the more important a theory, the more unrealistic its assumptions will be. The inadequacy of assumptions leads to an inadequate understanding of how capitalism works and subsequently - to bad policy. Above all, Reinert dislikes the "equality" assumption that means that all economic activities are qualitatively the same, e.g. it makes no difference whether to specialize in manufacturing or agriculture.

The "Other Canon" draws ideas from the German Historical School, the old Institutionalists, Schumpeter, Keynes, a host of long dead and forgotten Italian and German economists and others. It focuses on production rather than exchange.
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