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

by Ha-Joon Chang (Author)
Key Phrases: average industrial tariff rate, man exploits man, free trade economists, World Bank, Hong Kong, Second World War (more...)

Editorial Reviews

From Publishers Weekly
Starred Review. In the 1950s, South Korea was one of the poorest countries in the world, suffering the aftereffects of decades of brutal Japanese colonialism and war with its northern counterpart. During his childhood, Chang (Kicking Away the Ladder), a respected economist at the University of Cambridge, witnessed the beginnings of Korea's postwar economic miracle as Gen. Park Chung-Hee's dictatorship (despite its corrupt machinations) set the economic groundwork that would lift Korea out of poverty. Though Korea's strategies are heretical to first world, free-market economists, Chang argues that the world's wealthiest nations historically relied on the same heavy-handed protectionist approaches in their quests for economic hegemony. These wealthy, first world economies, which 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 are Chang's bad Samaritans. Chang builds his outsider stance through a history of capitalism and globalization and stories of other struggling countries' economic transformations. The resulting polemic about the shortcomings of neoliberal economic theory's belief in unlimited free-market competition and its effect on the developing world is provocative and may hold the key to similar miracles for some of the world's most troubled economies. (Jan.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From The Washington Post

Reviewed by Paul Blustein

Bookstore shelves are loaded with offerings by economists and commentators seeking to explain, in accessible prose, why free-trade-style globalization is desirable and even indispensable for countries the world over. Now comes the best riposte from the critics that I have seen. Readers who are leery of open-market orthodoxy will rejoice at the cogency of Bad Samaritans. Ha-Joon Chang has the credentials -- he's on the economics faculty at Cambridge University -- and the storytelling skill to make a well-informed, engaging case against the dogma propagated by globalization's cheerleaders. Believers in free trade will find that the book forces them to recalibrate and maybe even backpedal a bit.

I doubt, however, that the book will win many converts -- and it shouldn't. That's because Chang goes way overboard in advancing his central argument, which is that poor countries can get rich only by doing pretty much the exact opposite of what they are told by the World Bank, the International Monetary Fund and the World Trade Organization -- the "bad" Samaritans to which the title refers.

Chang's model for development is one he grew up in, the South Korean miracle of the 1960s, '70s and '80s. He describes in evocative terms the poverty of his parents' generation, the deprivations of his boyhood (no flush toilet in the family home, for example, even though his father was an elite civil servant) and the high-tech luxuries that today's Koreans take for granted.

In the process of achieving this breathtakingly rapid improvement in living standards, he notes, South Korea departed dramatically from free-market principles. The country set up high barriers to protect its fledgling industries, such as steel and autos, and offered subsidies to help promising firms flourish. Other Asian countries, notably Japan and Taiwan, developed in similar ways.

The dirty secret of capitalism, as Chang explains, is that much the same is true of the modern industrial economies of the West, including Britain and the United States. Although advocates of free trade typically extol the British as the pioneers of open markets, London lowered tariffs in the mid-19th century only after its industries had firmly established their lead over rivals. Likewise, U.S. tariffs remained high throughout America's industrialization. So why, Chang asks, should today's poor nations be required to develop differently?

Chang acknowledges that "the mere co-existence of protectionism and economic development does not prove that the former caused the latter." But, he asserts, "Free trade economists have to explain how free trade can be an explanation for the economic success of today's rich countries, when it simply had not been practiced very much before they became rich." A fair point, and Chang scores some more when he recounts the widespread unemployment and subpar growth that occurred in countries such as Mexico and Ivory Coast after their governments, under pressure from the "bad Samaritans," lowered barriers that were sheltering their industries.

But were the Samaritans "bad" to prescribe such policies? Consider Zambia, a country I visited recently, which followed World Bank advice in the 1990s to open its markets to foreign clothing. Unfortunately, the local industry was woefully uncompetitive, having survived in a protected market by selling shoddy, expensive apparel to the local population and showing no sign of success at exporting. So it quickly collapsed amid a flood of imports, resulting in 10,000 lost jobs. Sad as that was for the workers, millions of Zambians can now afford decent clothing (much of which is used and has been donated by Americans to various organizations, shipped to Africa in bulk and sold cheaply by street vendors). That's probably a very good trade-off for the poor. Did it help put Zambia on the path to prosperity? No, and for that the World Bank should be embarrassed -- for being overoptimistic Samaritans, not bad ones.

Chang counters that short-term benefits such as cheaper clothing should be sacrificed for the sake of long-term development. That means nurturing manufacturers with long periods of protection and subsidies, like the 30 years Toyota got in Japan. He insists that this approach can work even in destitute countries. "A backyard motor repair shop in [Mozambique's capital] Maputo simply cannot produce a Beetle, even if Volkswagen were to give it all the necessary drawings and instruction manuals," he writes. "But this does not mean that Mozambicans should not produce something like a Beetle -- one day. . . . After all, a backyard auto repair shop is exactly how the famous Korean car maker, Hyundai, started in the 1940s."

Lamentably, the book gives short shrift to the debacles that show the pitfalls of industrial planning. India's experience in the 1950s and '60s was a revealing example; its poor are still paying a dreadful price for the government's excessive investment in steel plants, fancy hospitals and universities instead of elementary schools and small clinics. Chang also glosses over the objection that industrial planning is doomed to fail in countries lacking the strengths that Japan, Korea and Taiwan had -- well-educated populations and talented, mostly incorruptible civil servants.

Ironically, in an incisive chapter on privatization, he cites the poor training and low ethical standards among government officials in many developing countries as a good reason to avoid selling off state enterprises that will require effective regulation. "Privatization sometimes works well, but can be a recipe for disaster, especially in developing countries that lack the necessary regulatory capabilities," he writes. Well, if such governments can't regulate properly, how can they successfully oversee the creation of world-class auto industries?

Chang's book deserves a wide readership for illuminating the need for humility about the virtues of private markets and free trade, especially in the developing world. But heaven help Mozambique if the book is taken too seriously in Maputo.

Copyright 2008, The Washington Post. All Rights Reserved.

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Product Details

• Hardcover: 288 pages
• Publisher: Bloomsbury Press (December 26, 2007)
• Language: English
• ISBN-10: 1596913991
• ISBN-13: 978-1596913998
• Product Dimensions: 9.4 x 6.1 x 1.2 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars See all reviews (35 customer reviews)
• Amazon.com Sales Rank: #131,535 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

58 of 60 people found the following review helpful:

4.0 out of 5 stars Entertaining, educational and funny, January 16, 2008

By	Kenneth K. Kraska "bookworm_54" (Michigan) - See all my reviews (REAL NAME)

One of the principle complaints of conservatives is that all education in America is deliberately skewed with a "left-wing" bias from kindergarten to college. And yet the field where this "bias", (if you accept this view) is clearly undone is the field of economic education. Whether you read the business section of the New York Times, the Harvard Business Review or National Public Radio, the actual bias present is really for the neo-classical economic model (AKA, neo-liberal economics) of the laissez-faire variety.

Dr. Chang, a professor of economics at Cambridge and former World Bank researcher, deconstructs in general and in detail many of the prevailing myths of the neo-liberal school of economic development. My favorite chapters were these two:

Chapter 1-The Lexus and the olive tree revisited. In this chapter Dr. Chang explains why he thinks that NYT columnist and author Thomas Friedman is full of crap about the benefits of globalization for ordinary people [pages 19-40].

Chapter 3-My six-year-old son should get a job. Says Chang: "I have a six-year-old son. His name is Jin-Gyu. He lives off me, yet is quite capable of making a living. I pay for his lodging, food, education and health care. But millions of children of his age already have jobs. Daniel Defoe, in the 18th century, thought that children could earn a living from the age of four. Moreover, working might do Jin-Gyu's character a world of good. Right now he lives in an economic bubble with no sense of the value of money. He has zero appreciation of the efforts his mother and I make on his behalf, subsidizing this idle existence and cocooning him from harsh reality. He is over-protected and needs to be exposed to competition, so that he can become a more productive person. Thinking about it, the more competition he is exposed to and the sooner this done, the better it will be for his future development. It will whip him into a mentality that is ready for hard work. I should make him quit school and get a job. Perhaps I could move to a country where child labour is still tolerated, if not legal, to give him more choice in employment" [page 65].

I found this tongue-in-cheek style of criticism of global capitalism both hilarious and enlightening.

There are many more examples of Chang's knowledgeable and funny criticism of neo-liberalism I could list here, but I don't want this review to be a spoiler. So go read Chang's book.

46 of 55 people found the following review helpful:

5.0 out of 5 stars Speaking truth to power, helpful revisionism, February 22, 2008

By	Robert D. Steele (Oakton, VA United States) - See all my reviews (TOP 50 REVIEWER)

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.

36 of 44 people found the following review helpful:

5.0 out of 5 stars 4.5 Stars-A return to the wisdom of Adam Smith, January 23, 2008

By	Michael Emmett Brady "mandmbrady" (Bellflower, California ,United States) - See all my reviews (TOP 1000 REVIEWER)    (REAL NAME)

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.