Introduction: How did the Rich Countries Really Become Rich? Policies for Economic Development: Industrial, Trade and Technology Policies in Historical Perspective; Institutions and Economic Development: 'Good Governance' in Historical Perspective; Lessons for the Present; References; Notes; Index
Kicking Away the Ladder: Development Strategy in Historical Perspective / Edition 1by Ha-Joon Chang
Pub. Date: 07/01/2002
Publisher: Anthem Press
How did the rich countries really become rich? In this provocative study, Ha-Joon Chang examines the great pressure on developing countries from the developed world to adopt certain 'good policies' and 'good institutions', seen today as necessary for economic development. His conclusions are compelling and disturbing: that developed countries are
How did the rich countries really become rich? In this provocative study, Ha-Joon Chang examines the great pressure on developing countries from the developed world to adopt certain 'good policies' and 'good institutions', seen today as necessary for economic development. His conclusions are compelling and disturbing: that developed countries are attempting to 'kick away the ladder' with which they have climbed to the top, thereby preventing developing countries from adopting policies and institutions that they themselves have used.
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The economist Ha- Joon Chang in his book “kicking away the ladder” addresses his topics in a logical and orderly manner. He focuses on the economic policies that were applied by the developed countries in the 19th and 20th century as a strategy geared towards driving economic growth. He highlights the irony or paradox that lies in the suggestions or proposals made by developed countries to developing countries in the light of “relevant” economic policies. The policies employed by developed countries were fundamentally different from those which they recommend as a panacea for developing countries. His first chapter explains how the rich countries became rich while the second chapter underscores how industrial and trade policies are structured to reduce inequalities between the developing and developed countries. Chapter three dwells mainly on good governance and a proper institutional framework while chapter four is just a conclusion of the book. Mr. Chang elaborates on the varied policies recommended to developing nations with the goal of fostering economic growth in these countries. In order to improve on their level of economic growth, an agreement has been reached for developing countries to embrace sound policies and set up good institutions. The book opines that it is highly paradoxical when the developed countries convince the developing countries to adopt democratic reforms which they never used when they were at a similar stage or the same stage of development, thus distracting them [developing countries] from using a similar path to economic growth. From a historical viewpoint, Mr Chang disagrees with the view held by other theorists with regards to the use of laissez faire and free trade by developed countries in their infant stages of development. He believes that countries like the US and the UK that recorded high levels of economic growth, diverted tested and successful economic models after achieving economic power and then created barriers to economic growth for other countries. The book proffers how the US and UK promoted and protected their infant industries and later on convinced the international community to adopt free and open trade policies. He postulates that the protection of infant industries is one of the most strategic secrets in ensuring a country’s economic growth. Therefore, preventing the developing countries from using the same policies which had been used by developed countries a century ago, developing countries are stripped off the potential of achieving economic growth. In conclusion, Chang in his book “Kicking Away the Ladder” advocates for the creation of good institutions and application of sound policies for developing countries. Chang propounds a number of policies that should be used alongside the stable macroeconomic policies and investment regime. Good institutions should safeguard property and ensure transparent corporate governance. These policies and institutions are considered good only if they are implemented with fairness but they do not operate in isolation since other factors must be integrated to achieve development. Agricultural and industrial resources are vital to development in developing countries, thus must be strongly considered. Many developing countries are reliant on agriculture, which is the bedrock of their economy necessitating close attention.
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.