Bad Samaritan Economist Ha-Joon Chang Criticizes Globalization
Exlcusive Interview with NOW Magazine
By: Roger Strukhoff
Mar. 5, 2009 09:00 PM
Dr. Ha-Joon Chang has taught at the Faculty of Economics, University of Cambridge, since 1990. He has consulted for numerous international organizations, including the United Nations, the World Bank, and the Asian Development Bank. He has published eleven books, including Kicking Away the Ladder, winner of the 2003 Myrdal Prize. His latest book, Bad Samaritans, was published by Bloomsbury Press in December 2007.
You point out that today’s economic powers did not follow similar policies in their rise to wealthy nation status, yet favor those policies for less-developed nations today. Is it this seeming hypocrisy that troubles you the most, or is it that you believe that neoliberal policies simply don’t work well?
The rich countries, through the IMF, the World Bank, and their bilateral aids, have induced, or sometimes even forced, developing countries into neo-liberal policies on the ground that the protectionist, interventionist policies that the developing countries had used in the 1960s and the 1970s have produced poor results, especially in terms of growth and that neo-liberal policies will revive their economies. As I explain in the (new) book, the result has been the contrary.
Chang: Growth in per capita income in the developing world used to be about 3% per year during the “bad old days” of the 1960s and the 1970s. Yet in the 1980s and the 1990s, it fell to half that level (1.7%). In the last several years, the rapid growth of China and the resulting rise in commodity prices have raised growth rates in some resource-rich develolping countries, but even so the growth rate of per capita income in developing countries in the last quarter of a century has been just over 2%.
And let’s not forget that even this rate was possible only because of the rapid growth of China and India, which, while liberalizing, did not follow the neo-liberal recipe.
Strukhoff: And this has been a disaster in your view…
In other words, neo-liberal policies that have been sold as ‘pro-growth’ policies are actually anti-growth. And here we are not even talking about the increase in inequality and job insecurity that neo-liberal reforms have created.
Chang: Yes, history shows that, while it may be possible to become a decent middle-income country without effective industrial policy—Chile comes to mind—it is extremely difficult to become rich without it. This is because the producers in a relatively backward economy need a period of government protection and nurturing—during which they of course will have to invest in building their productive capabilities—before they can compete fully with the more advanced producers from more economically developed countries.
So industrial policy is becoming even more necessary, as the technological gaps between the rich countries and the poor countries is growing, which means that poor country producers need even more government support than those in the poor countries of the past.
Unfortunately, while the need may be rising, it is becoming more and more difficult to implement industrial policy in developing countries, because of the power of the neo-liberal orthodoxy, manifested in terms of a.) the “conditionalities” imposed by the IMF, the World Bank, and the donor governments, b.) the WTO and the bilateral and regional free-trade and investment agreements, and c.) the ideological influence on national policy makers.
Chang: First of all, it is important to invest in education and research. IT is an industry where technology is evolving fast, and therefore it is important to have capable people who can absorb new technologies fast. Even in relatively poor countries, it is necessary to have some research people, even if they are doing it just to follow up the global trends and not necessarily to make world-class innovation.
Second, scale economy is important in IT. The best example here is, of course, with semiconductors. Governments need to make it sure that factories are built for the global market, and not for domestic markets, which are often too small to support the minimum efficient scale.
Third, government procurement has played an important role in ensuring the success of IT industry. Government procurement not only increases the volume of production--thus allowing the firms to achieve scale economy more easily--but but also gives it stability, which encourages long-term investment. Even in the US, which has been on the frontier of this technology, the early demands for computers and semiconductors in the US came from military procurement.
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