Kicking Away the Ladder – Ha-Joon Chang – The Dangers of Modern Day Economic Imperialism towards Developing Nations

Ha-Joon Chang’s “Kicking Away The Ladder” is a damning retaliation against the Now-Developed-Countries (NDCs) imposition of apparently “disadvantageous” policy and institutional standards onto developing countries. Chang argues that the practice of recommending blanket Anglo-American “good policies” and “good governance” is indeed counterproductive to the developing countries growth opportunities, and hypocritical seeing that the NDCs developed under institutions and policies that would be considered “bad policies and governance” by international organisations today.

Kicking aay the ladder

In order to understand the fundamental hypocrisy of the NDC’s economic imperialism, it is first important to understand the climate and situation of the NDC’s own development. Chang focuses on this in the first half of the book, by analysing the growth patterns of the developed countries and concluding that growth was actually achieved in a climate of protectionism and technological espionage. The stealing of patents, tariff wars, and mercantilism provided the basis for infant industry protection, which allowed for the development of Industry, Trade and Technology (ITT). However, Chang then uses this basis as a platform to promote his own heterodox approach to development economics, by defying the notion that free trade which encourages the Law of Comparative advantage is indispensable to promoting economic growth within developing nations. He argues instead that because the NDCs were able to develop economically under protectionist policies, they should not encourage the same level of globalism to nations who are currently at the equivalent stages of development.

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social disparity: wealthy minority and the 99 per cent

The second section of the book focuses on the institutional development of NDCs from a historic perspective. He argues that the level of institutional development in developing countries is much more advanced than when the NDCs (now developing countries) were at the equivalent levels of development.  In terms of “per capita income band”, the UK in 1750 was at a similar level level of economic development as India in 1992. However, in the UK in 1750, there was no male suffrage (1918), established central bank, Income Tax (1842), Modern Patent Law (1852) or Child Labour Regulation (1802). Whereas India, at the same level of economic development, had established all of these institutions over the last century. Could it be that institutions within developing countries are too advanced for the respective levels of development? Chang supports this theory by arguing that the capital used to maintain expensive WTO laws could instead be used to support issues more appropriate to the developing country’s specific needs, such as training teachers or subsidising new agricultural technologies.

WTO

However, it is important to understand that the NDC’s delayed adoption of “modern” inclusive institutions occurred as these institutions were a result of development, rather than a cause of initial development. Indeed, the evolutionary process of finding the optimum level of central banking intervention in Britain occurred over generations of trial and error. This level of intervention is different to that of Japan, due to differing economic culture and circumstance. However, Britain and America seem intent on imposing the “Anglo-American” standard of institutions on developing countries, whether or not this is simultaneous with their growth situation. Therefore, surely it would be beneficial if these developing nations were to develop their own unique brand of institutions, that fits their idiosyncrasies, as a result of their style of economic growth, rather than being encouraged to adopt concrete Anglo-American systems that may be completely incompatible with that country’s situation.  

US Flag Around the Earth --- Image by © Images.com/Corbis
US Flag Around the Earth — Image by © Images.com/Corbis

In a dramatic conclusion, Chang concludes that developed countries are indeed “kicking away the ladder” in terms of preventing developing countries from developing, due to a toxic cocktail of “unequal treaties”, and aid given on the condition of crippling hypocritical policies, such as free trade for infant industries. The external imposition of these “Neo-Liberal Policies” have done little to encourage sustainable growth, and therefore the developed countries are preventing the developing countries from following in the same path that they themselves developed in. The stark contrast between the path of growth of the UK, and that of say Kenya is extremely clear. Britain developed under very lax institutional and social standards (development occurred without centralised bank, child labour laws, patent law  etc.) , whilst utilising asymmetrically beneficial trade policies such as mercantilism (1700s-1830s), in order to protect its infant industries until it was firmly the technological centre of the world. On the other hand, Kenya does not have the same opportunity to develop in this fashion, because international bodies expect “world standard” institutions within Kenya (that may or may not be beneficial to Kenya’s idiosyncrasies), whilst the WTO places Kenya in a myriad of Free Trade agreements, that turn out to be disparaging to infant industries development.

The comparison between NDC’s development 200 years ago, and modern development today, shows the hypocrisy of modern nations in their neo-colonial economic intervention towards developing countries. The modern push for “good policies” and “good governance” from NDCs is the equivalent of “do as I say, not as I do.” As such, the gap between the majority of developing nations and NDCs is growing at an alarming rate, which amounts to effectively “kicking away the ladder” of economic development.

Although I thoroughly enjoyed the book and would recommend it to anyone interested in development economics from a historical context, the heretical nature of Chang’s claims leaves the book more susceptible to criticism. The frequent use of sweeping statements such as “As a result to this switch to protectionism, the Swedish economy performed extremely well in the following decades,” suggests that the correlation must imply causation, which often can give way to oversimplifying complex relationships, for the sake of moulding evidence to fit an argument.

I would disagree with Chang on certain aspects of his argument also- yes, it makes sense that infant industries are protected with high import tariffs to encourage domestic consumption of said product, but an increase in tariffs across the board would only encourage economic nationalism, and would do nothing to help the long term growth of said industry. Indeed, Chang seems to disregard the fact that these policies are working to encourage prosperity. During Britain’s Industrial Revolution, a growth average of 1-1.5% was achieved, whereas currently developing nations such as Brazil have achieved an average growth rate of 2.6% in the last 35 years. These policies, even if they are hypocritical and seemingly selfish from the NDCs, are working to encourage prosperity and growth.

Indeed, it is a grim fact of international economics that currently, it is the NDCs that possess the bargaining power and hence “call the shots”. If a richer country demands that a poorer country change their policies against their will, then often they must abide by these demands to receive increased aid or win more preferential trade deals. I would say that this modern day institutional imperialism of developed countries towards poorer countries is not a far cry from the European colonialism of the 16th and 17th centuries, and may well act to further hinder the growth potential of these stagnating nations.

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