New World Order University Forum

NWOU recently came across a nice article by Chalmers Johnson reviewing the work of Ha-Joon Chang, an economist at Cambridge University who specializes in Third World studies. Ha-Joon Chang is a Korean economist and author of Kicking Away the Ladder: Development Strategy in Historical Perspective (2002).

Chang drew his theoretical orientation from German economist Friedrich List, who criticized Britain in 1841 for preaching free trade while maintaining high tariffs and subsidies for its industries. List criticized Britain for “kicking away the ladder” by advocating free trade policies so that other nations could not reach its level of economic development. Chang has extended this analysis to the history of economic development and shows that all the successful economies got successful through high tariffs and protectionist policies. During the nineteenth century, U.S. tariff rates were around 50 percent, the highest of any country in the world at the time that the U.S. was the fastest-growing economy in the world.

Chang provides a necessary rebuttal to free-traders such as Thomas Friedman (The Lexus and the Olive Branch). He calls them Bad Samaritans for taking advantage of developing economies by promoting free trade that mainly benefits the wealthy internationalists.
Chang points out that granting a central bank the exclusive monopoly over issuing bank notes and the idea that democracy fosters economic growth were never part of classical liberal economic theory. These ideas were inserted into classical liberalism by international monopolists. Government subsidies for growing industries have always been part of a successful development strategy. The U.S. government continues to subsidized research through defense spending and grants to university professors, science under socialism. The U.S. also heavily subsidizes agriculture, which only benefits large farmers. The subsidized export of corn to Mexico drives small Mexican farmers out of business and encourages illegal immigration while making big farmers rich. The effect is multiplied by government subsides for ethanol.

Chang shows that developing economies’ growth rates began to slow in the 1970s as a result of UN policies of intervention, including birth control, gender equity, and multiculturalism. The Third World economic growth rates fell to 1.7 percent in the 1980s as opposed to 4.5 percent in the 1960s. Since the 1980s, African living standards have fallen as African economies were taken over by World Bank and IMF policies. When the WTO and IMF order trade liberalization, growth rates fall and unemployment increases in the poorer nations unless they manage to maintain subsides to their industries.

Chang takes on the false histories of Francis Fukuyama and Samuel Huntington, which blame culture for economic stagnation. These false histories stem from Max Weber’s observation that a “Protestant ethic” was necessary for economic development. Weber contended that Asia could never develop economically because of its Confucian and Buddhist culture. Chang argues that Weber had it backward: the emergence of the market economy promotes an ethic of economic efficiency regardless of culture.

Chang points out that culture has little to do with economic success. Histories identifying cultural traits as predicting economic success are based on national stereotyping. National stereotyping was a dominant way of thinking adopted by Marx and Engels when they wrote their false histories.

Chang also takes on the myth that consumers and exporters in the U.S. benefit from free trade. See the whole article at http://www.informationclearinghouse.info/article19174.htm

NWOU recently watched speeches by Maggie Thatcher on CSPAN from the 1980s glorifying free trade as the vehicle for reform of tyrannical governments.

Free trade does not reform governments.

Free trade policies make tyrannical governments richer and drive local businesses out of business. The only people who benefit from free trade policies are large corporations and the politicians they pay to defend their interests.

Tags: economic development, free trade, Friedrich List, Margaret Thatcher, tariffs, Thomas Friedman

This entry was posted by Director on Wednesday, February 6th, 2008 at 4:40 am and is filed under Book Reviews, Global Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.