An economist is a specialist who studies the link between a society’s resources and its output or production. Economists study a wide range of societies, from small local communities to entire countries and even the global economy. An economist’s expertise and research findings are used to shape a wide range of policies, including interest rates, tax laws, employment programs, international trade agreements, and corporate strategies.
Here are the economists who are working behind the scenes to change the world. The World Economic Forum has named the following economists as the most influential economists whose ideas are changing the world.
Kicking Away the Ladder
The first economist on this list is Ha-Joon Chang, who was born in Seoul, South Korea, and came to the UK in 1986 as a graduate student at the University of Cambridge’s Faculty of Economics and Politics. In 1992, he received his doctorate. Since 1990, he has been teaching economics at the University of Cambridge’s Faculty of Economics (as it is now known) and the Development Studies program.
Developed countries talk a lot about free markets, but they really use their power and financial strength to profit from emerging economies. Chang’s ideas are divisive, focusing on the role of international institutions such as the IMF and World Bank in the global economy. Economist Chang argues in his book “Kicking Away the Ladder” development Strategy in Historical Perspective that governments of larger economies help their own companies while preaching the benefits of free trade to developing countries. How did the wealthy countries become so wealthy? In this provocative study, Ha-Joon Chang looks at how the developed world puts pressure on developing countries to adopt certain ‘good policies’ and ‘good institutions,’ which are now seen as essential for economic development. Dr. Chang finds that the economic evolution of now-developed countries differed dramatically from the procedures that they now recommend to poorer countries, using a historical approach. His conclusions are both compelling and disturbing: developed countries are attempting to ‘kick away the ladder’ that has allowed them to rise to the top, preventing developing countries from adopting policies and institutions that they have used. The European Association of Evolutionary Political Economy awarded this book the 2003 Myrdal Prize.
Developing countries do not benefit from IDPE policies
The developed world, and the international development policy establishment (IDPE) that it controls, are currently putting a lot of pressure on developing countries to adopt a set of “good policies” and “good institutions” to help them develop economically. ‘Good policies,’ according to this agenda, are broadly those recommended by the so-called Washington Consensus. Restrictive macroeconomic policy, international trade, investment liberalization, privatization, and deregulation are among them. The ‘good institutions’ are primarily those found in developed countries, particularly those in the Anglo-American region: Democracy, a “good” bureaucracy, an independent judiciary, well-protected private property rights (including intellectual property rights), and transparent and market-oriented corporate governance and financial institutions are among the key institutions (including a politically independent central bank). There has been much discussion about whether or not the policies and institutions recommended are appropriate for today’s developing countries. Surprisingly, many critics who question the applicability of these recommendations assume that these ‘good’ policies and institutions were used by developed countries when they were developing themselves.
For example, it is widely acknowledged that Britain’s laissez-faire policy helped it become the world’s first industrial superpower, whereas France’s interventionist policies caused it to fall behind. Similarly, it is widely assumed that the United States’ abandonment of free trade in favor of the protectionist Smoot-Hawley Tariff at the start of the Great Depression (1930) was “the most visible and dramatic act of anti-trade folly,” in the words of the famous free-trade economist Bhagwati.
Another common claim that developed countries would not have been able to generate the technologies that made them prosperous if not for patents and other private intellectual property rights is that these countries would not have been able to generate the technologies that made them prosperous without patents and other private intellectual property rights. The historical record in the industrialized countries, which began as developing countries, demonstrates that intellectual property protection has been one of the most powerful instruments for economic development, export growth, and the diffusion of new technologies, art, and culture,’ according to the National Law Center for Inter-American Free Trade in the United States.
Has the developed world progressed because of the same policies that they advocate for developing countries?
Is it true, however, that the policies and institutions currently recommended to developing countries are the same policies and institutions that developed countries adopted when they were developing? Even on the surface, there appear to be bits and pieces of historical evidence that contradict this. Some of us may be aware that, in contrast to the eighteenth and twentieth centuries, the nineteenth-century French state was conservative and non-interventionist. We may have also read about the United States’ high tariffs, at least after the Civil War. A few of us have heard that the Federal Reserve Board, the United States’ central bank, was founded in 1913. One or two of us may even be aware that, in the nineteenth century, Switzerland became one of the world’s technological leaders despite the absence of patent law. In light of such evidence contradicting the orthodox view of capitalism’s history, it’s reasonable to wonder if developed countries are attempting to conceal the “secrets of their success.” This book brings together various pieces of historical data that contradict the conventional view of capitalism’s history and provides a comprehensive but succinct picture of the policies and institutions that developed countries used when they were developing countries. To put it another way, this book asks, “How did the rich countries truly become rich?”
The short answer to this question is that developed countries did not achieve their current status through the policies and institutions that they now advocate for developing countries. Most of them actively used ‘bad’ trade and industrial policies, such as infant industry protection and export subsidies, which are now frowned upon, if not outright prohibited, by the World Trade Organization (WTO) (World Trade Organisation). They had very few of the institutions deemed essential by developing countries today until they were quite developed (that is, until the late nineteenth and early twentieth centuries), including such “basic” institutions as central banks and limited liability companies. If this is the case, aren’t developed countries making it difficult for developing countries to use policies and institutions that they themselves had used to develop economically in the past, under the guise of recommending “good” policies and institutions? This is the question that the author of this book aspires to answer.
What is bad for them good for you?
Why don’t the International Development Policy Establishment (IDPE) and the countries that control it, the Now Developed Countries (NDCs), recommend the policies that most successful developers have used for centuries? Why are they attempting to impose on today’s developing countries institutions that were not used by the NDCs at comparable stages of development? So, why are developed countries so unaware of their own historical development? Is it because people have a natural tendency to interpret history through the lens of their current intellectual and political agenda, obscuring the historical perspective? Or is it because, as has been the case in the past, countries have a vested interest in imposing policies and institutions that they themselves did not use during their own development but that will benefit them once they reach the technological frontier? In other words, are developed countries attempting to ‘kick the ladder away’ by requiring developing countries to adopt policies and institutions that differ from those that they used to develop?
This book’s discussion suggests that this is exactly what they’re doing. I accept the possibility that this ‘ladder-kicking’ is motivated by genuine (if misinformed) goodwill. Some of the NDC policymakers and academics who make the recommendations may be genuinely misinformed: believing that free trade and laissez-faire policies helped their own countries develop, they want developing countries to benefit from the same policies. This does not, however, make it any less harmful to developing countries. Indeed, it could be even riskier than ‘ladder-kicking’ based on purely national interests because self-righteousness can be far more obstinate than self-interest.
Whatever the motivation for the ‘ladder-kicking,’ the fact remains that these ostensibly ‘good’ policies and institutions have failed to generate the promised growth dynamism in developing countries over the last two decades or so, despite the fact that they were vigorously promoted by the International Development Policy Establishment (IDPE). Indeed, growth in many developing countries has simply stopped. He claimed that the International Development Policy Establishment (IDPE), which they control, is recommending policies that benefit them rather than those that benefit developing countries.
An economist’s recommendations
So, what are the options? While it is beyond the scope of this book to lay out a detailed action plan, the following points may be made. To begin with, historical facts about developed countries’ developmental experiences should be widely disseminated. This is not only about ‘getting history right,’ but also about empowering developing countries to make informed decisions about the policies and institutions that would be most beneficial to them. By discarding historical myths and overly abstract theories that blind many theoreticians and policymakers, more intellectual effort should be put into a better understanding of the role of policies and institutions – particularly the latter – in economic development.
More specifically, in terms of policies, the developed countries and the International Development Policy Establishment that they control should at least allow, if not actively encourage, the “bad policies” that most NOCs used so effectively when they were developing. While it is true that activist industrial, trade, and technology (ITT) policies can occasionally devolve into a web of red tape and corruption, this does not mean that they should never be used. After all, we do not stop flying planes because there’s a chance they will crash, and we do not stop immunizing children because some of them might die from allergic reactions.
As a result of all of this, we require a very different approach to international development policymaking than that pursued by developed countries and the international development policy establishment. In terms of policies, I would advocate for a significant shift in the policy-related conditions attached to financial assistance from the IMF and World Bank, as well as from developed-country governments. These conditions should be based on the understanding that many policies that are considered “bad” are actually “good,” and that there is no such thing as a “best practice” policy that everyone should follow. Second, the rules of the World Trade Organization and other multilateral trade agreements should be rewritten to allow for more active use of infant industry promotion tools. Improvements in institutions should be encouraged, especially given the enormous growth potential that a combination of good policies and good institutions can achieve.
This should not, however, be interpreted as imposing a uniform set of contemporary Anglo-American institutions on all countries. More serious attempts must also be made, both at the academic and practical levels, to determine which institutions are necessary or beneficial for which types of countries, based on their developmental stages and specific economic, political, social, and even cultural circumstances. It is especially important to avoid pressuring developing countries to upgrade their institutions too quickly, given that they already have well-developed institutions when compared to NOCs at comparable stages of development and that establishing and running new institutions is very expensive.
Allowing developing countries to adopt policies and institutions that are better suited to their stages of development and other circumstances will allow them to grow more quickly, as was the case in the 1960s and 1970s. In the long run, this will benefit not only developing countries but also developed countries, as it will expand trade and investment opportunities.!? The tragedy of our time is that developed countries are unable to see this. They may be amassing larger, longer-term gains by too eagerly seeking smaller, short-term gains,’ to use a classic Chinese old saying. It’s time to reconsider which policies and institutions will assist today’s developing countries in developing more quickly, which will benefit developed countries as well.