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 as a result
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.
