Bad Samaritans

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Ha-Joon Chang, Random House Business Books, £8.99

The credit crisis has brought neoliberalism to the verge of intellectual and practical exhaustion. Following the US Federal Reserve's $30 billion bailout of the Bear Stearns investment bank, even Alan Greenspan, the former chairman of the Federal Reserve, conceded that the current crisis "is likely to be judged in retrospect as the most wrenching since the end of the Second World War".

Ha-Joon Chang, a Cambridge economist and adviser to the World Bank, has written a trenchant, historically informed contribution to the emerging establishment debates about neoliberalism. Chang contends that the governments of the rich nations are imposing development policies on poor nations that are not only misguided, but betray a complete misunderstanding of the history of capitalist development. In effect, they are "kicking away the ladder" that they climbed by misrepresenting their own history.

Chang finds that today's wealthy countries climbed the ladder to prosperity by systematically ignoring their own recommendations. For instance, Henry VII built England's woollen manufacturing industry, the backbone of its later industrial revolution, by hiking taxation massively on the export of raw wool to the Low Countries and using state planning to spur investment in technology. At the height of its power, England retained tariffs of 45 to 55 percent on manufacturing imports, far exceeding its nearest competitors.

Free trade, Chang argues, is a policy preached by rich nations who have no intention of adopting these policies for themselves. As England achieved spectacular growth rates by protecting its "infant industries" from foreign competition, colonial rule forced Indian, Chinese, and African markets open to English capital. "Despite their key role in promoting 'free trade' in the late 19th and early 20th century," says Chang, "colonialism and unequal treaties hardly get any mentions in the hordes of pro-globalisation books."

The unsuitability of these policies for the poor is reflected in their growth rates. During the period of Britain's "free trade" hegemony (1870-1913), per capita income in Asia (excluding Japan) increased by only 0.4 percent per year; Africa achieved similar results (0.6 percent). Likewise, since the ascendency of US-led neoliberalism, global growth rates have fallen sharply. While Bad Samaritans is an interesting and readable polemic on global development, there is something insubstantial about the book as a whole. Some have portrayed neoliberalism less as a tactic of the ruling class and more as an objective reality that governments must submit to, as in Margaret Thatcher's dictum, "There is no alternative."

Chang goes to the other extreme and writes as if Western policymakers implemented neoliberalism out of misguided altruism and can be transformed by appealing to their enlightened self-interest. A more measured analysis of power would consider how the systemic constraints of capitalism drive policymakers and are reflected in their tendency to privilege the short-term profitability of Western firms over long-term development elsewhere.