.
February 11, 2008
SouthAmerica: I did order a copy of the following book and I will start reading it as soon as I receive my copy of the book.
Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.
By: Ha-Joon Chang.
Published in 2008 by Bloomsbury Press.
***
Here are some book reviews from Amazon.com:
Review # 1
Ha-Joon Chang(C) demonstrates that the standard neoclassical international trade theory (model) applied by the economists at the World Bank (WB), the International Monetary Fund (IMF),the Import-Export bank, the World Trade Organization (WTO), and advocated by Thomas Friedman, is basically an artificially constructed , purely mathematical, blackboard and chalk model that generally ignores major, relevant variables and necessary political and social prerequisites, as well as the time it would take to implement these kinds of institutions. The current collapse of Kenya is precisely the type of failure that results from the gross ignorance of the economics profession of the ancient wisdom of Adam Smith. The so-called " miracle" of Kenya was a chimera from the beginning. The absence of these institutions (overlooked, in general by C) doom the application of the model from the beginning. The theory works only if certain prerequisites are in place .For example, necessary prerequisites are (1) the existence of political, corruption free legal, governmental, and political institutions that enforce contracts impartially and uphold the rule of law, and (2) the existence of an independent, impartial, corruption free judiciary that will apply the law fairly. These necessary prerequisites do not exist in China, India, Africa, Mexico, South America, and Central America. They have evolved and are functioning effectively in the First World countries of the West and Japan. These institutions are barely present in the Second and Third World. These countries can be regarded as "infant" countries. C extends the argument based on the protection of infant industries to the protection of infant countries in chapter 3.The standard free trade prescription can only apply to " grown up"(1st world) countries. C overlooks, in general, the extremely important policy discussions carried out by Adam Smith on pp.434-439 of the Wealth of Nations that support his overall position (1776;Modern Library (Cannan) edition). Smith (a) supports retaliatory tariffs if there is any probability greater than 0 of changing the policy of the offending country; (b)supports revenue tariffs ; (c)would dismantle protectionist tariffs carefully, in very slow gradations, in order to prevent the collapse of those industries that are being opened up to imported goods, and (d) recognized that a 100% free trade policy is a pipe dream, given the social and political realities of any society.
I recommend this book. C can easily get a full 5 stars from me by explicitly connecting his analysis to the wisdom of Adam Smith. Adam Smith would fire all the economists at the WB, WTO, and IMF for gross incompetence and negligence.
****
Review # 2
One of the principle complaints of conservatives is that all education in America is deliberately skewed with a "left-wing" bias from kindergarten to college. And yet the field where this "bias", (if you accept this view) is clearly undone is the field of economic education. Whether you read the business section of the New York Times, the Harvard Business Review or National Public Radio, the actual bias present is really for the neo-classical economic model (AKA, neo-liberal economics) of the laissez-faire variety.
Dr. Chang, a professor of economics at Cambridge and former World Bank researcher, deconstructs in general and in detail many of the prevailing myths of the neo-liberal school of economic development. My favorite chapters were these two:
Chapter 1-The Lexus and the olive tree revisited. In this chapter Dr. Chang explains why he thinks that NYT columnist and author Thomas Friedman is full of crap about the benefits of globalization for ordinary people [pages 19-40].
Chapter 3-My six-year-old son should get a job. Says Chang: "I have a six-year-old son. His name is Jin-Gyu. He lives off me, yet is quite capable of making a living. I pay for his lodging, food, education and health care. But millions of children of his age already have jobs. Daniel Defoe, in the 18th century, thought that children could earn a living from the age of four. Moreover, working might do Jin-Gyu's character a world of good. Right now he lives in an economic bubble with no sense of the value of money. He has zero appreciation of the efforts his mother and I make on his behalf, subsidizing this idle existence and cocooning him from harsh reality. He is over-protected and needs to be exposed to competition, so that he can become a more productive person. Thinking about it, the more competition he is exposed to and the sooner this done, the better it will be for his future development. It will whip him into a mentality that is ready for hard work. I should make him quit school and get a job. Perhaps I could move to a country where child labour is still tolerated, if not legal, to give him more choice in employment" [page 65].
I found this tongue-in-cheek style of criticism of global capitalism both hilarious and enlightening.
There are many more examples of Chang's knowledgeable and funny criticism of neo-liberalism I could list here, but I don't want this review to be a spoiler. So go read Chang's book.
*****
Review # 3
"Free Trade" has been progressively wrecking America's economy for at least two decades. Meanwhile, economists in our colleges continue, almost without exception, to warn of protectionism while extolling the writings of Adam Smith and David Ricardo - written long before today's gross wage imbalance between Asia and the U.S., instant communications, and fast, economical international transportation. Finally, a Cambridge economist, Ha Joon Chang, brings facts and common sense to the debate - aided considerably by the free-trade ignoring successes of his native country, South Korea - eg. Samsung, and Pohang Iron and Steel. (And then there's Toyota - started out in textiles, was protected by auto tariffs, and now the world's #1 auto manufacturer and teacher of advanced management techniques.)
"Bad Samaritans," as Chalmers Johnson points out, refers to "people in the rich countries who preach free markets and free trade to the poor countries in order to capture larger shares of the latter's markets and preempt the emergence of possible competitors." They are saying "do as we say, not as we did" and take advantage of others who are in trouble. He also points out that all of today's rich countries (INCLUDING the U.S.) used protection and subsidies to encourage their manufacturing industries - anathema in today's economic orthodoxy and contrary to the WTO, IMF, and World Bank. As a result, third-world nations' growth rates have fallen to less than half of that recorded in the 1960s (1.7 percent instead of 4.5 percent).
As for corruption being incompatible with high growth, Chang points to Zaire vs. Indonesia. Both suffered from murderous corruption, yet the former's living standards fell two-thirds while Indonesia's tripled. The difference was that corruption funds in Zaire fled to Swiss banks, while those in Indonesia remained in the country to help create additional jobs.
"Level playing field" rhetoric is often used to justify WTO and IMF prescriptions. Chang, however, reminds us that this is inconsistent with our practice of segregating sports by size and age, and that it is similarly unrealistic to expect eg. Honduras to compete evenly with the U.S.
Chang also points out the strong agricultural subsidies in Europe (milk), the U.S. (corn), and Japan (rice). The good news is that these subsidies keep farming viable in those areas and the nations involved more independent; the bad news is that U.S. corn is exported to Mexico - making economic survival impossible for their farmers and driving them to illegal immigration into the U.S.
Free-trade reduction of tariff revenues also plays undermines national budgets in poor countries because they lack efficient tax collection capabilities and tariffs are the easiest taxes to collect. Combined with free-trade-caused damage, the struggling nations are left far less able to fund health care and education for their citizens.
Still another Chang insight is his pointing out that pursuit of copyrights and patents are simply a sophisticated form of protectionism that again works against third-world nations by preventing their starting important new industries (eg. drug manufacture) that boost not only their economy but citizens' health as well. Chang sees the U.S. as the worst offender in this area. Chang asserts that self-development of new technology is difficult in third-world nations, using North and South Korea as examples. North Korea has tried to be self-sufficient (and done poorly), while South Korea has assiduously copied wherever possible and is now an industrial powerhouse.
Chang suggests that third-world countries use tariffs to protect their developing industries. However, he does not propose that the U.S. do likewise - perhaps in his next book. Nonetheless, "Bad Samaritans" punches enough holes in free trade thinking to help others rethink America's self-destructive commitment to it.
Source:
http://www.amazon.com/review/produc...82594-0858214?_encoding=UTF8&showViewpoints=1
.
