Kicking Away The Ladder (Ha Joon-Chang)

When reading this strange little book, I found it difficult not to think of John Gray's False Dawn, published four years earlier, for two reasons. Firstly, both books went against the conventional thinking of the time by questioning the Washington consensus, and general hegemony of free market economics after the fall of the Berlin Wall; and secondly because the two books couldn't have been more differently written. When Gray writes, he states his assertions however contentious, boldly and almost as fact, leaving the reader to take him as an authority or consult the gargantuan bibliography. Cambridge economist Ha-Joon Chang on the other hand, spends the majority of the book demonstrating and re-demonstrating his assertion with historical examples - it is not enough to say that rich countries protected their infant industries with tariffs which they now actively discourage poor countries from doing - Chang must give page after page of example, rather than moving into more interesting territory.

Chang begins the book by discussing methodology, asserting that his method will be inductive and historical rather than deductive, as is the want of many economists. This is admirable and as a reader far more interesting, but large numbers of confirmatory examples do not more effectively prove a point when, as here, counterfactuals are so neglected. The fact that in the 19th century(and sometimes earlier) phase of economic development, today's rich countries pursued protectionist policies whilst experiencing massive growth, does not then follow that these policies were the cause; in fact alternative explanations (for example by Stephen Broadberry) are well known but remain unexplored here.

Kicking Away The Ladder argues that rich nations and the international agencies (WTO, IMF, World Bank) that they influence, prescribe a set of policies and institutions for poorer countries which, whilst fitting the conventional neoliberal orthodoxy, were not adopted by those rich nations when in a similar position of development. Policies such as strong intellectual (and other) property rights, low tariffs and free flows of international capital, and institutions such as an independent judiciary and central bank, and universal suffrage were not all in place when Japan, USA, Britain, France, Holland and Germany were at comparable levels of GDP that developing nations currently are. Chang dispels the myth that these nations practiced laissez-faire policies, and actually shows how only when Britain had a significant industrial and technological lead did it promote free trade - going so far as to imposing low tariffs on colonies and countries such as China, where it was able to militarily mandate them. Equally, Germany, Japan, Britain and USA engaged in industrial espionage and flouting intellectual property rights when they were behind technologically, something they admonish China for today.

Whilst (as acknowledged by the author) these comparisons are not perfectly like-for-like, there certainly appears to be some hypocrisy on the part of the richer countries. The question posed in Kicking Away The Ladder is, are rich nations recommending policies cynically in order to maintain their technological and industrial lead? Whilst Professor Chang argues that they are, it seems to me to be a far more nuanced situation. Firstly, the economists at institutions like the World Bank are not tyrants, and gain nothing from retarding the economic development of poor countries - they may be (as Chang believes) wrong in the prescriptions, but that is obviously very different from being saboteurs. Secondly, one can certainly imagine self interest in the U.S. wanting lower tariffs or insisting on foreign governments closing down fake Apple stores. But campaigning for the abolition of child labour or for an independent judiciary is not a hypocritical act simply because rich nations didn't enact these policies in the mid 19th century.

It appears to me that the more interesting question is, which policies are good for the poor countries, regardless of a benefit or detriment of rich countries? Chang asserts that strong growth from 1960-80 coincided with advanced institutions (by comparison with rich countries at a similar stage), but 'bad' policies from a neo-liberal perspective. He further shows that the deregulation from 1980 ('good policies') coincided with lower growth in poor countries - surely the true litmus test of successful economic policy. Unfortunately this is more of an aside than a central discussion of the book. The fundamental disagreement between a proactive industrial policy, where nascent industries are encouraged and promoted (led by Friedrich List), and free market ideology (led by Adam Smith) is both the core of the book, and a strangely unexplored argument - unfortunately the book is the worse off for it.

The real appeal of this book to a person interested in economics and policy in 2020 may not be the sparse history lesson within, but the historical context of the book itself. After the fall of the Berlin Wall, the ideologies of Reagan, Friedman and Thatcher had won, and Fukiyama declared the end of history. The Washington Consensus was largely unchallenged, and American free-market orthodoxy was spread to Russia, Eastern Europe and ultimately, tragically, Baghdad. Only with the 2008 financial crisis was the consensus demolished, and so in 2002 Kicking Away The Ladder must have appeared far more radical than it does today. But then John Gray wrote a more comprehensive, devastating and entertaining critique in 1998, so why not just read that?