Chang, a South Korean who grew up during the nationÆs so-called economic miracle and is now an economics professor at Cambridge University, puts together a tidy piece of historical evidence that shows that free trade often hurts a nation. Many of todayÆs strongest economies û from the US and the UK to his own South Korea û got that way through protectionism and government intervention in industry.
Like many in the region, he blames the World Bank, the IMF and the WTO for policies that benefit the rich nations at the expense of developing nations. If you were working in Asia during the financial crisis in 1997-98 youÆve likely heard many of his complaints. And you probably already agree with his thesis.
The value of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism is the history of the US, the UK and South Korea, which he uses to prove his point. He presents the historical evidence that proponents of globalisation tend to focus on; and he also provides some of the details many modern historians tend to gloss over. For example, when the War of 1812 broke out, the US Congress doubled tariffs to 25% from the average 12.5%. By the 1820s the average tariff rose to 40% in an effort to protect infant industries. That policy lasted until World War II.
ôIt was only after the Second World War that the US û with its industrial supremacy now unchallenged û liberalised its trade and started championing the cause of free trade,ö writes Chang. ôMoreover, even when it shifted to freer (if not absolutely free) trade, the US government promoted key industries by another means, namely, public funding of R&D. Between the 1950s and the mid-1990s, US federal government funding accounted for 50%-70% of the countryÆs total R&D funding, which is far above the figure of around 20%, found in such ægovernment-ledÆ countries as Japan and Korea.ö
He puts together equally damning evidence of hypocrisy for other economic powerhouses of the day and calls for them, but particularly the US, with its disproportionate influence over the World Bank, IMF and WTO, to reevaluate the policies enforced on developing nations.
All told, the book is a quick read û digestible on a long-haul flight and worth checking out to counter all the Friedman nattering of the wonders of free trade.
However it is not without flaws. For one, while Chang criticises some economists for glossing over history that doesnÆt support the notion that protectionism can be good for economic development, he at the same time skips over how cronyism and corruption arenÆt good for development either. Another criticism is that there is a bit of academic overkill here. His point could have been equally made in a fraction of the pages.
Bloomsbury Press, 276 pages