Review & Summary: Bad Samaritans by Ha Joon Chang

EconSystems Thinking
Nov 2 · 6 min read

Review

Sometimes I take notes on books I read, and I figure if I post them here I’ll be motivated to clean them up a bit. Plus I wish I could have some cliff notes of books I want to read. Be the change.

Some I had to read for university, some were voluntary. This one is the latter. It’s also probably my shortest set of notes so I’ll get it out of the way first.

I wanted to read this since my Economics degree was mostly positive on free trade. Ha Joon Chang on the other hand invites criticism for bucking free trade orthodoxy which is weird since mostly his argument boils down to free trade is good when it’s good, and bad when it’s bad. What an ideologue. His true cardinal sin is that he engages with the real world, which taints the purity of economics. In one of his Guardian pieces he writes

“John Maynard Keynes famously said that economics should be like dentistry, by which he meant it should be a modest profession providing practical services to noneconomists, rather than indulging in grand theorising for its own sake. Unfortunately many academic economists seem to have an alternative, ivory-tower-centred view of the world: ‘pure’ research is more prestigious than applied or policy-relevant research, and research is more important than teaching. So, the more detached from the real world your work is, the higher up in the intellectual hierarchy you are.”

The sentiment is echoed by Thomas Piketty in his book Capital in the Twenty First Century.

“To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.”

(I have notes on Piketty’s book too but they’re written in the margins not on a Google doc so… I doubt they’ll ever make it here.) Anyways all in all I liked Bad Samaritans well enough. I preferred Economics the User’s Guide especially since he goes over some of the same material. I’ll post that later.

In the summary it’s about 98% Joon Chang 2% me. I make no claims of comprehensiveness. I write what I find interesting or worthy of remembering. Notes do not equal endorsements.


Summary

Do as we say not as we did. Developed nations spread free market ideology despite historically using tariffs, subsidies, state coordinated development of industry etc.

Not all succeed with protectionism but few succeed without. For the poor free trade has rarely been a choice. It has been an imposition, even militarily.

Economies should be opened up selectively and gradually. Neoliberalism claims to sacrifice equity for growth. Achieves neither. Growth has slowed last 30 years. Instability has increased as well.

Golden Straightjacket:

“Thomas Friedman refers to the Washington Consensus prescription as the ‘Golden Straitjacket’. He argues that ‘As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks.’ It is a straitjacket because it ‘narrows the political and economic policy choices of those in power to relatively tight parameters. That is why it is increasingly difficult these days to find any real differences between ruling and opposition parties.’”

So you’re right. We live in a guided democracy, but it’s actually good.

Growth in developing nations fell from 3.5% in the 60s and 70s to 1.7% in the 80s. (Would be lower if not for China & India.) Rich countries fell 3.2% to 2.1%.

History is written by victors. We view the past through the lens of the present. Protectionist history of the first world is underplayed, as is imperialist origin of global integration. Rich countries induce poor countries to adopt their policies via foreign loans & trade agreements.

African countries for decades have been basically run by IMF and World Bank.

3rd world debt crisis led to increased SAP (Structural Adjustment Programs) by unholy trinity. (IMF World Bank, WTO) All 3 have overstepped their initial purposes. IMF is the gatekeeper of international finance.

Globalization is set by politics not technology. “There is no Alternative” of Thatcher is not true.


Before 1970s targeting unemployment meant reduced economic instability.

Since 1980s, monetarists target low inflation. It is thought that inflation prevents growth which is a common sentiment based on nothing.

1–3% inflation as a requirement is arbitrary. Anything under 10% is fine and even below 40% there is no correlation between inflation and growth. (Dubious of this but we’re overdue for an inflation discussion.)

Neoliberals claim inflation is uniquely bad especially for those on fixed incomes. However the policies designed to prevent inflation generally hurt working people reducing prospects and wages. (We should be skeptical when Neoliberals claim to be concerned about the poor.)

Protecting central bankers from politicians also shields them from democracy.

Long term deficits as a developing country is like taking out loans for school or training. Well… it literally is that. It’s worth it and can be paid back later.

IMF demands balanced budgets every year, which is a completely arbitrary timescale. Unemployment crises and riots in the streets are OK if it means a budget surplus.

Poor countries are expected to be austere during downturns which would never happen in rich countries (except for the poor). Keynes for the rich, monetarism for poor. (Insert MLK quote…)


Patent law unnecessary: imitation lag, reputational advantage, racing down learning curves head start. Schumpeter was not concerned with patents. He said monopoly rent, is a big enough incentive for investment.

Patents by definition are monopolies which impose costs on society. Economic development is about absorbing advanced foreign technologies. Whatever slows that is bad including patents.

China didn’t invent the borrowing of patents. All developed countries have borrowed intellectual property from each other.

Patent explosion since 1983: From 1% to 5% per year.

Theft of traditional knowledge: Turmeric patented as medicine which has been a medicine for millennia. Overturned due to India’s size & power.

Rich countries low originality bar (US) hurts developing countries. Making increasingly minute pieces of tech patent-able reduces innovation.

How to weaken IPR: shorten the period of protection, raise the originality bar, and make compulsory licensing parallel imports easier. If this leads to insufficient incentive the public sector can step in. (Already does)

Academic books should be cheaper in developing countries. More knowledge diffusion is good and they aren’t buying them anyway. Also applies to fake luxury goods.


Will economic development lead to democracy?

No, (China) but is the free market good for economic development?

Also no, (China) but can we at least say democracy and free markets are natural partners which reinforce each other?

No. Democracy = 1 man 1 vote. Market = $1 1 vote. Result: we spend more researching weight loss than Malaria. This distinction was obvious to classical liberals who immediately choose free markets.

Neoliberals unlike classical liberals cannot openly oppose democracy, so instead they try to discreditpolitics “Depoliticization of policy decisions in a democratic polity means,- let’s not mince our words,- weakening democracy.”

They also have no success story to point to, and since they are in denial of ever being wrong they must find explanations in politics and culture. (Beyond Parody)

Markets are political constructs, all property rights and other rights have political origins. Many rights which are natural today were unheard of in the past. Such as the right to not have to work to live until you are 18.

No correlation between democracy & growth.

“Democracy is acceptable to neoliberals only insofar as it does not contradict the free market. This is why some of them saw no contradiction between supporting the Pinochet dictatorship and praising democracy… they want democracy only if it is largely powerless.”

Economists love choice until a poor country chooses its own economic policy.

Well designed welfare and retraining reduces costs of unemployment.

Rationalism, long term planning etc. comes from development, not the other way around. Japanese, German people were once considered easy going, slovenly.

Putting rich and poor countries on a level playing field is like an NFL team playing against a college team. Level playing field does not equal fair. Things should be made easier for the poor countries, not to give them an advantage, but to give them a chance.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade