People in rich countries who preach free market and free trade to poor countries without realising they are hurting the developing countries with their policies are “Bad Samaritans”, according to Ha-Joon Chang in his book Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity. As someone who grew up in Korea during the time of that country’s “economic miracle”, he says the rapid economic growth was certainly not attributable to free trade.
The arguments made by the author include:
- Historically, the best-performing economies have adopted free trade selectively and gradually.
- A substantial period of protection is often required to nurture infant industries.
- Free trade reduces freedom of choice for poor countries.
- Government interference in commerce is sometimes good for development.
- Intellectual property rights favour rich countries at the expense of poor countries.
In my view, some of the author’s arguments are compelling. It really is difficult to find a country which has started poor and become rich solely as a result of free markets and free trade. On the other hand, the conditions under which government interference with free trade succeeds in promoting development remain mysterious. Most government attempts at interference seem to have negative rather than positive influences on economic growth. The book suggests that all intellectual property rights are bad for development, but I think it is more accurate to say that countries which have become wealthy have tended to give strong protection of intellectual property rights to nationals while according weak protection to foreigners.
So what policies should a poor African country adopt today? Many such countries have very high tariffs on imports, and this is a major source of government revenue. However, these tariffs are restraining trade and helping to keep the countries poor. The author seems to suggest that such countries should choose some manufacturing industries to protect, in the hope of reaping rewards from them in the future, while reducing tariff barriers to encourage free trade in other areas.
The book is well written and a great pleasure to read, and I highly recommend it to anyone who is interested in development.