My first post on 23 Things They Don’t Tell You About Capitalism addressed Ha Joon Chang’s dubious debating tactics when discussing ‘free market economics’. I turn now to some of Chang’s more specific critiques of economic liberalism to illustrate these tactics in greater detail.
Summarising his work in Kicking Away the Ladder and Bad Samaritans Chang tries to debunk the claim that free trade and open markets are the key to prosperity in developing countries. He claims that historically free trade was rarely if ever practiced by developed nations such as Britain and the USA. To the extent that they prescribe free trade for today’s developing nations, therefore, free market economists and their political supporters are guilty of a ‘do as I say, not as I did’ hypocrisy. What the developing world needs is the freedom to pursue the protectionist industrial policies that Chang himself favours. The economic success stories of East Asia owe their prosperity to high levels of state intervention and not to ‘neo-liberalism’.
To put it mildly, Chang misrepresents free market economics and offers a highly selective view of the evidence on trade, markets and development. First, few if any free market economists have ever claimed that Britain or the US were historical paragons of free trade. At most they have suggested that relative to previous historical eras nineteenth century Britain and the US benefited from a broad package of market-oriented policies of which free trade (especially in Britain, though less so in the United States) was a part. Similarly, they have been foremost in attacking the residual protectionism that exists in the developed world today – notably the European Union Common Agricultural Policy and equivalent schemes in the US. While Chang has every right to suggest that free market economists are in error the charge of hypocrisy is disingenuous because these economists have been critical of protectionism whenever and wherever practiced. Arguably, rich country politicians who preach free trade while refusing to reform domestic protection may be guilty of hypocrisy – but this is not a charge that can be directed against free market economists themselves.
Second, Chang misrepresents the place of free trade in the overall package of institutions and policies supported by free market economics. The classical liberal case has never been that international trade is the engine of development per se but that free trade offers an extension of the benefits provided by domestic market oriented policies – such as improvements in the security of property rights, largely private ownership of industry and a broad reliance on competition rather than central planning. Free trade can extend the benefits of these policies and may be especially important for smaller countries that have very limited scope for internal trade. Recognising this perspective is crucial when separating correlation from causation in understanding development outcomes. The fact that Britain and especially the USA had protection in place during industrialisation does not imply that it was the protection that caused the growth. Rather, the negative effect of protection may have been more than offset by other policies – such as improved security of property rights, low taxes, low government spending, and strong internal competition. Thus, though it pursued an external policy that was often highly protectionist, nineteenth century America also benefited from the creation of an enormous internal free trade zone where the free movement of goods, labour and capital enabled gains from trade across a massive territorial area.
Significantly, Chang fails to acquaint his readers with any of the empirical literature that has sought to decipher the causal role of protection in development relative to other factors. Douglas Irwin and Stephen Broadberry, in particular, have questioned the role of tariffs by showing convincingly that the sectors of the US economy that were supposed to benefit most from ‘infant industry’ protection did not in fact experience strong growth. Thus, at the time the US overtook Britain in the nineteenth century it did so largely by increasing labour productivity in the service sector – and not through gains in protected sectors of manufacturing industry. Similarly, high growth in Argentina and Canada in the late nineteenth century was largely due to growth outside the specific industries which were supposed to benefit from import tariffs. Protection in Britain meanwhile – notably the Corn Laws, actually slowed the industrialisation process by preventing the transfer of resources out of agriculture and into industry. *
Chang cites a number of small countries (such as Finland) that had elements of state intervention during the nineteenth century but succeeded nonetheless. Again however, he makes no effort to put this evidence in a broader context of other policies. Typically, Chang seizes on any evidence of state intervention however small to claim that it must have been the intervention that did the developmental heavy lifting. Interestingly, he does not apply the same criteria when accounting for declining economic growth in Europe and the United States over the last thirty years. During this period there has been privatisation of state-owned industries and liberalisation of labour markets – but these trends have been accompanied by substantial government spending and significant increases in regulation elsewhere (see on this blog ‘ America’s Thirty Year Experiment with ‘Radical Economic De-Regulation). Nonetheless, Chang asserts that the ‘dominance’ of free market economics must be to blame for recent ills. On planet Chang, state intervention no matter how extensive cannot be considered a legitimate explanation for declining economic performance. Reading Chang’s book one is left with the impression that Europe and the United States during the Victorian era were models of Keynesian interventionism, even though they had government expenditures between 5 and 10% of GDP, minimal regulation and virtually non-existent welfare states. Europe and America of today by contrast are depicted as practitioners of rampant laissez faire – even though government spending runs at between 40 and 60% of GDP alongside constantly escalating regulation.
Chang’s analysis of East Asian development is no more impressive. Though it is true that South Korea and Taiwan pursued protectionist policies during the 1960s and 1970s and experienced strong growth their performance was eclipsed by that of Hong Kong and Singapore which operated much closer to a free trade model. China post 1978 meanwhile, though it is far from a laissez faire economy has undergone one of the most significant economic liberalisations in world history – a liberalisation that has promoted unprecedented economic growth. Not surprisingly, Chang is quick to claim that the continuing existence of industrial policies and active government involvement in the financial sector are the cause of this growth. Yet, as Jasheng Huang has shown, the growth that started the Chinese economic boom had little to do with any such policies – it was the result of a huge boost in agricultural productivity following Deng’s massive programme of rural privatisation in the early 1980s. More recently, residual government controls in industry and finance have thwarted the Chinese industrial sector. Insofar as the Chinese have developed successful industrial companies (such as Lenovo) these have been Chinese in name alone. Nearly all such companies although operating in China are formally owned and registered in Hong Kong where they have access to one of the most liberal capital markets anywhere in the world. Far from China’s system of financial controls being the cause of their success it has been the ability of entrepreneurial start-ups to exit from these restrictions and to re-enter China on the more liberal terms granted to ‘foreign investors’ that has been critical. **
Perhaps the worst misrepresentation of free market economics in 23 Things They Don’t Tell You About Capitalism occurs in chapter 15 where Chang claims that ‘they’ – the ‘free market economists’ – attribute lack of development in poorer countries to the absence of entrepreneurial spirit. I know of no free market economist who has ever made such claims. From Peter Bauer in the past to William Easterly in the present free market economists have argued that entrepreneurship is a universal aspect of the human condition. What matters is whether social and political institutions channel this entrepreneurship towards voluntary exchange and positive sum games or whether institutions encourage entrepreneurs to engage in rent-seeking activity focused on the predatory transfer of wealth. The primary obstacle to the poor in much of the developing world is the absence of secure title to property and a maize of regulatory restrictions which limit access to markets, confine people to the ‘informal sector’ and which benefit predatory elites that monopolise access to the legally recognised economy. Chang offers no account of how these obstacles would be addressed by his protectionist/ high regulation agenda. Were developing countries to follow his advice they would be destined to a future that would institutionalise crony capitalism on a truly massive scale – the very sort of crony capitalism that is now disfiguring much of the developed world as well.
* Broadberry, S. (1998) How Did the United States and Germany Overtake Britain? A Sectoral Analysis of Comparative Productivity Levels, 1870-1990, Journal of Economic History, 58: 375-407.
Irwin, D. (2000) Did Late Nineteenth Century US Tariffs Promote Infant Industries? Evidence from the Tinplate Industry, Journal of Economic History, 335-360.
Irwin, D. (2000) Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century, American Economic Review, 165-169.
** Huang, J. (2008) Capitalism with Chinese Characteristics, Cambridge: Cambridge University Press.
PILEUS 
Chang’s diagnosis and prescription sound like a rehash of 1950s dependency theory. Latin America, the Middle East, and South Asia adopted “nationalist,” protectionist programs of development en masse during the period. I wonder how those worked out?
Dependency theory in Latin America stayed largely in academic circles. Who made it work by applying protectionism were the Japanese, South Koreans, and the Chinese. Proponents of free trade seem to forget that the U.S. has always been protectionist until recently. The average tariff from 1820 to 1931 was about 43 percent. Interestingly, Marx supported free trade because he believed it was destructive, pushing the antagonism between the proletariat and bourgeoisie to an extreme point.
Latin America is the land of protectionism. In fact, dependency theory is just one version of an array of state-induced development strategies that prevailed in the region until very recently (and in some countries, until today). Brazil, for example, was very protectionist during almost all 20th century? during the Vargas dicatorship (1930-1945), during its brief postwar democratic period (1945-1964) and, specially, during the military dictatorship (1964-1985). The country was practically sealed off from trade. It had dozens of state companies. Nowadays the Brazilian government still controls the biggest company in the country, Petrobras. Dilma Rousseff (2010-2016) tried to do it again, but failed. The militaries did not vindicate “dependency theory”, but they adopted nonetheless policies that could perfectly fit that agenda.
Hi Jason, I wouldn’t say he is a dependency theorist as such – he doesn’t use any of the quasi-marxist language associated with that school. He is basically a modern day defender of Friedrich List – but in the process engages in some of the most awful caricatures of market liberal ideas i’ve ever read. Not sure how big he is in the USA – he is selling very well on Amazon – but he has been a huge seller here in the UK, and of course in his native S.Korea. My first post from last week is in the process of being translated into Korean.
M
I see. I haven’t read any of his work and hadn’t actually heard of him until you launched this series. So I don’t think he is big in the US! It’s hard to imagine economists taking him seriously, and political scientists here are, I think, more uniformly positivist than they are in the UK and certainly continental Europe (so uninterested in general in this kind of work).
Probably the dumbest series of posts I´ve ever read. Chang fails to cite neoliberal academic work not because he doesn´t know it but because this is a POPULAR work. The idea is to simplify and clarify. If you think you are smart enough to understand Chang´s critique of neoclassical economics (he is quite sympathetic to Hayek and cites him quite a lot in his academic work) read the Political Economy of Industrial Policy which engages (and critiques) all the authors mentioned. And there is a response article to the extremely ideologically biased criticisms of Douglas Irwin in an article in the Journal of Institutional Economics. But really, complaining that a popular work doesn´t cite academic texts but instead simplifies and popularises is very stupid. All the myths mentioned by Chang are the kind of comments one hears all the time in conversations with free market supporters (I reapeat: this is a conversational critique, not an academic one, if you want the academic one, read the academic book and the articles idiot)
Oh and what makes you clever? The failure of market economics?
I’m sorry you feel that way John. You are right, this particular book is a ‘popular’ book – though that doesn’t stop Chang discussing academic sources when it suits him – whether it is his own work or historical figures such as Herbert Simon. If Chang has read Hayek or Vernon Smith then he should know that they subscribe to an evolutionary view of reason not the stereotype full information rational actors that are parodied here. A popular work should at least attempt to educate people about the existence of this view – and to provide critiques of it rather than the ludicrous straw-men that Chang attacks. In some cases, Chang has no basis whatsoever for the claims he makes – notably the notion that free marketeers oppose free immigration – some do, but many do not. I repeat, he doesn’t want his readers to know about these subtleties – a popular book should be capable of conveying them – even if it does not provide detailed citations.
Finally, I disagree with you about the Irwin and Broadberry work – it is published in peer reviewed journals. That does not mean that it is necessarily right – but Chang’s only reason for saying it is ‘ideological’ is that it offers a different interpretation than his own. Perhaps Irwin and Broadberry are ideological and are somehow blind to the positive effects of protection, but it is equally if not more credible to think that Chang is the one with the ideological blinkers – how else can you explain why he insists that ‘free market economics’ is to blame for our present ills in a world where governments both before and after the crisis have been spending around 50% of GDP and regulating extensively. Maybe it is the market that is to blame, but it is hard to accept this critique from someone who doesn’t even bother to consider alternative explanations.
Mark, you are quite right that Hayek is a very subtle and interesting thinker. But the fact is that Chang does engage with him. In fact he provides a critique of his position in the Political Economy of Industrial Policy where he discussing how Hayek finesses the informational cost of central planning (clearly prohibitive) with the (much lower) informational cost of other types of industrial intervention (there is a whole section called the Dynamic Critique of Industrial Policy which looks at the Austrian School having dealt in great detail with the neoclassicals in a section called the Static Critique of Industrial Policy). What Chang is attacking in 23 Things are commonplace economic myths held by the political right (think the free market Republican Party and the Conservatives) and he characterises them rather well. I just think your whole post is at cross purposes: if you really want to attack Chang you need to read the texts where he deals with the arguments he puts across.
I wasn´t actually talking about Irwin and Broadberry´s work but rather Irwin´s review of Kicking Away the Ladder which is clearly ideological (the work with Broadberry is not, I would merely say that it is a very narrow piece that clashes with an overall pattern they do not address). As for the issue of the % of GDP spent by the state, Chang deals with the idea that “bigger” states intervene “more” (false, this is a bad metric on that basis Japan is “non interventionist”, and Argentina is liberal but anyway, Chang isn´t defending “more” intervention” but a very specific kind of industrial upgrading and welfarism) in Economic Development and the Role of the State. I am sorry but I really do feel all these comments are misplaced. It´s like dismissing Hayek as a third rate thinker after reading The Road to Serfdom. For people who are´t sympathetic to the free market position RTS is easily dismissed. However (as someone unsympathetic to neoliberalism myself) I would not accept as dismissal of Hayek based on RTS which is clearly a popularisation.
John, thankyou for this response – we are getting closer. I have read Bad Samaritans and Kicking Away the Ladder, but have not read the PE of Industrial Policy – I will take your advice and read it. That said, from the popular summary that is presented in this book I don’t think Chang has a very good appreciation of the Austrian/Hayekian position – my next post will deal with what he says on bounded rationality in 23 Things.
I disagree with you about the purpose of 23 Things – it is not just a critique of the ‘political right’ but is quite explicit in attacking ‘free market economists’. Even in a popular work it should be possible for an author with honest intent to separate vulgar popularisations of ideas from serious thinkers – but Chang makes no effort to make this distinction. I’m not even convinced that this book is an accurate representation of what your average Sarah Palin worshipper would say – when was the last time you heard a Republican politician speaking about ‘perfect information’ or ‘full rationality’ – yet these are the notions attacked in the book. I have my own ideological blinkers on here, but I wouldn’t compare Hayek’s Road to Serfdom with the intent of this book. The difference between the two is that Hayek even in what is a semi popular work does make reference to the specific authors and ideas he is attacking – not just vague generalisations about the ‘political left’.
Of course, government spending isn’t the only metric of intervention. But it is not only spending that has been on the rise – but regulation as well. The Pileus post i referred to presents the evidence that spending on regulation has more than tripled in the USA since 1980 – supposedly a period of ‘de-regulation’ . Oddly enough just because ‘right wing politicians’ having been talking about ‘de-regulation’ over the last 30 years Chang simply assumes that on net there must have been substantial de-regulation – there has been in some areas notably labour markets in Britain (now slowly re-regulating), but there has been increased regulation elsewhere. There have been a great many peer reviewed studies conducted which look at various measures of ‘economic freedom’ – not just government expenditures – and the effect they has on economic performance. The vast majority of these confirm that the type of policies Chang supports are detrimental to growth.
On Broadberry and Irwin (his journal articles not his review) the whole point of these papers is to be ‘narrow’ precisely because they are trying to separate correlation from causation – trying to see whether in specific sectors where protection existed this was a help or a hindrance. In all I have read of Chang’s work he makes little or no effort to do this type of analysis, resting instead on mere assertion that if protection was present and growth occurred it must have been the protection that aided the growth.
Thanks again for the comment and I look forward to further engagement on this matter. Mark
Mark, I will be happy to engage with these points in future as long as we can avoid talking at cross purposes. The books you are critiquing are not attacking Sarah Palin per se, but rather the kind of attitudes that dominate in the policy circles of the Conservative and Republican parties (they were horrified by Sarah Palin´s ignorance but their own combination of neoliberalism and neoclassical economics does pretty much fit Chang´s characterisation being very simplified and very problematic). But anyway, it doesn´t matter very much what Chang says in his popular work if what you are interested in is Hayek´s extremely sophisticated version of neoliberalism, which also clearly clashes with Chang.
To discuss this you really need to read the Political Economy of Industrial Policy. Similarly if you are want to look at economic regulation you must read Chang´s paper on it (in the collection Globalization, Economic Development and the State). I think he would firmly dispute the idea that economic regulation has increased in the past thirty years and discusses all the decreases we have seen. I think with these two we will be in a position to have a serious conversation about Chang´s work.
PS Something you said in another place, about Victorian Britain intervening less than modern Britain, you have to remember that Chang is a development economist and the relevant issue is not “more” or “less” regulation is a country but what kind of regulation and at what level of development. Given it´s level of development the specific kinds of regulation that Victorian Britain engaged in a more than that of countries which today languish with Victorian levels of GDP. In the UK case, now it´s much richer, the issue in the kind of regulation and intervention we go in for, and again in the second volume I mentioned all this is discussed. I am sure there is a really interesting Austrian critique of Chang, but it will not come from attacking his popular books. (Road to Serfdom, for those that knows the thinkers Hayek cites, is pretty unfair to them, straw men abound but that´s necessary when what you want is readership)
(about Broadberry and Irwin … Chang suggests that productivity growth in services, which they point to as the engine of US progress, is itself dependent on the industrial sector, so there point in no way takes away from the importance of industrial policy for the US, but the discussion of all this stuff, again, you will not find in his popular work. the issues with the cross country econometric studies of “economic freedom” and growth have also been dealt with by Chang, there is a special issue of the Journal of Institutional Economics with a discussion paper a debate and a response by him, which you can download from his website http://www.hajoonchang.net
You said ” even though they had government expenditures between 5 and 10%”.( I waited patiently to get a slip you seem to be attacking Chang’s delivery skills not his argument or perhaps your deliberately left out his main argument).
This is a popular myth peddled by folks of little historical knowledge. In Britain, between “1688 and 1815, the accumulated public debt stood at a colossal 180 percent of national income”. (Hobson :247) During Britain’s economic ascent, what we call industrial revolution, the government maintained high and unfair tax coupled with high government intervention like no country ever did. Consider the textile industry in Lancashire. The importation of printed cotton fabric was banned in two stages and later an increased tariff was imposed on importation in order to aid domestic producers. As Anwar Shaikh puts it, “British cotton textile industry in Lancashire grew up under protection from superior Indian imports “(2006: 74). Britain later imposed a “one-way free trade” on India, the rest is history.
But to help you understand Chang’s argument (you wrongly associated him with protectionism instead of historian in search of persisitent pattern ) consider this: before 1970, Japanese automobiles were unsatisfactory so for more than 30 years government restrictions on the influx of American and European cars were essential to keep the dream alive. Free market advocates doubted the strategy of government protection, and made constant calls for a more orthodox economic strategy. For instance, the then Governor of the Bank of Japan strongly opposed the protection of the auto industry, he wrote: “Efforts to foster an automobile industry are meaningless. This is a period of international specialization. Since America can produce cheap, high-quality cars, should we not depend on America for automobiles?” (quoted in Engerman and Gallman, 2000: 434).
I think Chang sometimes overlaps – so do every economist, but the core is his argument is sound. He backs every claim with historic fact as oppose to abstract theory, this is the lineage of Alexander Hamilton and Friedrich List.
The Cambridge Economic History of the United States: The twentieth century
By Stanley L. Engerman, Robert E. Gallman
The Eastern origins of Western civilisation
By John M. Hobson 2004
Globalization and the myths of free trade:
By Anwar Shaikh 2006
Sorry, but Chang does advocate protectionism. He even wrote an article in a British magazine recently explicitly arguing for it as a way of getting out of recession. You do not seem to have read the post very carefully. I explicitly recognised that Britain (and even more so the USA) had protectionist policies in place historically. I then went on to consider the evidence on whether there was a causal connection between the protection and the growth. This is not just ‘abstract theory’ it is what good social science should be about -the authors I cite are trying to separate correlation from causation – not merely reciting ‘historical facts’ in the manner that Chang does – and which you seem to favour also.
Finally, there is very good reason to question his style of argumentation. Whatever government intervention there was in Victorian Britain (and I agreed that there was intervention and large military expenditures) is as nothing compared to the social expenditures and regulatory measures engaged in by contemporary states.Yet to read Chang you would think that Victorian Britain was more interventionist than contemporary Britain – where he blames all problems on the supposed dominance of ‘free market economics’.
@John: John we will have to agree to disagree. Perhaps we can agree on one thing though – that 23 Things is about book selling and not about trying to educate the public – in even a semi-popular way – about legitimate differences of opinion.
I’m sure Chang would dispute the claim that regulation has diminished – it has in some areas – labour markets to some extent, airlines and you can make a case that product regulation has also diminished in some sectors as well (sectors which have seen significant productivity improvements). Elsewhere though there have been significant increases in regulation. I repeat, overall spending on regulation in the US has tripled in real terms since 1980 – well in advance of overall growth in the economy.
On development – I understand the point you are making – but I would dispute the claim that much of the developing world somehow has less regulation than Victorian Britain at an equivalent stage. A very detailed book by Philipe Van de Walle – The Politics of Permanent Crisis (Cambridge Univ Press 2002) shows that most of sub-Saharan Africa has higher government spending and a very predatory form of government which for all its corruption most of the contemporary developed world did not experience in the 19th century. Though there are big disputes over the history of the period it is a widely held view (by Douglas North among others) that what allowed take off in Europe was improvements in security of property rights – compared to earlier historical periods. Deirdre McCloskey has added to this the role of changing cultural attitudes towards innovation. As far as I can see Chang never engages seriously with any of this literature.
I look forward to reading the PE of Industrial Policy – and will write something on it when I have. I have also asked a colleague who has a paper (critiquing Chang) in the special issue of Journal of Institutional Economics – to send me the rest of the papers in that issue.
Mark, am glad you are willing to read the work before criticising. The special issue of the JOIE and the PEoIP are central to the issues you are raising. I would add GEDRS http://books.google.com/books/about/Globalisation_economic_development_and_t.html?id=N87ne0C7R_QC which discusses deregulation, public enterprises and intellectual property.
Having sat through Chang´s classes on institutional economics at Cambridge (which spent a very long time on Douglas North as far as I can recall) I don´t think it´s fair to say there is no serious engagement with the literature. No one is saying that in the developing world, particularly in Africa, the ONLY problem is free market economics. There are all kinds of issues with state capacity and basic property rights but Chang´s point is merely that neoliberalism has made this worse. The problem is that you are still thinking in terms of “more” or “less” interventionism based on state spending, but Chang looks at different kinds of state intervention (neoliberals go in for state intervention too you know, the Chicago Boys nationalised practically the entire Chilean banking sector and spent more money than Allende ever did on rescuing indebted firms after their “monetarist approach to the balance of payments” caused total financial breakdown there). His point is that the “right kind” of state interventionism has been cut and the “wrong kind” increased. The point that “there´s no such thing as a free market” is to say that all economists argue for state intervention, the point is what kind (I hope, when you have read the texts) you will see what he means by right kind and wrong kind. I´m sure you won´t agree but I look forward to reading your criticisms!
PS Agree to disagree on 23 Things, I´d just say I wouldn´t spend any time on it. But then I´d say the thing about Road to Serfdom, I like to keep popularisations separate from serious work.
Is it really fair to claim that the monetarist approach to the balance of payments caused total financial breakdown there? I mean most of South America was hit by a severe financial crisis which devastated the economies of many South American countries.
Best regards.
Ha Joon Chang is indeed a moron. Is he an economist? Oh, give a fuckin’ break. He argued that rich countries like America got rich through protectionism and government controls? What a male bimbo! If he really understood his economics and history lessons, he would have known that it’s protectionism that helped aggravate the effects of the Great Depression in the 1930s.
Here’s what I wrote on this blog… http://fvdb.wordpress.com/2010/12/09/the-roots-of-americas-great-depression/
“Another proof that excessive government intervention caused the ‘real depression’ was when the Smoot-Hawley Tariff Act of June 1930 was implemented, which increased American tariffs to unprecedented levels. This statist act practically closed the American borders to affordable foreign goods, which would have benefited financially troubled Americans. American economists and historians claimed that the 1930s was the beginning of the ‘real depression’ and the crowning folly of the whole troubled period from 1920 to 1933.[xii][xiii][xiv]
“According to American economist Benjamin Anderson[xv]:
“Once we raised our tariffs, an irresistible movement all over the world to raise tariffs and to erect other trade barriers, including quotas, began. Protectionism ran wild over the world. Markets were cut off. Trade lines were narrowed. Unemployment in the export industries all over the world grew with great rapidity. Farm prices in the United States dropped sharply through the whole of 1930, but the most rapid rate of decline came following the passage of the tariff bill.”
The arguments that government policies restricting free market activities are good or bad in an economic sense are meaningless. The issue is individual freedom and the right of voluntary exchange, not optimization of economic statistics. Government confiscation of the funds of some citizens to subsidize the endeavors of others or protectionist measures with a similar goal are immoral, period, regardless of their supposed positive effect on the mythical community.
Great post. I would add one point I heard from EconTalk: the United States itself was the largest free trade zone for a significant number of years. Indeed, the US Constitution provided some protection against the separate sovereignties of each State to put up trade barriers. Britain had a similar free trade zone with its empire of colonies. While none of these legal structures were created for free trade purposes, the creation of these free trade zones created the space for both countries to thrive at a higher level than those countries without access to such free trade zones…
Free Trade And The Euro Crisis For Non Economists
http://www.scribd.com/doc/201196367/Free-Trade-And-The-Euro-Crisis-The-Case-of-Greece
Mark, this is some years later but I feel you argued very well with everything at your disposal. It was just unfortunate that in many important areas your ammunition was limited.
You make many good points about Chang’s straw men and cherry picking. You don’t get far in convincing us of the wisdom of a largely absolutist position over a heterodox one. Chang can’t prove anything with his correlations and neither have you with your’s (though I believe he has more).
What he has done is provide compelling accounts of the causal mechanism by which protection for infant industries can help and one by which level-field competition with those much larger can curse a child to always lose. In the background Chang tacitly accepts the counterfactuals – the mechanisms through which free competition can powerfully drive growth and the ways protection can hinder. That’s not news. It’s the background we already know and he constantly acknowledges email. Eg by consistently stating that of course controls need rolling back when industries mature. (I don’t know what his arguments for new tariffs in the West are but I’d be surprised if they don’t contain at least a few of the kind of subtleties you wish he’d give others credit for.)
Here’s the neat little kernel I’d have thought you might agree with: Surely, all things being equal a nation left to form its policies according to its self interest will do better than one whose decisions are made for it by its competitors? This puts the burden of proof on your side. The neutral position would be for other nations not to intervene with their policies. If you must insist then you have to see the demonstrable fact that at certain points open competition gives little chance for a country to go from low to high tech. You then have to provide real world evidence that the demonstrable beneficial tendencies to free trade (and I don’t question they’re significant, particularly the alternative risk of death by corruption) massively overwhelm the harmful ones in the whole grand sweep of very different countries. Because your opponent isn’t on the opposite side to you. He’s in the middle.
Just like developing nations are each in their own middle. He leans one way but says, ‘try the thing that fits the situation’ . You seem to say ‘only try one thing’ .
… Except at the points where you seem to say otherwise in championing Hayek in regulation which promotes fruitful, constructive competition.
I guess that’s like a golf handicap which allows a beginner to flourish in being at least able to play the same game as the expert.
Maybe you two even agree on the details. Playing on the same green from different ends.
Reblogged this on Utopia – you are standing in it!.
I am quite illiterate economicswise, and am trying to give myself an education in it afresh.I went through an MBA ten years ago, ended up despising and fearing economics, and have now decided that textbooks are not going to cut it.However, I have some fresh resolve to tackle this subject as of now, and am trying to get a 360 degree view of the field by reading important works of all sorts of economists, from the extreme right to the left.I have picked up The Road to Serfdom, Henry Hazlitt’s econmics in one lesson, Ha Joon Changs works, some commentary by Chomsky, Ruchir Sharma’s Breakout Nations, Raghuram Rajans faultines , Debt by David Graeber and The Ascent of Money by Niall Fergusson.Am I doing OK with this selection.This looks like just like the right place to ask, and also ask for recommendations please ?