Kicking Away the Ladder: Development Strategies in Historical Perspectives

by Ha-Joon Chang

Anthem Press, London,
ISBN 1843310279

Reveiwed by:
Goh Chien Yen
Researcher
Third World Network,
Penang, Malaysia
chienyen2001@yahoo.com

1. Introduction

It has always been remarkable even to the most casual observer of economics and history, the disparity between what is currently expected of developing countries to do in order to progress economically and what the developed countries themselves did. Developing countries are constantly lectured to open up their economies especially in the trade and finance areas so that goods and capital can flow unfettered in and out of the country. Developing countries' governments are also harangued into stepping away from the economy, to have their economies deregulated and privatised, so that the market could operate unhindered and efficiently. They are then told the market however, needs to be bolstered by the right institutions if it were to function as expected; and the right institutions are essentially those to be found in the developed countries, especially Anglo-American institutions.

Yet the simple truth is that the development experience and history of the industralised countries today bears scant resemblances to the free trade, free market characteristics often associated with those countries. Ha-Joon Chang in 'Kicking Away the Ladder' provides a vivid account of this glaring but neglected reality in mainstream neoclassical economics. Despite the relative brevity of the publication, Chang convincingly captures the protectionist tendencies and interventionist policies pursued by the major industralised countries during their early developmental phase. He shows that practically all the developed countries today come from a long tradition of active state intervention in the economy and insulated their national economies as they practiced extensive infant industry promotion, in their efforts to generate economic growth.

2. Debunking Conventional Economic Myths

In examining the history of the industrial, trade and technological policies undertaken in several developed countries when they are developing Chang persuasively dispels several cherished laissez faire myths, and establish some important facts about these policies, critically challenging the current orthodoxy in economic thinking. For instance, tariff protection was used most aggressively by the United States and the United Kingdom, supposedly the homes of free trade policies, when it suited them. Not only were high tariffs erected, the state governments of industrialising Germany, Japan, Britain, the US, France, intervened directly in the market and played an active part in promoting infant industries. They did this by employing a range of industrial policies, such as sponsoring research and development and subsidizing domestic producers, if not acting as producers themselves.

Chang devotes Chapter Three to addressing the current interest on 'good governance' that has come to occupy centre stage in mainstream development policy debate in recent years. The excitement is generated and sustained by the acute economic problems facing previously successful emerging markets. These economic woes, according to the international development policy establishments, such as the World Bank, are due to deficient institutions. Hence, the argument goes that if a set of good institutions is adopted, economic development would necessarily follow. The package required for 'good governance' include, with varying emphasis, an efficient bureaucracy and judiciary; strong protection for property rights, United States-inspired corporate governance structure and accounting standards; and well-developed financial institutions.

Chang argues that the correlation between economic development and institutional variables is unclear let alone the causal link asserted by its neoliberal supporters. In employing a historical approach to economic analysis, Chang concludes that it is factually more accurate to see these institutions as consequence rather than the cause of economic development.

He points out that the historical trajectory of developing the right institutions in industrialized countries was patchy, uneven and slow. By comparing the levels of institutional development between the now developed countries and the developing countries today, Chang shows clearly that the latter have gone a lot further than the developed countries during their comparable developmental phase.

The significance of the observation that policies used by now developed countries in the early stages of their development differ significantly from those that have commonly assumed to have been used by them is not merely academic. One casualty, Chang laments, has been academia itself, where 'contemporary discussion on economic development policy-making has been peculiarly ahistorical.' More importantly, the experimentation with these neoliberal policies have not resulted in economic development for many developing countries, more worryingly in many instances the impact has been detrimental. Furthermore, Chang warns that these policies prevent developing countries from pursuing a meaningful and effective industralisation programme which is key to the development of most nations. In this sense, the title of the book taken from illuminating quote by 19th century German economist Friedrich List seems well justified. In writing about the British economic development experience and the polices they pursued, List had this to say 'It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him.'

Cynical? Maybe, but Chang explains 'whatever the intention behind the ladder kicking may be, the fact remains that these allegedly 'good' policies and institutions have not been able to generate the promised growth dynamism in the developing countries during the last two decades …'

Citation: Goh C Y, 'Kicking Away the Ladder: Development Strategies in Historical Perspectives' by Ha-Joon Chang, Book Review, Law, Social Justice & Global Development Journal (LGD) 2003 (1) <http://elj.warwick.ac.uk/global/2003-1/goh.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2003_1/yen/>