Bad Samaritans: The Myth of Free Trade and Secret History of Capitalism - Book Report/Review Example

? CRITICAL ANALYSIS OF THE BOOK “BAD SAMARITANS: THE MYTH OF FREE TRADE AND SECRET HISTORY OF CAPITALISM” The of the book, Ha-Joon Chang has specialized in developing economics and is one of the leading economists worldwide. He was a past consultant to the World Bank, the European Investment Bank, the Asian Development Bank, and Oxfam and to the various agencies in United States. He is currently a reader at University of Cambridge in the Political Economy of Development and has written numerous influential and debate generating policy books. VIEW POINT OF THE BOOK The book, “BAD SAMARITANS” has encountered a wide range of serious economic issues related to its development. The book has unveiled the truth of the world’s economy and discussed the trade policy, regulation of foreign investment, intellectual property rights, privatization, and other economic issues like democracy, corruption and aspects of culture, all from a very different perspective. One can tell from title of the book that says free trade is nothing more than a myth, a thing that has no presence in the reality and that exists in economic theories and books only. If you look at the economic practices of all the developed and rich countries you would find that none of them is letting the market work freely. Free trade has no reality rather it has hidden a truth of capitalism behind it. The author has tagged rich countries and the international organizations (IMF, World Bank, WTO) that are monitored by these rich countries, as Bad Samaritans. Author has used such words because of the fact that these international organizations are being controlled by the rich countries, and ultimately only those policies are recommended or even imposed that both of them mutually agree on. These policies are apparently made to help the developing countries but the truth is that these policies have never been able to get any positive results or bring any improvement in the economies. Moreover, the rich countries, which make such policies, do not use those policies themselves when it comes to them. Hence, by the act of helping the developing countries, Bad Samaritans end up harming and manipulating them. Supporting his arguments, Chang has further stated that looking back at the past of western industrial countries it has been seen that they have never followed a policy of free trade until they had achieved a form of industrial supremacy. The western countries that apparently follow the free trade for the economic development of the world has never actually done anything for the under developed countries. There are different insights and references given by the author at various points throughout the book to support his arguments and give relevance to the reality. Chang says that all the current economically developed and wealthy countries did not accumulated their wealth through free trade rather than they achieved it by implying highly protective tariffs, subsidies and laws for the regulation of foreign business within the country. According to him this truth was buried by one of the biggest myths of capitalist free trade and that it brings successes with globalization. It is not the free trade, nothing else but the protectionism that has been making these developed countries successful since years. DISCUSSION AT U.S. ECONOMY IN THE BOOK The book has done some analysis of the U.S. economy, discussed the strengths and weaknesses and the overall performance of American economy at certain places. It has often done a comparison and contrast of U.S. economy with the British economy, considering both of them as highly successful countries in terms of economies. At a certain point the author says, that the Britain economy found a safe place for itself before it actually implemented the free trade in the country. It reached at the level where it gained an edge of technology over its competitors by putting strict and extended tariffs and once it was stable it moved towards the free trade. While U.S. economy was the most protectionist country in the world, examining the policies made by Hamilton, Lincoln, and Henry Clay, it was also a rapidly growing economy. Here Professor Chang linked the rapid growth of U.S. economy with the protectionism that it followed. Britain and the U. S. are the countries with protection of overall the highest tariff and stringent laws which highly benefited their industries, economic development and other economic stability. Being a protectionist country, U.S. and Britain had an edge over the others and a room to play safe. One of the premium strengths of U.S. economy highlighted in certain areas of the book is the gift of “full spectrum dominance.” In both military and economy, the tendency of dominance has acted as a valuable asset for America. The industries and economies of United States seem to be perfectly working as long as they have this power in its hands. It has a full control over the development of its country and setting the global laws and policies in a way that is beneficial for it from all the sides. Evident from the narrations of Hi-Joon Chang, he does not seem to get convinced by the efforts of United States to help the poor countries as he said that American neo-liberals do not wish to aid the poor countries else they would have actually studied what benefits them. Being dominant western countries or governments, there is no true desire to help poor countries gaining an economic strength and more competitiveness. EXAMPLES AND INCIDENTS MENTIONED IN THE BOOK To support the argument against the implementation of free trade in the real world Professor Chang has taken the use of some specific incidents and realistic examples. He used the example of the relationship between him and his son as he said that his son is an infant and is not really ready to work and do things on his own. For his son’s development it is necessary for him to take care of him until he reaches his maturity when he can take care of himself. Further he said that at this early stage if the infant is left on his own he would not be able to get stable properly. Also pushing him to make an income would be a false practice as the child would end up doing something petty like shoe polishing or mare labor work and would never be able to develop skillfully or even generate sufficient money. Rather, Chang would invest his money in the education of his son till a point where he would be able to stand on his feet, take care of himself and get developed, even earn a lot more than what he had done otherwise. The author, Ha-Joon Chang briefs a perfect incident of a clothing manufacturing company in 1933 that took the decision of expanding their business into the manufacturing of automobiles. Who can expect a clothing company to go into automobiles, hence the whole expansion project seemed too unrealistic and naturally situations were negative around it. The company had not even a single thing was supporting the new business expansion idea. Neither the nation has any serious domestic auto industry, nor did the company have any experience with the automobiles. Moreover the other developed countries like Britain and U.S. had already been manufacturing the first-class vehicles having attained a large market share out of the whole world. With so much skeptical conditions, the company took the interest of the country’s leadership and finally the ministry of trade decided to help it. Company developed its first car buy the help of the Government subsidies. The Government let the product protected from foreign competition by the high import tariffs for years. The outcome of the implied tariffs was that by 1939 the automobile company gave a tough competition to both GM and Ford (top class automobile manufacturers of that time) in terms of sales within the country. The manufacturers soon started to grow bigger and made its presence world-wide. This was the story of the company that is today known as “Toyota” and from this incident Chang tried to give an insight of the importance of Government’s help, assistance and spoon feeding for the infant industries. The Government needs to intervene to protect its own industries to make them go big, it does not let the market decide the fate of the industry hence there is no such thing as a free trade. Similarly, the author says that free trade policies are often found in books and economists and Governments have also been talking of free trade, especially the rich countries to make the rest of the world feel as if they are actually doing a lot for the poor. If this is so, why do they feel the need of imposing restrictions on trade, they can rather leave the decision on the poor country about the restriction of foreign investment. The author has serious doubts as he proves in his next example that free trade sounds good but has not been practiced by rich countries at all. At this point the author gave an example of Nokia in Finland which, today, is the world leader in communications but had been protected for the foreign investors for 17 years. Now Professor Chang has gone deep into the causes and effects of protectionism. If there was not any restriction at the foreign investment, the poor or developing countries must have been benefited by taking part in the investment. This proves that the regulation of restricting the foreign investment keep the developing countries from practicing free trade and thus it adversely affects them rather than improving their economic condition. CRITICISM AT AUTHORS ARGUMENT Chang has offered a totally different perspective of economic development and practices of the world and has tried to change the concept of free trade and capitalism in the eyes of the reader. While on the other side there are some economists that do not seem to be agreeing with the Chang’s viewpoint. However, when I read the point of view of those economists on the statement of Chang I feel it is true that there is some loop holes left behind or some possibilities that can make Chang’s school of thought doubtful. First of all, I disagree with Chang’s argument of secrecy in the history of capitalism. I do not believe that there is anything hidden about the history of U. S. protectionism. From years it has been taught in high school history classes and there had been an open discussion regarding it. Secondly, Chang has insistently said at various points in the book that the high tariffs and trade laws were directly responsible for the economic stability and development of U. S. and Britain. In this regard, to strengthen his argument he presented quite a few examples and quoted some specific incidents. One of the economists, Professor Glaeser, who tried to prove this statement wrong, said that Chang has not provided sufficient evidences based on his findings and research. Likewise, Douglas Irwin, another economist has also targeted the same argument and has presented his own view in response. Where Chang made high import tariffs the reason of U.S. economic growth, Irwin address this issue in his paper “Historical Aspects of U.S. Trade Policy,” where he gave number of other possible reason for the economic success of United States. One of the factors that he presented in that regard was, “expansion of population and accumulation of capital.” Further according to his observation, he in fact blamed tariffs for the being harmful by increasing the prices of imported capital goods and discouraging accumulation of capital. He presented high tariffs as damaging practice instead of the reason of economic growth. Professor Irwin ended the discussion by concluding that the high productivity growth was shown in the sectors that were non-trade and that are not even directly affected by tariffs. The argument of Chang would have been stronger if he had done the deeper and broader analysis of historical impact of trade protectionism in the United States and Britain keeping other economic factors also in mind. Having a clear picture of these economists’ view and comparing their statements and argument I, myself, feel that Chang has not done much justification with the explanation and effects of tariffs on economic growth. Shifting the entire burden to tariffs and trade laws is perhaps not a realistic approach of analysis. In a real world phenomena there are many other economic factors intervening, and Chang has completely ignored the ‘other’ factors that leave their impression in the final results. The reason of the economic growth cannot be the tariffs all the time or solely tariffs in all the cases. Chang’s emphasis on strict tariffs as the golden way to economic growth above everything else is a major drawback in his argument. PERSONAL RECOMMENDATION The book “Bad Samaritans” is for everyone to read. It is for economists, students, professionals and a layman too. Undoubtedly Professor Chang has twisted the angle from which people see and analyze things. Giving a new meaning to the economic growth and putting back the misconceptions that kept dwelling in our minds for years. This book is for sure a must read, even if you do not seem to be agreeing with all the points, like me, but you need to open your mind to accept a few realities. In my opinion, either you are for or against the free trade, either your accept the free trade to be a reality or consider it just a myth, the debate in this book can generate a lot of solutions and resolve a lot of issues. The Government should at first, help their infants and weak industries to make them stand and improve the economy but should not go far beyond the point where the industries stay protected for decades just for the greed to be huge. That would seriously harm developing countries and increase the gap between developed countries and developing countries even more, that is certainly not a good practice for the world’s economy. At a particular level, the Government of developed countries should reduce its intervention in the economy and start practicing free trade for the benefit of all. In this way the value of the currency will be protected and inflation will be low or controlled at least and naturally the market and private sectors will get a chance to play their parts. Therefore my personal recommendation is that it is necessary for the infant industries to get pampered but reaching a certain level (when they have made their national presence at least) the Government should step out of the game and let the economy work by itself. The Government should reduce the restriction of foreign trade and should implement stringent anti-inflation macroeconomic policy. The privatization of Government- owned enterprise would also help, if the circumstances are stable and feasible to do so. Read More