I got back from a five day trip to Chicago yesterday, and as such, was able to catch up on a lot of my magazine reading. A review that caught my attention was Amitabh Pal, of The Progressive Magazine, review of Ha-Joon Chang’s recent book 23 Things They Don’t Tell You About Capitalism. For those unfamiliar with Ha-Joon Chang, he is a heterodox economist who is a prominent supporter of industrial policy – a view largely shunned by mainstream economists.
Amitabh Pal gives a list of the positives and negatives of the book (some I agree with, some I don’t) but the part of the review that most caught my attention was this part:
Chang’s Achilles heel is his fixation with industrial policy, which he views as the road to salvation for poorer nations. Only if countries protect their infant industries, nurture them in various ways, and allow them to mature can they ascend to prosperity, he says.
But a number of nations have tried this with little success, the biggest example being India, where family-run conglomerates used protectionist policies to instead foist the most shoddy, substandard products on hapless Indian consumers (the dominant car model until the late 1980s was based on a 1950s British Morris Oxford).
The obvious difference between India and Chang’s native South Korea was that big business in India held sway over the state, rather than the other way around in South Korea, as delineated in Vivek Chibber’s Locked In Place: State-Building and Late Industrialization in India. Chang sidesteps such issues.
What I find most interesting is that Amitabh Pal’s rebuttal is nearly identical to the standard economic criticism of industrial policy: namely, if a countries government is independent enough to properly implement industrial policy, the country likely doesn’t need it, and if the government is too corrupt, industrial policy only makes things worse.
I find it interesting that one of the most prominent proponents of industrial policy, in arguing for industrial policy, completely avoids dealing with a central criticism head on. But I admit, I have personally not read the book – so maybe Amitabh Pal completely missed it?
I cannot seem to find the online version of the review, but it was listed in the printed edition of April’s publication.