The Progressive Magazine On Ha-Joon Chang’s Book

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.

11 Responses to “The Progressive Magazine On Ha-Joon Chang’s Book”


  • Chang’s argument is not that state intervention in the economy will produce prosperity. He’s very clear on that, though he probably discusses that more extensively in Bad Samaritans. His claim is that state intervention has produced prosperity and also looking to the countries that have brought themselves out of poverty, the majority did it with intensive government intervention and protection of infant industries.

    Still, India and China are the two states that are probably the leaders in economic growth since the advent of globalization. China more so. He says India foisted crappy cars on the peasantry. Maybe. But Tata Motors has emerged as a serious global player. The import restrictions produce short term pain (you don’t have access to the best products) in order to generate long term gain (what ultimately emerges is an industry, in this case automotive, that really does compete on a global scale).

    You don’t see Haiti, Africa, or Latin America producing high end (that is extremely profitable) products that compete on a global scale because they lack the infant industry protection. But India is. And India’s growth is crushing the growth of the neoliberal locations.

    Growth in Africa was decent prior to the neoliberal reforms. About 1980 and the advent of neoliberalism their infant industry protections were dismantled. Their economies collapsed. Look at India starting about the same time frame, with their state management of globalization. They’re doing amazing in comparison. Surprising that this criticism points to India as if it’s some sort of failure. You want failure? Look to Africa and neoliberalism.

    In any case the argument is a straw man like I said in the first paragraph. Chang doesn’t even claim that industrial policy is a guarantee of success. Still, it’s pretty amazing to me that the supposed failure of India is a strike against Chang. If this is failure, what would success look like? And if this is failure what does that make Africa and Latin America?

  • Of course the response here is that Africa, Latin America, Haiti and other countries are not really as free and neoliberal as you think. Remember? We went round and round on this? Where I show you economic freedom indexes, IMF reports, and World Bank stats and you reply with movie directors and linguists? You keep making these claims as if doing so makes them true. But you don’t back up your claims with facts – well, with facts that don’t come from movie directors and linguists.

    But glad to see you responded.

  • Btw, don’t give Chang too much credit – I think the reason Amitabh Pal focused on India is because…well, because he is Indian and that’s generally the focus of a lot of his writings.

  • Actually we haven’t really discussed Africa that much. Africa is basically run by the IMF and World Bank, and that means austerity. The turn around with the advent of the IMF and World Bank and their austerity has been pretty stark.

    And let’s also recall that I read your Freedom Index and detailed what it said. Haiti needs more government regulation. More taxes. They are ranked low because they lack government intervention. Even Heritage admits that. Your sources agreed with me and against your neoliberalism. So on my side are the indexes and the linguists (that is, the world’s top intellectual). You’ve still got the English Literature major, who you regard as your personal favorite commentator on economics.

    http://bigwhiteogre.blogspot.com/2011/04/bogus-freedom-index-from-heritage.html

  • One other comment on what you call the standard criticism of IP. You say if they are independent they don’t need IP and if the government is too corrupt IP doesn’t help. The latter claim is thoroughly rebutted by Chang. South Korea was enormously corrupt, as was the US. He goes to other places as well, like Indonesia. Suharto stole billions of dollars. But despite that economic performance wasn’t bad. He then goes to where neoliberalism and corruption are combined. Duvalier in Haiti and also Africa. Yeah, it’s a total disaster, and the neoliberals blame the corruption, whereas the IP countries have no need to look to corruption as an excuse because despite the even larger corruption they still succeed.

    Your other point about independence is the same one you’ve made many times. But as far as this being the standard view, what do you base that on? As I recall you pointed to DeLong on this. That’s obviously not enough to justify a claim about whether or not this is standard. So why do you say this is standard?

    And what is the basis for the claim? Do you have examples of independent places developing with neoliberalism? Because Hong Kong was a colony, which is the opposite of independent. You can say that Britain was hands off, but that’s not the same as independent. When you have a colony and they are doing what you like you are hands off. But then when you get out of line that’s when the lack of independence becomes clear. It’s the same in the Arab world. You kind of have local lackeys run the place. They can tow cars parked illegally and various other stuff that the ruling country isn’t to concerned about as long as things are going smoothly. Things get out of hand and in comes the American muscle to let them know that really the appearance of independence was a facade. Hong Kong was certainly not independent.

  • The Heritage report doesn’t say what you claim it says, but you’ve never been one to read carefully. On your side you have a linguist who has a grasp of economics that extends to the 12th century scholasticism, on HP’s side there is actual evidence. Such as this.

  • Jon,

    Here is the Heritage Freedom Index. Notice where Haiti is? Pretty far down there. Notice where the African countries are? Again, almost at the bottom of the list. Haiti’s problems are listed here.

    Don’t like the Heritage Freedom Index? Fine. Lets look at the “Ease Of Doing Business” index published by the world bank (a higher authority, even in my book). See the ranking here. Notice the pretty strong mappings between the two indexes? Again, Haiti is way towards the bottom, but Africa really dominates the bottom.

    Why is Haiti ranked so low? It lists the reasons why here.

    Haiti gets horrible ratings on these categories:

    Starting A Business
    Dealing With Construction Permits
    Registering Property
    Protecting Investors
    Trading Across Borders

    I would say these are ALL fundamental to economic growth. Wouldn’t you? In other words, even if you did everything else right, you can’t move forward if these are messed up. Property rights is big. Trading Across borders is HUGE. All of these Haiti scores abysmally. So why even begin with neoliberalism (and go against economic consensus) when you have clear explanations for its poverty well within the economic fold???

    Of course, this is the point where you start listing linguists and movie directors, and start with your claims that all of these organizations are somehow incahots with the rich. And it’s really your poor caring linguist and movie directors who have their hearts in the right place. We should trust them and disregard the experts.

    Sorry man, I don’t buy it.

  • Jon,

    Regarding IP, you write: You say if they are independent they don’t need IP and if the government is too corrupt IP doesn’t help. The latter claim is thoroughly rebutted by Chang. South Korea was enormously corrupt, as was the US.

    Were arguing semantics here Jon. Of course these governments were corrupt. Every government is corrupt. There is no such thing as a benevolent government. I believe this to the core of me. Remember, I am the conservative here?

    But there are degrees of corruption. Some governments, and especially head of states, are so corrupt they want to run down their country just to amass all the short term power and wealth they can. Think of many African countries. Then there are the corrupt governments that would also like to bring economic growth to their country. This is the kind of government I am referring to as the non-corrupt country.

    If you are uncomfortable with the terminology of “non-corrupt”, then substitute this well phrased sentence coined by Brad DeLong: “a government that was both competent and (relatively) benevolent–in the sense of wanting to see the economy grow rapidly if that could be accomplished without endangering its hold on power”. Because that is really what I mean.

    Regarding the standard view, I could probably look for resources. But that would take too much time (its not like there is a list somewhere I can point you to). But it mainly comes from my many years of reading both sides of an argument. When a liberal and conservative within the economics profession, a Brad DeLong and Don Boudreaux, a Paul Krugman and a Milton Friedman, both agree on something, chances are that’s a consensus standard view.

    So out of pure laziness, I am going to punt on digging this up. For now, you can add an AFAIK to the front of my claim that this is standard. Better? :_)

    Regarding industiral policy, again…this would be hard to do, as it’s the common practice of ALL countries governments to try and control free trade in some way. You point to correlation and imply causation. My point here is that you have to SHOW causation. Brad DeLong disputes your claims regarding China (more neoliberal areas, greater economic growth, etc). I have disputed your claims with regard to Hong Kong. I could make similar claims with regard to Chile. We can look at areas within countries that did different things in different areas. etc. This is what economists do! This is their job! It’s not as easy as listing countries that performed IP and grew rich, vs ones that didnt.

    But here, let me phrase this in a different way: out of the countries that did do IP, I would say maybe 40% of them succeeded. Out of the VERY VERY few countries that didn’t do IP (and really, there is only one – Hong Kong – and maybe even Chile), 100% of them are successful now. And even countries that DID do IP (ie China), areas that allowed uninhibited growth (ie no IP, neoliberalism), those areas grew FASTER.

    How is that for a correlation? Even just doing your very simplistic method of listing countries that did IP vs ones that didn’t, correlation leans in my direction.

    Darf Ferrara,

    My explanation of why Jon feels so comfortable with such fundamentalists, non-data based views, is because he likes fundamentalism. If you look at the full trajectory of where he has been, that is the one constant: fundamentalism. Something about that attracts him. So he likes gravitating towards those corners, whether on the right or the left. It’s a personality characteristic, I suppose.

  • Mark Pennington has started a series debunking Chang Ha-Joon’s numerous strawman arguments.
    http://pileusblog.wordpress.com/2011/07/22/what-ha-joon-chang-doesnt-tell-you-about-free-market-economics/

    Probably the most breathtakingly stupid part of Chang’s book is his section about free market economists supposedly not supporting free immigration.

    I mention it here, I suspect he is referring to Milton Friedman’s comment about open immigration and welfare states (and, by the way, I disagree with Friedman’s point).
    http://eng.cfe.org/mboard/bbsDetail.asp?cid=mn1309270313&idx=2008

    From Chang’s book:
    “Hardly any of them [[free market economists]] advocates the abolition of immigration control. But, if they are to be consistent, they should also advocate free immigration. The fact that few of them do once again proves my point in Thing 1 that the boundary of the market is politically determined and that free-market economists are as ‘political’ as those who want to regulate markets.”

    1) In that case, because he is wrong, it undermines his point in Thing 1.

    2) What the hell is Chang talking about? It is very typical for free market advocates to support more immigration, many are even for open borders. I suspect with Chang’s “all-or-nothing” style of arguments that he must mean that if you want someone to even have a passport that it means you are for immigration control.

    Anyway, Chang himself supports immigration control, as he makes clear in the following section and in one of his previous books.

    “Of course, in criticizing the inconsistency of free-market
    economists about immigration control, I am not arguing that
    immigration control should be abolished – I don’t need to do
    that because (as you may have noticed by now) I am not a
    free-market economist.”

    Okay, someone please back up Chang’s claim that free market economists don’t advocate open immigration. If anyone can do it then I will send you a free copy of Chang’s next book once he publishes it.

  • Mark Pennington has started a series debunking Chang Ha-Joon’s numerous strawman arguments.
    http://pileusblog.wordpress.com/2011/07/22/what-ha-joon-chang-doesnt-tell-you-about-free-market-economics/

    Probably the most breathtakingly stupid part of Chang’s book is his section about free market economists supposedly not supporting free immigration.

    I mention it here, I suspect he is referring to Milton Friedman’s comment about open immigration and welfare states (and, by the way, I disagree with Friedman’s point).
    http://eng.cfe.org/mboard/bbsDetail.asp?cid=mn1309270313&idx=2008

    From Chang’s book:
    “Hardly any of them [[free market economists]] advocates the abolition of immigration control. But, if they are to be consistent, they should also advocate free immigration. The fact that few of them do once again proves my point in Thing 1 that the boundary of the market is politically determined and that free-market economists are as ‘political’ as those who want to regulate markets.”

    1) In that case, because he is wrong, it undermines his point in Thing 1.

    2) What the hell is Chang talking about? It is very typical for free market advocates to support more immigration, many are even for open borders. Not all do, of course, but as is typical with Chang, he cherry-picks information, applying his usual broadbrush of ignoring there are differences of opinion among free-market advocates. I suspect with Chang’s unsophisticated “all-or-nothing” style of argument that he must mean that if you want someone to even have a passport that it means you are for immigration control.

    Anyway, Chang himself supports immigration control, as he makes clear in the following section and in one of his previous books.

    “Of course, in criticizing the inconsistency of free-market
    economists about immigration control, I am not arguing that
    immigration control should be abolished – I don’t need to do
    that because (as you may have noticed by now) I am not a
    free-market economist.”

  • I apologize for the Spam filtering Casey. I just noticed it now. I have approved both of your comments. Much appreciated.

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