“The Myth of Free Trade and the Secret History of Capitalism”
According to research trade and development are interconnected and one leads to the other. Chang for instance is a renowned writer and economist and his contributions towards development and strategies have had a great influence across the globe. In his book ( Bad Samaritans: The myth of free trade and the secret history of capitalism) Chang brings out the relationship between developed and underdeveloped nations in connection to development strategies and theories (Chang). This author dwells more on neoliberal models of economic globalization specifically capitalistic development strategies. He gives his own perspective on what he refers to as bad Samaritan organization that impose development strategies and according to this author, the first world nations and the international monetary institutions such the World Bank are a bad influence. He holds this view because he believes that even though these nations encourage free trade and market, they apply protectionist policies to protect their own industries. Therefore this book review will evaluate his strategies with reference to the neoliberal theory and how it is different from what developed countries did to develop. The review will focus on the United States of America and compare her strategies to those in Korea. In addition, the review will attempt to cite the differences in the development strategies in US and Korea. Finally the conclusion will entail my view in relation to capitalism as a prerequisite to development.
In this chapter the author evaluates the main ingredients to development in the history of the world. He point out that the drivers of industrialization solely rely of the adoption of free market and trade and he UK as an example (page,12). According to Chang, in the history of development there are nations applying double standard for instance first world nations are found to use tariffs and protectionist policies and these are responsible for the sustained development in such nations. However protectionism adversely affects trading partners because it denies them a chance to trade without any limitations, it also continues to widen the gap between developed and the developing nations (Chang p,1-40). This behavior results to unequal development and even no development at all in developing nations thus such countries may experience economic stagnation in neo-liberal periods (page,20).
According to Chang, development in the first world nations dates back to the late 1940s. In this chapter the author analyses Great Britain and USA and their development strategies and he draws a conclusion that these nations and their like employs protectionist policies. In addition, this author argues that protectionist policies help such nations to alleviate stiff competition to upcoming industries in their home grounds enabling their survival (Chang p, 66). The chapter draws the fact that the most successful nations maximize protectionism and this is a challenge to neo-liberalist development strategies.
According to (Chang p,65), neo-liberal policies could facilitate development in developing nations to a great extent. However, the author argues that neo-liberal policies could be challenging, for instance Chang argues that these policies are responsible for the problems facing industries in Korea and the reason is that encouraging radical trade polices in developing nations where the economies focus more on export guided development that import allows multi-investment. With such investment, developed nations take the advantage because there is increased privatization of the means of production and the consequences include increased competition to infant industries brought about by liberalizing trade. This makes competition unbearable and infant industries in developing countries cannot keep up instead they close down.
In this chapter Chang analyzes some advantages associated with liberalizing the market. He argues that foreign investment is a prerequisite to economic development because it avails the resources to flow into developing economies through direct investment. However, Chang is quick to note that such liberalization calls for certain measures, for instance he argues that blending free trade and protectionist policies will be beneficial to upcoming nations just like America after the World War II (Chang page,70). The chapter reveals that there are benefits associated with foreign investment and liberalization of the market it helps in expanding the market however, it should have some measures.
According to Chang in this chapter there is a possibility that state interference in trade could facilitate development. He argues that neo-liberalist policies hold that the state should minimize its interference in trade by creating room for privatization to avoid chances of adversely affecting the market economy and free trade. He compares the performance of state owned enterprises to the private ones and draws the conclusion that it is very much possible to find nationalized entities performing very well unlike privatized industries (p, 160).
In this chapter, the author appreciates the differences in development between developed nations and the developing states by evaluating intellectual rights according to neo-liberalism. He argues that, intellectual right according to Word Trade Organization are an added advantage to the developed nations because it facilitates their markets. According to the author developing nations are beginning to accept these terms regarding the intellectual rights, they accepts the fact that they do not have the necessary technology to compete with developed nations and have embarked on exporting agricultural products. However this further aggravates inequality in terms of technology and he feels the great need in investing in knowledge to balance trade.
In chapter seven Chang evaluates the relationship between inflation and economic growth in a country. He notes that there is no direct relationship between the two because according to him some levels of inflation are healthy for development (p.160). He gives Brazil as an example of a fast developing nation with an inflation rate above forty percent. Inflation is not so good because according to neo-liberalists because inflation can affect the balance of trade by increasing import cost and this could be detrimental to an economy.
In his book ( Bad Samaritans: The myth of free trade and the secret history of capitalism), Chang attempts to establish the relationship between corruption and economic development. He argues that developed nations and international financial institutions attempt to link corruption to poor economic development however, according to him this is an excuse to avoid embracing neo-liberal theories that they had established before (p, 172). It is a lame excuse to deny assistance to up coming nations and justify their argument that market forces should be increased.
This chapter tries explaining the relationship between cultural practices and economic growth. Chang argues that developed nations are today using culture to frustrate developing nation’s efforts for the failed neo-liberal policies. According to him, culture has no correlation with development he argues that laziness cannot affect economic development however, poor economic development could lead to laziness therefore culture can be altered for the better (Chang p, 221).
In conclusion I would like to point out that trade is necessary for development and that neo-liberal ideas could apply and boost development to some extent. However, some nations have taken advantage to use protectionist strategies to develop. In addition, free market is essential but with some measures. Chang proves that there are no relationships between culture, corruption and economic growth it all depends on individual nation’s determination to excel and also protect their industries from possible exploitation. Neo-liberal ideas come from nations that do not embrace them.