Saturday, November 16, 2013

Bad Samaritans

Bad Samarians: The myth of free trade and the secret history of capitalism
Author: Ha Joon Chang
Meetup link - http://www.meetup.com/Bangalore-Politically-Inspired/events/141408152/


Once at a meetup, I met this person who claimed that it must be better for those Bangladeshi laborers to work in those shoddy, lethal conditions than to do anything else. Being a strong believer in free market, he claimed that  these people are free to choose what they want to do and this is a choice that they had made. To him, it was not coerced, not an imposition but rather a natural outcome of this theory. He didn't bat an eyelid, argued all the time by looking straight into my eyes and asked me to prove with some data that why is this wrong. How does one counter the idea of free choice? Argue with proof, with data, with not just anecdotal cases but rather a framework that explains the macro phenomenon. It was not the first time i was having such a discussion. Previously, i had met at least two other gentlemen with whom i had a similar discussion and in all these times, the burden to prove them wrong was upon me and i did not had any idea how to do so. It is with these questions in mind, i began reading this book - Bad Samaritans - The myth of Free Trade.

The book begins with a few positive anecdotal cases, some  highlight the evils of capitalism while others show the success of state owned enterprises. If mere existence would have proven universality, then our logic will be doomed. But pleasantly, and indeed surprisingly, Ha-Hoon Chang manages to provide a theory that binds these examples. He comes up with a framework for which he discusses its advantages, its soundness and how it has been so commonly used in past yet we have not paid attention to it. He calls it namely Infant Protection.

Infant protection says that as nations or societies are growing up, it makes complete sense to avoid free trade. Using the analogy of children, Ha-Joon Chang argues, that as it makes complete sense to shield children from the scary adult world, protect them and gradually introduce them to bigger themes as they develop maturity, a similar approach should be followed with industries as well. When a country is developing, its industries do not have the technical expertise to compete with global economy. Their products are bound to be expensive to manufacture, less efficient and may be of sub-standard quality when compared with competition.  By allowing free trade and competition, it is surest thing that the industry will fail. But if the industry was protected, if the government shielded the industry by imposting imports, or subsidies, it gives that  industry some time to evolve and in the process it allows the industry to reach a point that it can compete with competition. Infant protectionism provides a gap to make sure the playing field is leveled for all industries.

Ha-Joon Chang argues that the current developed nations, be it UK or USA, in their developing years were extremely protectionist towards their respective domestic industries. He cites several examples in the book to make his case. He argues that these free-trade arguing nations are forgetting their own past and are acting as Bad Samaritans. He is quite critical of the policies of IMF, WTO and other such global organizations. He urges these countries to walk a tight rope of balancing protectionism and liberalization.

While the book shines in its early pages to elicit this theory and argues it rather convincingly, it becomes quite a drag in later pages. The book becomes repetitive as Chang applies protectionism over and over again to other areas. Later, in order to provide other perspectives, Chang devotes a chapter each on piracy, democracy and culture which are all claimed to be side-effects of free trade. In each one Chang fails to comprehensively articulate his position or defend his ideas.

But, with just over 200 pages, it is a worthy read. The chapter that goes into FDI does a great job in explaining alternatives of FDI and along with its pros and cons at a macro level. Chang is quite critical of people in his profession, economists, as he believes that they are acting in an acute self-interest. Unfortunately, critical reviews of this book has been generally ignored by the popular press or academia.

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The meetup discussion in this book was quite interesting. It attracted couple of folks who were quite Leftists in their  views. Sadly, none of the proponents of free market came. People want to hear what they believe.  But, it was a nice discussion in the end. The issue of piracy was at the center and attracted a lot of diverse view points.


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