2.1. The Washington Consensus

As Chang points out in the Introduction to his book, “[t]here is currently great pressure on developing countries from the developed world . . . to adopt a set of ‘good policies’ and ‘good institutions’ to foster their economic development” (Chang 1). In terms of the former, Chang argues that the so-called “good” policies are “broadly those prescribed by the so-called Washington Consensus” (1). The term “Washington Consensus” was first introduced by John Williamson in 1989 to summarize the commonly shared themes among policy advice by Washington-based institutions, such as the International Monetary Fund, World Bank, and U.S. Treasury Department, which were believed to be necessary for helping underdeveloped countries with their development in the 1980s (GTN). According to Chang, these policies represented by the Washington Consensus can be summarized as including “restrictive macroeconomic policy, liberalization of international trade and investment, privatization and deregulation” (Chang 1), all of which are advocated by the NDCs today.

2.2. The Rungs of the Ladder

As the title of the book suggests, Chang compares economic development to ladder climbing, which takes time and undergoes different phases (rungs). The NDCs also experienced the inevitable transition from being underdeveloped to developed countries. More importantly, Chang manages to show that the NDCs’ actual process of development in the past suggests their applications of policies and institutions that were almost exactly the opposite of the “good” policies represented by the Washington Consensus and the “good” institutions.

To begin with, before 1600, almost all of the NDCs were underdeveloped. In order to give impetus to their economic developments in this early stage, virtually all the NDCs applied what Chang refers to as “a deliberate infant industrial promotion policy” (20), through which infant industries were built and protected domestically. In terms of institutions, virtually none of the “good” institutions suggested by the NDCs today were present at this point.

Later when the NDCs entered what Chang refers to as the “catch-up period,” “virtually all the NDCs actively used interventionist industrial, trade and technology (ITT) policies that are aimed at promoting infant industries” (18). For example, the import of related products were discouraged by government’s protectionist policies such as import tariff, and the growth of domestic infant industries were encouraged by government or state interventions such as “financial support for research and development, education, and training” (18). Institutions at this point were developing but not yet sophisticated and firm enough to be regarded as the causes of economic development.

Furthermore, as Chang points out, “[s]ome countries used activist ITT policies even after the catch-up was succeeded,” which was exactly the case as can be seen in the fact that duties on imported foreign manufactured goods remained or were even raised when infant industries were already well established, and that export duties of related manufactures gradually decreased and were eventually abolished at this point (18).

Finally, it was only until the NDCs established their industrial hegemonies so clearly in the mid-nineteenth century did they adopt free trade (60). At the same time, it was also up until this point did the appropriate and beneficial institutions become fairly available in the NDCs. As such, the NDCs gradually climbed the ladder of economic development not with the help of the “good” policies and institutions, but with ITT policies and less-than-perfect institutions.

2.3. The Actual Behavior of Developed Countries

In order to support his arguments, Chang cited many major NDCs in Chapter Two and Chapter Three. This essay will focus on Britain and the USA as two typical examples.

In terms of policy, both Britain and the USA adopted and had been aggressive users of ITT policy to promote their infant industries. As for Britain, Chang points out that “policies introduced after 1721 were deliberately aimed at promoting manufacturing industries” (21). For instance, import duties on raw materials used for manufactures were lowered, or even dropped altogether; however, duties on imported foreign manufacturing goods were significantly raised in order to protect domestic industries. At the same time, export duties on most manufactures were abolished to encourage export. As a result, domestic manufacturers were protected at home from competition with foreign finished products (22). During the Industrial Revolution, Britain adopted even more extensive ITT policies focusing on technological advancement. Therefore, despite the short period of tariff deduction after the repealing of the Corn Law in 1846, Chang draws our attention to the fact that “Britain’s technological lead that enabled this shift to a free trade regime had been achieved ‘behind high and long-lasting tariff barriers’” (24), and that Britain’s dramatic development was not caused by free trade and laissez-faire policies.

The USA was essentially the same as Britain in terms of policy. In 1816, “a new law was introduced to keep the tariff level close to that from wartime as a result of the considerable political influence of the infant industries that had grown up under the ‘natural’ protection accorded by the war with Britain” (26). In the following decades, new and higher tariffs had been enacted again and again in order to protect domestic infant industries and to help economic growth in the USA. Eventually, it was “only after the Second World War that the USA—with its industrial supremacy unchallenged—finally liberalized its trade and started championing the cause of free trade” (29).

In terms of institution, Britain and the USA again share many similarities. For example, universal suffrage was not adopted in Britain until 1928 and in the USA until 1965 (77). The “spoils” system, “where public offices were allocated to the loyalists of the ruling party,” became a key component in American politics in 1828, and in Britain sinecures were common in bureaucracy (79). Furthermore, there was no central bank in Britain until 1844 and in the USA until after 1929 (79). Therefore, these “good” institutions were not the cause but the outcome of Britain’s and the USA’s economic development over the years.

2.4. Critical Discussion of the Book

In his book, Chang foresees three potential objections to his argument. First of all, one might argue that underdeveloped countries have no choice but to adopt the recommended policies and institutions (135). Secondly, these policies and institutions have to be adopted because they involve interests of international investors (136). Thirdly, one might also argue that “the current developing countries should not consider the NDCs of 100 and 150 years ago their role models” (138). From my perspective, the first two objections are not of major significance because there are obvious counter-examples, such as China, that adopt what are by current definition “bad policies” and “poor institutions,” and yet not only experience tremendous economic development but also attract a huge amount of foreign investment. However, in terms of the third objection, Chang only vaguely deals with it. From my perspective, the third objection leads to two critical arguments.

Firstly and more significantly, Chang seems to have paid too much attention on infant industries and related policies and institutions. Even if Chang’s historical study of the NDCs is generally accurate, which is to say that the NDCs had indeed done something different than what they are now advocating to underdeveloped countries in terms of economic development, it does not necessarily mean that their economic success can be reduced to infant industries and related policies and institutions. In economic development, there are simply too many variables that cannot afford to be overlooked.

Secondly and less significantly, Chang’s study does not essentially prove anything because of the inductive reasoning behind his study. Therefore, Chang’s conclusion is obviously not free of the suspicion of hasty generalization, and his recommendations based upon the conclusion of his study accordingly lose their strength and applicability to some extent. Nevertheless, the reason why this second criticism is “less significant” is because nobody is able to deductively study economics, or any subjects that deal with human beings really, for human mentality and behavior are simply too fickle to predict, which is probably why economics is ironically less accurate in description and prediction than weather forecast today as Dr. Dugger has suggested in previous occasions.

In conclusion, in Kicking Away the Ladder: Development Strategy in Historical Perspective, Ha-Joon Chang argues that the NDCs are actually “kicking away the ladder” of economic development, and that underdeveloped countries should caution in following the so-called “good” policies and institutions. Instead, Chang argues that the so-labeled “bad” policies should at least be allowed and that institution building should accord with the particular situation of individual underdeveloped countries. Although Chang’s theme seems very disturbing at first glance, it does touch upon some truths in economic development that should not be overlooked in the days to come.

Works Cited

Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press, 2003.

Global Trade Negotiations (GTN). “Washington Consensus.” 9 November, 2009. < http://www.cid.harvard.edu/cidtrade/issues/washington.html>.