As the "New Economy" Crashes, to What Degree Will Mainstream Economists Change Their Stripes?

By Mark Engler, Dollars and Sense. Posted January 3, 2009.

Given capitalism’s foundational and often-celebrated exaltation of self-interest, one might surmise that wealthy countries are motivated in their ladder-kicking by a crass desire for greater market access for their own goods and services. However, Chang takes a gentler stance. He argues that, in the late stages of their economic development, countries like the United States and Britain have rewritten their economic histories to make themselves seem like paragons of free market virtue when “in fact, for a long time they were the most protectionist countries in the world.” The great majority of free market politicians, he contends, are genuinely well intentioned but have been duped by this revisionist history. Thus, they have become bad Samaritans, “making the lives of those whom they are trying to help more difficult.”

That’s No Way to Grow

Chang’s publishers somewhat disingenuously market him as a fresh new voice on the economics scene. In fact, although still relatively young, he has been involved in writing or editing over a dozen books. The most prominent, Kicking Away the Ladder, actually took its name from the aforementioned List quote, and it advanced many of the same ideas as Bad Samaritans, if in a more technical manner. At this point, Chang’s historical argument seems so solidly documented and sensibly put to be almost pedestrian. Its urgent relevance becomes clear only when it is placed against the unrelenting “free-trade” advocacy of laypeople like Thomas Freidman and the editorial board of The Washington Post, or against the work of party-line economists who, even in these days of government bailouts for Wall Street, remain in a state of denial.

For all their blasé self-confidence, defenders of the Washington Consensus have failed to answer the most damning charges against neoliberalism. The fact that most consistently nags is that the policies of corporate globalization have failed to live up to its promoters’ central promise: robust GDP growth. Chang notes, “[d]uring the 1960s and 1970s, when they were pursuing the ‘wrong’ policies of protectionism and state intervention, per capita income in the developing countries grew by 3.0% annually.... Since the 1980s, after they implemented neoliberal policies, they grew at only about half the speed” seen previously. “Growth failure,” he notes, “has been particularly noticeable in Latin America and Africa, where neoliberal programmes were implemented more thoroughly than in Asia.”

Studies purporting to show that globalizing nations fare better than non-globalizing ones fall apart if countries like China—which, as Chang reminds us, has steadfastly protected its economy—are not misleadingly categorized as “free trade” exemplars. The reason is clear. Chang compares the act of forcing developing countries to prematurely adopt “free trade” policy with the prospect of sending his six-year old son out into the open labor market to learn the value of hard work and thrift. Hypothetically, free-marketeers might contend that putting the boy into the workforce would allow him to overcome the dependency of parental care and to thwart market-distorting subsidies like public education. In the short term, the kid would probably bring in more cash than the average deadbeat first-grader. But obviously, his life choices—and future income—would be noticeably constricted.

Ultimately, Chang is not against trade or movement toward open markets—if appropriately timed and planned. At the same time, he seems to relish the opportunity to take shots at some of the most hallowed tenets of the corporate globalizers. He argues that foreign direct investment (the holy grail of conventional development economics) is not actually very helpful to poor countries in many circumstances. He reminds us that some of the world’s most efficient enterprises are state-owned (think Singapore Airlines, repeatedly voted the world’s favorite carrier), and that many now-private businesses became world-class firms under state control. And he makes a damning case against intellectually property laws designed by self-interested lobbyists at corporations such as Disney.

Chang is not alone in voicing many of these views. Even some his foils, such as Columbia University economist Jagdish Bhagwati, are critical of overzealous protections for corporations’ intellectual property. And the prevalence of this criticism is part of a wider trend. In the decade since the Asian financial crisis, the accumulating failures of neoliberal mandates have led to a dramatic increase in the number of mainstream economists who are willing to speak out against them. Arguments once commonplace at the protests and teach-ins of the global justice movement—but taboo within economics departments—have moved to far more central places in the public debate.

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Mark Engler, a writer based in New York City, is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, 2008). He can be reached via DemocracyUprising.com.

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