I recently listened to a very intriguing book called - Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism - by Ha-Joon Chang
Its not a ‘light’ book, but it really opened my eyes to a few issues concerning, free trade, poverty, capitalism and globalization. Chang demolishes the myth of capitalist free trade and its supposed successes with globalization. I agree with Richard Cunningham’s review below:
This is one economics text that should be read by everyone. Ha-Joon Chang the author, puts Free Trade and unfettered Capitalism within a historical and even political perspective. Along with an earlier book, “Kicking Away the Ladder: Development Strategy in Historical Perspective” he gives sufficient and tangible real world examples of how developing nations and infant & growing industries need tariffs and import substitution to both survive and thrive. An alternative title might be; Genuine & Honest Free Trade Maybe BUT Only Between Economic Equals.
I must say, that before I read this book, my ideas of Free Trade were idealistic and very naive. I would have been the first to say that Free Trade is a great idea for developing nations…. however, I would now disagree. Ill give a quick summary of the book below.
Every prosperous nation became so because at one point or another in history its leaders/government encouraged industry within that said country to thrive by offering subsidies and creating tariffs (import taxes) on imports within particular industries and other barriers like regulatory legislation and quotas. For example, the US Automotive industry thrived because the government offered subsidies to companies who invested in these businesses within the country and discouraged and made it very difficult for foreign car manufactures to import vehicles to the US…. until it was developed and strong. England did the same thing when wool was being exported. The king placed high import tariffs of woolen textiles and offered subsidies to textile industries with its boarders to grow the textile industry, which improved the economy, created jobs and enabled people to live better lives.
This all makes sense right? Every nation who has a high GDP has done this in various forms. So why then is FREE trade NOT a good idea for developing nations.
Because:
1) It discourages industry to thrive within its own boarders - ie - Nigeria is the worlds 11th highest oil producer - about 2.3 million barrels a day. However it does not have the capacity to refine the oil for its citizens and must then re-import the refined oil products. At HUGE expense and crippling of the economy.
2) The rich nations Lord it over the smaller with the dangling carrot of “AID MONEY” - Foreign Aid moneys used as lures to entice these developing nations to keep their borders open, to not impose tariffs. This is a good idea for the rich nations, but terrible for the developing countries! The only way to sustainably eliminate poverty is to create economies that drive and encourage industry and business. Creating jobs, health care, improving city infrastructure like roads, sewer, and basics like access to clean water.
Again, Genuine & Honest Free Trade Maybe BUT Only Between Economic Equals!
I like what Bob Geldof said about this book:
“I recommend this book to people who have any interest in these issues—i.e. everyone.” —Bob Geldof
