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What They Don’t Tell You About Capitalism

Interview with Ha-Joon Chang

Ha-Joon Chang is one of the world’s leading development economists. Currently professor in the faculty of politics and economics at Cambridge University, he has served as a consultant to the World Bank, the Asian Development Bank and the European Investment Bank as well as to Oxfam and various United Nations agencies. He is the author of a number of critically acclaimed books, including 23 things they don’t tell you about capitalism (2010), ‘Kicking Away the Ladder: Development Strategy in Historical Perspective’, and ‘Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism’. In the interview with The European Financial Review, he answered some of the most important questions on the history of capitalism, the free market myth, his views the effect of neo-liberal economics on the world’s poorer countries, and the future of the world system and international development.

1. Looking back over economic history, how did rich countries get rich, and why are poor countries poor? What is free market myth? Is there better models/policies for economic development?

The common myth is that today’s rich countries got rich through free-market, free-trade policies while today’s poor countries are poor because they have not used such policies.

However, starting from 18th-century Britain, through to 19th-century US, Germany, and Sweden, to late 20th-century France, Norway, Finland, Japan, South Korea, and Taiwan, most of today’s rich countries have not become rich through free-market, free-trade policies. They used trade protectionism, subsidies, regulation on foreign investment, and other policy measures that are intended to protect and nurture their ‘infant industries’ against superior foreign competitors from abroad. Having practiced free trade most of the time, the Netherlands and Switzerland are partial exceptions to this, but even they do not fit today’s orthodoxy, as these countries refused to protect patents until the early 20th century.

Moreover, during the 1960s and the 1970s, when they are supposed to have pursued disastrous protectionist, interventionist development strategies, the developing countries in Africa and Latin America grew (in per capita terms) much faster than they have since the 1980s, when they are supposed to have ‘seen the light’ and adopted free-market, free-trade policies (1.6% vs. 0.2% in the case of Sub-Saharan Africa and 3.1% vs. 1.1% in the case of Latin America).

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