Back in Cambridge, I naturally had to read the works from my renown lecturer, Dr. Ha-Joon Chang. One of them was his book Bad Samaritans: The Guilty Secrets of Rich Nations & the threat to Global Prosperity (Random House Paperback version). For those who don’t know, Chang in this book launches into a critic of the tenets of the “Washington Consensus”. He further explores the economic history of today’s industrialised nations (some which he covered more extensively in his previous book, Kicking Away the Ladder) to argue that these nations did not develop based on pure market-based policies and ideas, but rather through active state-led actions. Written in a story tale style for laymen (non-economic readers), the book gained much praise from the development and non-development community.
In comes, William (Bill) Easterly, Professor and well-known author of The White Man’s Burden: Why the West’s efforts to aid the rest have done so much ill and so little good. Easterly severely criticising Chang–see here–calling his version of development using only selective evidence and making and exaggerated claims that state-led development would be the way for economic growth. This was originally published in the New York Review of Books (I provided the full exchange in the preceding link as the NYRB article needs subscription). Chang was granted a chance to provide a defence and rebuttal of Easterly–which he did so here, only to receive a second salvo from Easterly, who again criticised the South Korean for falling into the trap of randomness. Easterly further published his exchanges with Chang in his (now closed) Aid Watchers blog–see here and here, generating lots of pro-Easterly comments and only a few pro-Chang comments. (I know I’ve said before that I don’t wish to link to the Aid Watchers website often. Well, this is an exception and furthermore, Easterly et al have supposedly stopped blogging).
So, was Bad Samaritans really an inaccurate recipe book for economic growth in developing countries? Was Chang falling into the trap of a “random walk” and using narrow and small sources?
A first glance however, shows that the “battle” was already lop-sided from the start. A quick look at Easterly’s CV and bio as well googling reveals some characteristics about him. To cut it short, Easterly, despite his critique of World Bank policies, is ultimately himself a neoliberal. This can be inferred from his work The White Man’s Burden. While noting the negative effects of Western aid/Official Development Assistance (ODA), promotes pro-free-market reforms and less state intervention. His chapter, “You can’t plan a market” may indicate that external intervention is bad, but also notes that markets should be left largely alone by themselves. His proposal of having “home-grown development” is commendable, but his idea is to leave the market largely alone. Further similar arguments by Easterly can be seen in articles such as this where he argues for less regulation in the post-2008 financial crisis world.
In contrast, Chang is on the opposite end of the spectrum. He is a well-known critic of not just the Washington Consensus, but prevailing free-market policies on any country of any period in time. His CV, journal articles, book chapters and edited books clearly reveal that the free-market was not the single tool used to foster development in the 18th, 19th, 20th or 21st Century. Basically, the criticism from Easterly is like a Nazi telling a Communist in three words “I dislike you”.
Anyway, back to the first critical article by Easterly. He lists what he called the “Gang of Four”–Singapore, Hong Kong, South Korea and Taiwan. First of all, this term “Gang of Four” is not readily used. Most people think of the growth success of East Asia as the “East Asian model” or the “East Asian Tigers”. Beyond that, Easterly misses out Japan, a country part of the East Asian Miracle and one that Chang brings up in Bad Samaritans. Easterly then cites that Chang’s book is about providing a blueprint for high rates of economic growth like the “Gang of Four” had. Chang in his reply clearly cites that his book was never about any formula(e) for growth, but simply criticising those in the neoliberal school of thought and the basic tenets. You don’t need to re-read Chang’s book to discover who’s right. Bad Samaritans is clearly a criticism of (extreme) neoliberal beliefs that prevailed long after the Washington Consensus has been discounted by development economists. Only as a side does Chang indicate that growth plans of developing countries should include an active state policy. Chang through the book (and his other works) of course hints that state intervention in the market can produce positive results. However, no where did he state that state-led intervention is the only way for high rates of growth. He is simply criticising the neoliberal actors/believers and NOT, as Easterly suggested, producing a recipe of for growth.
The second glaring issue is the line “In 2003, Arnold Harberger, a free- market economist from the University of Chicago,observed that “there aren’t too many policies that we can say with certainty…affect growth.” (emphasises added in bold). “Free-market economist”. This indicates (as my above paragraphs state) that Easterly is arguing against Chang from the neoliberal school. This line and the line about we don’t know how growth occurs strikes me. Is Professor (and Easterly is suppose to be a higher ranking academic than Chang), suggesting that there is no model for growth? Then what do we ever learn about in economics then? Why does Professor Easterly (and I hate written that salutation now) says that there is no certain model for growth and yet stands on his own tower to proclaim that? Why bother getting a PhD in economics and then say there’s no real route for economic growth? No world leader, from Obama in America to the smallest leader in a Least Developed Country wants to hire someone like Easterly and get the answer, “sorry, there’s no real model for growth”. Mind you, Easterly (unlike Chang), served in the World Bank. I wonder if he actually told Bank aid recipients this.
Anyway, moving further. Easterly uses a certain book called The Drunkard’s Walk: How Randomness Rules Our Lives by a certain Leonard Mlodinow to argue that Chang used small example (the “Gang of Four” countries) to prove that state-led intervention is the way for high rates of growth. Brushing away Easterly’s mistaken reading (or biased reading) of Chang’s book, let’s first look at the index. Chang in fact mentioned more than just Taiwan, South Korea, Singapore and Hong Kong in his book (he already discounts HK early on since HK in his view developed in a laissez-faire manner). Chang mentioned Westerns countries like Germany, Finland Sweden, other East Asian countries like Japan and Indonesia. Chang doesn’t mentioned every single country from both is 19th/19th century examples and 20th century examples. Apparently that is what Easterly wanted Chang to do so–if not he has fallen into the trap of the “Law of Small Numbers”.
As a research student (and even before), I was taught how not to rest on one or two examples to prove an argument. Yet, I’m not sure if I could have cited every single exmaple in for every argument in my politics, economics and development studies essays (even ignoring word limits). So neither should Chang. Bad Samaritans is not an academic thesis/dissertation for submission to a econometric degree. Even basic research degrees in economics don’t mark down students from not considering all examples. However, apparently, Easterly argued that Chang failed to do so and is in the “Drunkard’s Walk”. How many does Easterly require? All 190 plus countries? That would produce a Tom Clancy-style Bad Samaritans which was not the point of the book.
Let’s still consider Easterly’s pick on Chang’s argument on infant industry protection. Easterly argues that Chang fails to mention that there are examples of failures of state protected industries. That is pretty true but again Chang’s purpose in Bad Samaritans is not to produce a model for growth. It is arguing against the prevailing neoliberal norm that protection of industries is bad. Easterly provides the example of Morogor factory, Kenyta Railways and a list of failed African airlines. All of this was done without any citations whatsoever and in fact, this is also a small sample. Is Easterly not falling into the trap of his own “Drunkard’s Walk”? In the final analysis, yes, state-led intervention can lead to failures–see the work on Punam Chuhan-Pole as I mentioned in this post. Chang was arguing against the purists in the neoliberal camp that there should not be any state assistance for young industries. Again, the neoliberal beacon from Easterly is showing.
Easterly then tries to walk down the historical path like Chang. He (Easterly) asserted that “the shift in development advice in the 1980s toward free trade and free markets had nothing to do with the economic history of rich countries themselves.” Yes and No. Free-market economics (you note that Easterly doesn’t want to drop the word neoliberal) came at the demise of the belief of Keynesianism. It also came at the height of the Cold War and the drawing of the bipolar world of Western-supported capitalist and west-friendly states versus socialist/communist friendly world. Then comes another glaring point. Easterly says Chang’s selective evidence is called “confirmation bias”. He says Chang was pushing for inward state-led plans and wanted all developing countries to be like South Korea. He cites the (in)famous Anne Osborn Krueger, the neoliberal Bank Chief economist who help drive the Structural Adjustment/”Washington Consensus” plans. Easterly said that Krueger and Chang have different stories about Korea but that Chang was using selective evidence. This is a weak argument, clearly showing again how Easterly reeks of neoliberalism himself. Chang did argue against the neoliberal version of Korea’s success. (Something that Easterly did not mention).
To give Easterly credit, yes Chang talks quite a bit too much about South Korea. Chang, during the lectures I was under, noted that East Asian nations were South Korean-style development: regulation, tariffs, state action, copyright violations. No, not all East Asian nations were like that. Malaysia tried but failed to get a successful state-led growth model. Singapore was lectured by Albert Winsemius to open up its borders to Foreign Direct Investment and external trade, contrary to Chang’s view of Singapore. Not all East Asian nations developed through state-assist policies a la Korea. Yet, neither was all of East Asia using ultra-free market models.
Easterly picks at Chang’s few growth statistics. First, as I’ve mentioned, the book is not a full-page thesis, or a journal article, or a heavy macro/microeconomics book. It is a book that is meant to be read by anyone of any background. Therefore, figures are not littered in every single page although there are copious amount of footnotes. Anyway, Easterly again says that Chang is walking down the “Drunkard’s Walk” or finding pattern in the clouds. Easterly claims that Chang’s justification of neoliberalism producing weak or negative growth is false. If Easterly (ignoring his neoliberal roots) really believes these figures are narrow and inconclusive, what range of data will be appropriate for him? Do you really expect a single author like Chang to dig data from all parts of the 20th Century (before and after the so-called neoliberal period according to Easterly)? No research grant would ever be able to fund that and no single group of researchers would be able to produce that until at least thirty years time. As I said, if that were the case, Bad Samaritans would be a book as thick as a Tom Clancy novel.
“Pick and choose” seems to be the fault that Easterly is “seeing” in Chang’s book. Yet Easterly confidently says that Chang has no concrete evidence while Easterly himself did not providing any alternative. The small alternative from Easterly comes at the end where his “searchers” ideas comes in: Chang is no help to South Korea (this is a direct criticism and almost racist), it’s people like Ju-Yung Chung who were free-market entrepreneurs that brought success to South Korea. Again, this shows the true colours of this NYU professor: A pure pro-free market, die-heart neoliberal. In his counter reply published by the New York Review of Books (NYRB), Chang blasts Easterly false information by revealing Chung’s success was due to assistance from the government. One more area that Easterly picks on: it’s Chang’s earlier (and more development economics-based) book, Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem Press, 2003). He draws out another economist criticism of Kicking Away the Ladder, Douglas Irwin to show that Chang’s historical research is still inconclusive. Perhaps it is. Perhaps the industrialised nations today did not succeed through protectionist policies. However, Easterly just uses sweeping averages: that those nations back then were more laissez-faire on average, countries were more democratic on average etc. So from the call to not have “small numbers”. Pretty weak alternative don’t you think?
You may think that Chang was graciously allowed a rebuttal by the NYRB. However, my personal communication with my old professor revealed that Dr. Chang’s reply was a water-downed version; they only permitted him 400s words in reply. I won’t mention the long reply since it’s not published, but the short version here was a pretty good rebuttal. Then, the esteemed Easterly got a second chance to shoot back at Chang, which I personally think is unjustified. This isn’t some journal article debate. In the reply, Easterly again talks about the so-called Drunkard’s Walk” that Chang so happened to fall into. Easterly mentioned “at growth is slower under a system of neoliberalism (to use his term)” indicating that Easterly again doesn’t want to mention the “N” word and yet reeks of neoliberalism himself.
In the final analysis, we have a neoliberal hawk attack at heterodox economist who isn’t the only one to claim that neoliberalism/the “Washington Consensus” is not the model for development and has produced disastrous results. We have a die-hard free market, no government intervention supporter claiming that free trade, no government intervention can work. Worst of all, we have a critic, who relies only on the claim of the so-called “Law of Small Numbers”, “patternd in the clouds,”[the] Drunkard’s Walk” claiming that there is no real recipe for growth.
Yes, Chang does not consider all countries (who does in any of his academic work?), yes Chang harps a lot of East Asia as one model (which orthodox person doesn’t?), yes Chang talks a way too much about South Korea as a success model. However, Bad Samaritans was NOT a book about growth model. It was not evidently claiming that state action is the way to development (and Chang is not the only one in this area; we can trace people far back as Karl Polanyi who argued for the societal action in the market). It was a book arguing that neoliberalism is not the way to go, that big powers were providing unhelpful policies for development (thus the term Bad Samaritans) and that the roll back of the state was not the answer. Alas, Easterly, by trying to hit at Chang, only shows his true self.