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Kicking Away the Ladder – Development Strategy in Historical Perspective
Author: Ha-Joon Chang
Date of Publication: 2002-09-20
There is currently great pressure on developing countries to adopt a set of ?good policies? and ?good institutions? to foster their economic development. Naturally, there have been heated debates on whether these recommended policies and institutions are appropriate for developing countries. However, curiously, even many of those who are sceptical of the applicability of these policies and institutions to the developing countries take it for granted that these were the policies and the institutions that were used by the developed countries when they themselves were developing countries.
If this is the case, aren?t the developed countries, under the guise of recommending ?good? policies and institutions, actually making it difficult for the developing countries to use policies and institutions that had allowed them to develop economically in earlier times? Friedrich List, the mid-19th-century German economist who perfected the theory of infant industry protection (which interestingly was first systematically developed by the first US Secretary of Treasury, Alexander Hamilton), certainly thought so. He criticised the British preaching of the virtues of free trade to countries like Germany and the USA as an attempt to ?kick away the ladder?, with which Britain climbed to the top.
Pointing out that the allegedly ?good? policies and institutions recommended by the Bretton Woods institutions and the developed country governments have not been able to generate the promised growth dynamism in the developing countries during the last two decades or so, the book calls for a radical re-thinking on development strategy.
The book argues that, first of all, the above-mentioned historical facts about the developmental experiences of the developed countries should be more widely publicised so that the developing countries can make more informed choices about policies and institutions. Second, it argues, policy-related conditionalities attached to financial assistance from the IMF and the World Bank or from the donor governments should be radically changed, on the recognition that many of the policies that are these days considered ?bad? are in fact not, and that there can be no ?best practice? policy that everyone should use. Third, the WTO rules and other multilateral trade agreements should be re-written in such a way that a more active use of infant industry promotion tools (e.g., tariffs, subsidies) is allowed. Fourth, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of (in practice, today?s ? not even yesterday?s ? Anglo-American) institutions on all countries. Special care has to be taken in order not to demand excessively rapid upgrading of institutions that are not really essential in the earlier stages of economic development (such as strong intellectual property rights), when these countries already have relatively high-quality institutions by historical standards and when institutional upgrading can divert resources away from other crucial sectors such as education, health, and infrastructure.
The book argues that by adopting policies and institutions that are more suitable to their stages of development and to other conditions they face, the developing countries will be able to grow faster. This will benefit not only the developing countries but also the developed countries in the long run, as it will increase the trade and investment opportunities available to the developed countries in the developing countries.
Link to Publication: http://www.fpif.org/pdf/papers/SRtrade2003.pdf
Other publications by Ha-Joon Chang