Book Review: Kicking Away the Ladder

As the topic suggests, this book holds pretty interesting combination of history, economy and politics. Providing a gist of the entire book in a summarized way is difficult but appealing to do. This book is written by Ha-Joon Chang; he is a South Korean Institutional Economist. Other than that he has a multi-disciplinary background in academia (Economics, politics and development) for writing such a book comprehensively.

The main objective of this book is to present the real face of Now Developed Countries (NDCs) and their historical experience about development. The author historically explains how developed countries hide the way they themselves developed, their motives in hiding and what they dictate to developing countries. The author uses secondary sources of data to explain historical perspective. Author defines how industrialization occurred in Britain first and then it was done in other countries afterwards and how different factors helped them in doing so. A detailed history is being provided in the book for initially industrialized economies with respect to their policies and institutional structures.

The author disagrees that the particular policies and institutions guided by NDCs to developing countries matched what they have chosen at their development stages. So as there is a conflict between what they are showing and what they actually did, there has to be a hidden reason behind this all. A question arises of why NDCs are guiding developing countries ahistorical set of tools to develop. The answer to this is simple but complex at the same time. NDCs want to hold the power structure they are enjoying currently. They do not want developing countries to develop for their vested interests. The type of policies and institutional structures they have been guiding through the so called conventions and agreements like Washington consensus are expensive to run. These recommendations or dictation in reality is not the mean to develop, rather is an outcome of development. The policies and institutions NDCs opted are now labeled as bad and the opposite of it is said to be the means of development. We could not ignore the fact that every state wants their own interests to be met. This state politics is a reality in the international arena which feeds upon such agreements and consensus.

In the second chapter of the book, the author defines the set of policies opted by NDCs at their development stages. Britain being the first country to experience industrialization, did it by protecting its infant industry in a very smart way. Another way Britain enjoyed development was colonization. Not only Britain but others like USA, Germany, France, Sweden, Belgium and many others did it almost the same way with varying degree. Britain used policies like higher import tariffs on only finished products initially and export tariffs on raw goods to do import substitution. The motive was to sustain positive balance of payment for a longer time period. Raw goods are cheaper so they incentivized the refining and production of expensive finished products within the country to increase the value of export. Almost every NDCs have done this but with differing degrees. Colonization helped a lot to the colonial masters. Countries like Britain colonized India which was a technology leader in cotton products before being colonized. Britain in India demotivated production of finished products and initiated production of raw material for their own motives of holding a monopoly. These ways were helpful for the masters to get economic independence and growth through realism. Countries like Switzerland did not enforced patent rights protection. It helped them to copy technology from other advanced countries like Britain. Main way of benefiting from technology of other countries at that time was hiring human capital from them. Britain banned emigration of skilled labor for this reason. All of the NDCs got helped from tariffs and government interventions in the economic activity. In Japan, the state initiated industries of military products, locomotives and others to help its connected industries to grow first in the private sector and then privatized the industries to make them competitive. Late comers in the industrialization process used protectionism more smartly. Talking about colonies, India mainly experienced deindustrialization in the colonial period. Colonization did not helped colonies to grow but instead it did helped colonial heads. Powerful countries of that time made agreements with less powerful on tariffs rates. Tariff ceiling was used to maintain lower tariff rates in other countries. These were the historical experiences of NDCs towards development but now they are dictating laissez-fair policies. Again through which they can manipulate developing countries to get the most out of it.

Third chapter talks about the particular set of institutions NDCs established at the time of their industrialization. Democracy has been told to be a must pre-requisite for development to happen. History is not like what they now say. Institutions like democracy is expensive to run, which can even hold countries back from development. In NDCs in the past, only elite class was able to vote because of the minimum requirements to vote. People with more resources (according to land), education, skillset, tax paying ability were allowed to vote only. Then in countries like USA, there was discrimination to vote even on the ethnic basis. Black Americans were not allowed to vote due to direct and indirect measures. Only white men with more resources could vote making a very small portion of the society able to participate in the electoral process. Women in NDCs were also not able to vote. Voting rights for women was first introduced during 1906 in Australia. Democratic nations of today have been developed through the other way and they achieved expensive institutions as an outcome of development. Bureaucracy in the NDCs in the past was based on nepotism making it non-professional and non-inclusive. Bureaucratic institutions were literally sold to the elite royal families. These institutions were not connected to the state as their operational cost was not bared by the state as well. It eased the fiscal expenditure and did not diverted the focus of state towards regulating bureaucracy. Judiciary as an institution in NDCs experienced corruption and appointments beyond meritocracy. Non-professionals elite with little academic background in law were appointed. Looking at property rights, the author explains the cause and effect relation between public property rights (Common) and development. Common property motivated production with incentivizing the class of the society to get into production that cannot afford to have private property. Then the NDCs at their time of development pushed intellectual property rights protection into the system but with less enforcement. The system was pretty weak and authorities were not able to even confirm the invention belong to the party asking for intellectual property right or not. NDCs as a pre-requisite to development never had strong institutions. Rather they developed strong institutions through development process over time. Even when NDCs got rich in the past as the rich countries of today are, they did not had such strong institutions as their counterparts today have. It took longer for NDCs to get strong institutions because they evolved natural way over time. Today’s developing countries are doing it faster through adaptation and mostly setting strong institutions as a pre-requisite to development.

The author has pretty well organized his arguments with support of historical evidence. It is quite clear that the dictation from the outsider is never efficient nor effective for a progressive development. The development should be designed with in the territory by the indigenous people to make sure it happens more of a natural way. One thing I disagree to the author is on the way he differentiated the types of institutions NDCs had and developing countries have. History was there with its own set of international market and power structure. Today none of the countries can afford to have weak institutions that once NDCs had. But compulsory is that these institutions had to be developed a democratic way (from the people, by the people and for the people).