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Countries urged to challenge "good" development policies

Ha-Joon Chang

Renowned economist Ha-Jooh Chang has urged developing countries to challenge conventional wisdom on the "good policies" and "good institutions" being promoted to help them achieve economic growth.

Speaking during a seminar at UNU Institute for New Technologies, the Cambridge-based economist said that some of the measures being prescribed by the developed world were actually restraining growth in  developing countries.

Expanding on the thesis of his award-winning book, Kicking away the Ladder – Development Strategy in Historical Perspective, Dr. Chang said: "The historical fact is that the rich countries did not develop on the basis of the policies and institutions that they now recommend to, and often force upon, the developing countries."

He said that a detailed historical survey of the experiences of the United States, European Union member states and the East Asian economies showed that almost all of today’s wealthy countries used tariff protection and subsidies to master cutting edge technologies and promote their industries. The long list of protective policies adopted by developed countries includes limits on ownership, insistence on joint ventures with local firms, barriers to 'brownfield investments' through mergers and acquisitions and performance requirements on exports, technology transfer or local procurement.

On the role of institutions, Dr. Chang noted that not only does it take time – decades, and even generations – to build up capable and effective institutions, but today’s developed countries achieved growth with much lower levels of institutional development. He cited 19th Century Britain, which made  huge strides economically at a time when it did not have universal suffrage, a central bank, income tax, or even minimal labour regulations – all of which are ubiquitous in many developing countries today.

"It is no coincidence that economic development has become more difficult during the last two decades when the developed countries started turning on the pressure on the developing countries to adopt the so-called "global standard" policies and institutions."

Dr. Chang said that support for developing countries in adopting policies and institutions more suited to their conditions could come in the form of:

• Publicizing the historical experiences of developed countries, not only in the interest of "getting history right" but also to allow developing countries to make more informed policy and institutional choices.

• Accepting that "there can be no best practice policies that everyone can use, and that the orthodox recipes are not working, as the basis for a radical overhaul of conditionalities to bilateral and multilateral financial assistance.

• Rewriting WTO rules to allow developing countries to adopt less stringent patent and other intellectual property rights laws.

• Encouraging structural improvements without imposing a fixed set of institutions on all countries.

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