Likewise, the market is an exceptionally effective mechanism for coordinating complex economic activities across numerous economic agents, but it is no more than that a mechanism, a machine. And like all machines, it needs careful regulation and steering. In the same way that a car can be used to kill people when driven by a drunken driver, or to save lives when it helps us deliver an emergency patient to hospital in time, the market can do wonderful things but also deplorable ones. The same car can be made better by putting in improved brakes, more powerful engines or more efficient fuel, and the same market can be made to perform better through appropriate changes to the attitudes of the participants, their motives and the rules that govern it.
There are different ways to organize capitalism. Free-market capitalism is only one of them and not a very good one at that. The last three decades have shown that, contrary to the claims of its proponents, it slows down the economy, increases inequality and insecurity, and leads to more frequent (and sometimes massive) financial crashes.
There is no one ideal model. American capitalism is very different from Scandinavian capitalism, which in turn differs from the German or French varieties, not to speak of the Japanese form. For example, countries which find American-style economic inequality unacceptable (which some may not) may reduce it through a welfare state financed by high progressive income taxes (as in Sweden) or through restrictions on money-making opportunities themselves by, say, making the opening of large retail stores difficult (as in Japan). There is no simple way to choose between the two, even though I personally think that the Swedish model is better than the Japanese one, at least in this respect.
So capitalism, yes, but we need to end our love affair with unrestrained free-market capitalism, which has served humanity so poorly, and install a better-regulated variety. What that variety would be depends on our goals, values and beliefs.
Second: we should build our new economic system on the recognition that human rationality is severely limited we should build our new economic system on the recognition that human rationality is severely limited. The 2008 crisis has revealed how the complexity of the world we have created, especially in the sphere of finance, has vastly outpaced our ability to understand and control it. Our economic system has had a mighty fall because it was rewired following the advice of economists who believe the human ability to deal with complexity is essentially unlimited.
The new world should be formed with a clear recognition that we have only limited powers of objective reasoning. It is suggested that we can prevent another major financial crisis by enhancing transparency. This is wrong. The fundamental problem is not our lack of information but our limited ability to process it. Indeed, if lack of transparency was the problem, the Scandinavian countries famously transparent would not have experienced a financial crisis in the early 1990s. As long as we continue to allow unlimited 'financial innovations', our ability to regulate will always be outstripped by our ability to innovate.
If we are really serious about preventing another crisis like the 2008 meltdown, we should simply ban complex financial instruments, unless they can be unambiguously shown to benefit society in the long run in the long run. This idea will be dismissed by some as outrageous. It's not. We do that all the time with other products think about the safety standards for food, drugs, automobiles and aeroplanes. What would result is an approval process whereby the impact of each new financial instrument, concocted by 'rocket scientists' within financial firms, is assessed in terms of risks and rewards to our system as a whole in the long run, and not just in terms of short-term profits for those firms.
Third: while acknowledging that we are not selfless angels, we should build a system that brings out the best, rather than worst, in people we should build a system that brings out the best, rather than worst, in people.
Free-market ideology is built on the belief that people won't do anything 'good' unless they are paid for it or punished for not doing it. This belief is then applied asymmetrically and reconceived as the view that rich people need to be motivated to work by further riches, while poor people must fear poverty for their motivation.
Material self-interest is a powerful motive. The communist system turned out to be unviable because it ignored, or rather wanted to deny, this human driver. This does not, however, prove that material self-interest is our only motive. People are not not as much propelled by material self-interest as free-market textbooks claim. If the real world were as full of rational self-seeking agents as the one depicted in those textbooks, it would collapse under the weight of continuous cheating, monitoring, punishment and bargaining. as much propelled by material self-interest as free-market textbooks claim. If the real world were as full of rational self-seeking agents as the one depicted in those textbooks, it would collapse under the weight of continuous cheating, monitoring, punishment and bargaining.
Moreover, by glorifying the pursuit of material self-interest by individuals and corporations, we have created a world where material enrichment absolves individuals and corporations of other responsibilities to society. In the process, we have allowed our bankers and fund managers, directly and indirectly, to destroy jobs, shut down factories, damage our environment and ruin the financial system itself in the pursuit of individual enrichment.
If we are to prevent this kind of thing happening again, we should build a system where material enrichment is taken seriously but is not allowed to become the only goal. Organizations be they corporations or government departments should be designed to reward trust, solidarity, honesty and cooperation among their members. The financial system needs to be reformed to reduce the influence of short-term shareholders so that companies can afford to pursue goals other than short-term profit maximization. We should better reward behaviour with public benefits (e.g., reducing energy consumption, investment in training), not simply through government subsidies but also by bestowing it with a higher social status.
This is not just a moral argument. It is also an appeal to enlightened self-interest. By letting short-term self-interest rule everything we risk destroying the entire system, which serves no one's interest in the long run.
Fourth: we should stop believing that people are always paid what they 'deserve' we should stop believing that people are always paid what they 'deserve'.
People from poor countries are, individually, often more productive and entrepreneurial than their counterparts in rich countries. Should they be given equal opportunity through free immigration, these people can, and will, replace the bulk of the workforce in rich countries, even though that would be politically unacceptable and undesirable. Thus seen, it is the national economic systems and immigration control of the rich countries, rather than their lack of personal qualities, that keep poor people in poor countries poor.
Emphasizing that many people stay poor because they do not have true equal opportunity is not to say that they deserve to remain poor insofar as they have had equal opportunity. Unless there is some equalizing in outcome, especially (although not exclusively) so that all children can have more than minimum nutrition and parental attention, the equality of opportunity provided by the market mechanism will not guarantee truly fair competition. It will be like a race where no one has a head start but some people run with weights on their legs.
At the other end of the spectrum, executive pay in the US has gone into the stratosphere in the last few decades. US managers have increased their relative pay by at least ten times between the 1950s and today (an average CEO used to get paid thirty-five times an average worker's salary then, while today he is paid 300400 times that), but that is not because their productivity has risen ten times faster than that of their workers. Even excluding stock options, US managers are paid two and a half times what their Dutch counterparts are or four times what their Japanese counterparts are, despite no apparent superiority in their productivity.
Only when we are free to question the hand of cards that the market has dealt us will we be able to find ways to establish a more just society. We can, and should, change the rules of the stock market and the corporate governance system in order to restrain excessive executive pay in limited liability companies. We should not only provide equal opportunity but also equalize, to an extent, the starting points for all children for a truly meritocratic society. People should be given a real, not superficial, second chance through unemployment benefits and publicly subsidized retraining. Poor people in poor countries should not be blamed for their poverty, when the bigger explanations lie in the poverty of their national economic systems and immigration control in the rich countries. Market outcomes are not 'natural' phenomena. They can be changed.
Fifth: we need to take 'making things' more seriously we need to take 'making things' more seriously. The post-industrial knowledge economy is a myth. The manufacturing sector remains vital.
Especially in the US and the UK, but also in many other countries, industrial decline in the last few decades has been treated as an inevitability of a post-industrial age, if not actively welcomed as a sign of post-industrial success.
But we are material beings and cannot live on ideas, however great the knowledge economy may sound. Moreover, we have always lived in a knowledge economy in the sense that it has always been a command over superior knowledge, rather than the physical nature of activities, that has ultimately decided which country is rich or poor. Indeed, most societies are still making more and more things. It is mainly because those who make things have become so much more productive that things have become cheaper, in relative terms, than services that we think we don't consume as many things as before.
Unless you are a tiny tax haven (a status that is going to become more and more difficult to maintain, following the 2008 crisis), such as Luxemburg and Monaco, or a small country floating on oil, such as Brunei or Kuwait, you have to become better at making things in order to raise your living standard. Switzerland and Singapore, which are often touted as post-industrial success stories, are in fact two of the most industrialized economies in the world. Moreover, most high-value services are dependent (sometimes even parasitic) on the manufacturing sector (e.g., finance, technical consulting). And services are not very tradable, so an overly large service sector makes your balance of payments situation more precarious and thus your economic growth more difficult to sustain.
The myth of the post-industrial knowledge economy has also misdirected our investments. It has encouraged excessive emphasis on, for example, formal education, whose impact on economic growth turns out to be highly complex and uncertain, and on the spread of the internet, whose productivity impacts are actually quite modest.
Investment in 'boring' things like machinery, infrastructure and worker training needs to be encouraged through appropriate changes in tax rules (e.g., accelerated depreciation for machinery), subsidies (e.g., to worker training) or public investment (e.g., redirection into infrastructural development). Industrial policy needs to be redesigned to promote key manufacturing sectors with high scope for productivity growth.
Sixth: we need to strike a better balance between finance and 'real' activities we need to strike a better balance between finance and 'real' activities.
A productive modern economy cannot exist without a healthy financial sector. Finance plays, among other things, the crucial role of resolving the mismatch between the act of investment and the bearing of its fruits. By 'liquidizing' physical assets whose characteristics cannot be changed quickly, finance also helps us to reallocate resources quickly.
However, in the last three decades, finance has become the proverbial tail that wags the dog. Financial liberalization has made it easier for money to move around, even across national borders, allowing financial investors to become more impatient for instant results. As a consequence, both corporations and governments have been forced to implement policies that produce quick profits, regardless of their long-term implications. Financial investors have utilized their greater mobility as a bargaining chip in extracting a bigger share of national income. Easier movement of finance has also resulted in greater financial instability and greater job insecurity (which is needed for delivering quick profits).
Finance needs to be slowed down. Not to put us back to the days of debtors' prison and small workshops financed by personal savings. But, unless we vastly reduce the speed gap between finance and the real economy, we will not encourage long-term investment and real growth, because productive investments often take a long time to bear fruit. It took Japan forty years of protection and government subsidies before its automobile industry could be an international success, even at the lower end of the market. It took Nokia seventeen years before it made any profit in the electronics business, where it is one of the world leaders today. However, following the increasing degree of financial deregulation, the world has operated with increasingly shorter time horizons.
Financial transaction taxes, restrictions on cross-border movement of capital (especially movements in and out of developing countries), greater restrictions on mergers and acquisitions are some of the measures that will slow down finance to the speed at which it helps, rather than weakens or even derails, the real economy.
Seventh: government needs to become bigger and more active government needs to become bigger and more active.
In the last three decades, we have been constantly told by free-market ideologues that the government is part of the problem, not a solution to the ills of our society. True, there are instances of government failure sometimes spectacular ones but markets and corporations fail too and, more importantly, there are many examples of impressive government success. The role of the government needs to be thoroughly reassessed.
This is not just about crisis management, evident since 2008, even in the avowedly free-market economies, such as the US. It is more about creating a prosperous, equitable and stable society. Despite its limitations and despite numerous attempts to weaken it, democratic government is, at least so far, the best vehicle we have for reconciling conflicting demands in our society and, more importantly, improving our collective well-being. In considering how we can make the best out of the government, we need to abandon some of the standard 'trade-offs' bandied about by free-market economists.
We have been told that a big government, which collects high income taxes from the wealthy and redistributes them to the poor, is bad for growth, as it discourages wealth creation by the rich and makes lower classes lazy. However, if having a small government is good for economic growth, many developing countries that have such a government should do well. Evidently this is not the case. At the same time, the Scandinavian examples, where a large welfare state has coexisted with (or even encouraged) good growth performance, should also expose the limits to the belief that smaller governments are always better for growth.
Free-market economists have also told us that active (or intrusive, as they put it) governments are bad for economic growth. However, contrary to common perception, virtually all of today's rich countries used government intervention to get rich (if you are still not convinced about this point, see my earlier book, Bad Samaritans Bad Samaritans). If designed and implemented appropriately, government intervention can increase economic dynamism by augmenting the supply of inputs that markets are bad at supplying (e.g., R&D, worker training), sharing risk for projects with high social returns but low private returns, and, in developing countries, providing the space in which nascent firms in 'infant' industries can develop their productive capabilities.
We need to think more creatively how the government becomes an essential element in an economic system where there is more dynamism, greater stability and more acceptable levels of equity. This means building a better welfare state, a better regulatory system (especially for finance) and better industrial policy.
Eighth: the world economic system needs to 'unfairly' favour developing countries the world economic system needs to 'unfairly' favour developing countries.
Because of the constraints imposed by their democratic checks, the free-market advocates in most rich countries have actually found it difficult to implement full-blown free-market reform. Even Margaret Thatcher found it impossible to consider dismantling the National Health Service. As a result, it was actually developing countries that have been the main subjects of free-market policy experiments.
Many poorer countries, especially in Africa and Latin America, have been forced to adopt free-market policies in order to borrow money from free-market-loving international financial organizations (such as the IMF and the World Bank) and rich-country governments (that also ultimately control the IMF and the World Bank). The weakness of their democracies meant that free-market policies could be implemented more ruthlessly in developing countries, even when they hurt a lot of people. This is the ultimate irony of all people needing most help were worst hit. This tendency was reinforced by the strengthening of global rules over the last couple of decades on what governments can do to protect and develop their economies (more necessary in the poor countries) through the establishment and/ or strengthening of organizations such as the WTO, the BIS and various bilateral and regional free-trade and investment agreements. The result has been a much more thorough implementation of free-market policies and much worse performance in terms of growth, stability and inequality than in developed countries.
The world economic system needs to be completely overhauled in order to provide greater 'policy space' for the developing countries to pursue policies that are more suitable to them (the rich countries have much greater scope to bend, or even ignore, international rules). The developing countries need a more permissive regime regarding the use of protectionism, regulation of foreign investment and intellectual property rights, among others. These are policies that the rich countries actually used when they were developing countries themselves. All this requires a reform of the WTO, abolition and/or reform of existing bilateral trade and investment agreements between rich and poor countries, and changes in the policy conditions attached to loans from international financial organizations and to foreign aid from the rich countries.
Of course, these things are 'unfairly favourable' to the developing countries, as some rich countries would argue. However, developing countries already suffer from so many disadvantages in the international system that they need these breaks to have a hope of catching up.
The eight principles all directly go against the received economic wisdom of the last three decades. This will have made some readers uncomfortable. But unless we now abandon the principles that have failed us and that are continuing to hold us back, we will meet similar disasters down the road. And we will have done nothing to alleviate the conditions of billions suffering poverty and insecurity, especially, but not exclusively, in the developing world. It is time to get uncomfortable.
Acknowledgements
I have benefited from many people in writing this book. Having played such a pivotal role in bringing about my previous book, Bad Samaritans Bad Samaritans, which focused on the developing world, Ivan Mulcahy, my literary agent, gave me constant encouragement to write another book with a broader appeal. Peter Ginna, my editor at Bloomsbury USA, not only provided valuable editorial feedback but also played a crucial role in setting the tone of the book by coming up with the title, 23 Things They Don't Tell You about Capitalism 23 Things They Don't Tell You about Capitalism, while I was conceptualizing the book. William Goodlad, my editor at Allen Lane, took the lead in the editorial work and did a superb job in getting everything just right.
Many people read chapters of the book and provided helpful comments. Duncan Green read all the chapters and gave me very useful advice, both content-wise and editorially. Geoff Harcourt and Deepak Nayyar read many of the chapters and provided sagacious advice. Dirk Bezemer, Chris Cramer, Shailaja Fennell, Patrick Imam, Deborah Johnston, Amy Klatzkin, Barry Lynn, Kenia Parsons, and Bob Rowthorn read various chapters and gave me valuable comments.
Without the help of my capable research assistants, I could not have got all the detailed information on which the book is built. I thank, in alphabetical order, Bhargav Adhvaryu, Hassan Akram, Antonio Andreoni, Yurendra Basnett, Muhammad Irfan, Veerayooth Kanchoochat, and Francesca Reinhardt, for their assistance.
I also would like to thank Seung-il Jeong and Buhm Lee for providing me with data that are not easily accessible.
Last but not least, I thank my family, without whose support and love the book would not have been finished. Hee-Jeong, my wife, not only gave me strong emotional support while I was writing the book but also read all the chapters and helped me formulate my arguments in a more coherent and user-friendly way. I was extremely pleased to see that, when I floated some of my ideas to Yuna, my daughter, she responded with a surprising intellectual maturity for a 14-year-old. Jin-Gyu, my son, gave me some very interesting ideas as well as a lot of moral support for the book. I dedicate this book to the three of them.
Notes.
THING 1.
1 On how tariff (hampering free trade in goods) was another important issue in the making of the American Civil War, see my earlier book On how tariff (hampering free trade in goods) was another important issue in the making of the American Civil War, see my earlier book Kicking Away the Ladder Development Strategy in Historical Perspective Kicking Away the Ladder Development Strategy in Historical Perspective (Anthem Press, London, 2002), pp. 248 and references thereof. (Anthem Press, London, 2002), pp. 248 and references thereof.
THING 2.
1 A. Smith, A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations An Inquiry into the Nature and Causes of the Wealth of Nations (Clarendon Press, Oxford, 1976), p. 741. (Clarendon Press, Oxford, 1976), p. 741.
2 N. Rosenberg and L. Birdzell, N. Rosenberg and L. Birdzell, How the West Grew Rich How the West Grew Rich (IB Tauris & Co., London, 1986), p. 200. (IB Tauris & Co., London, 1986), p. 200.
3 A. Glyn, A. Glyn, Capitalism Unleashed Finance, Globalisation, and Welfare Capitalism Unleashed Finance, Globalisation, and Welfare (Oxford University Press, Oxford, 2004), p. 7, fig. 1.3. (Oxford University Press, Oxford, 2004), p. 7, fig. 1.3.
4 J. G. Palma, 'The revenge of the market on the rentiers Why neo-liberal reports on the end of history turned out to be premature', J. G. Palma, 'The revenge of the market on the rentiers Why neo-liberal reports on the end of history turned out to be premature', Cambridge Journal of Economics Cambridge Journal of Economics, 2009, vol. 33, no. 4, p. 851, fig. 12.
5 See W. Lazonick and M. O'Sullivan, 'Maximising shareholder value: A new ideology for corporate governance', See W. Lazonick and M. O'Sullivan, 'Maximising shareholder value: A new ideology for corporate governance', Economy and Society Economy and Society, 2000, vol. 29, no. 1, and W. Lazonick, 'The buyback boondoggle', Business Week Business Week, 24 August 2009.
6 Lazonick, op. cit. Lazonick, op. cit.
THING 4.
1 R. Sarti, 'Domestic service: Past and present in Southern and Northern Europe', R. Sarti, 'Domestic service: Past and present in Southern and Northern Europe', Gender and History Gender and History, 2006, vol. 18, no. 2, p. 223, table 1.
2 As cited in J. Greenwood, A. Seshadri and M. Yorukoglu, 'Engines of liberation', As cited in J. Greenwood, A. Seshadri and M. Yorukoglu, 'Engines of liberation', Review of Economic Studies Review of Economic Studies, 2005, vol. 72, p. 112.
3 C. Goldin, 'The quiet revolution that transformed women's employment, education, and family', C. Goldin, 'The quiet revolution that transformed women's employment, education, and family', American Economic Review American Economic Review, 2006, vol. 96, no. 2, p. 4, fig. 1.
4 I. Rubinow, 'The problem of domestic service', I. Rubinow, 'The problem of domestic service', Journal of Political Economy Journal of Political Economy, 1906, vol. 14, no. 8, p. 505.
5 The book is H.-J. Chang and I. Grabel, The book is H.-J. Chang and I. Grabel, Reclaiming Development An Alternative Economic Policy Manual Reclaiming Development An Alternative Economic Policy Manual (Zed Press, London, 2004). (Zed Press, London, 2004).
6 K. Ohmae, K. Ohmae, The Borderless World: Power and Strategy in the Interlinked Economy The Borderless World: Power and Strategy in the Interlinked Economy (Harper & Row, New York, 1990). (Harper & Row, New York, 1990).
THING 5.
1 An accessible summary of the academic literature on the complexity of human motivations can be found in B. Frey, An accessible summary of the academic literature on the complexity of human motivations can be found in B. Frey, Not Just for the Money Economic Theory of Personal Motivation Not Just for the Money Economic Theory of Personal Motivation (Edward Elgar, Cheltenham, 1997). (Edward Elgar, Cheltenham, 1997).
2 The example is an elaboration of the one used by K. Basu, 'On why we do not try to walk off without paying after a taxi-ride', The example is an elaboration of the one used by K. Basu, 'On why we do not try to walk off without paying after a taxi-ride', Economic and Political Weekly Economic and Political Weekly, 1983, no. 48.
THING 6.
1 S. Fischer, 'Maintaining price stability', S. Fischer, 'Maintaining price stability', Finance and Development Finance and Development, December 1996.
2 A study by Robert Barro, a leading free-market economist, concludes that moderate inflation (1020 per cent) has low negative effects on growth, and that, below 10 per cent, inflation has no effect at all. See R. Barro, 'Inflation and growth', A study by Robert Barro, a leading free-market economist, concludes that moderate inflation (1020 per cent) has low negative effects on growth, and that, below 10 per cent, inflation has no effect at all. See R. Barro, 'Inflation and growth', Review of Federal Reserve Bank of St Louis Review of Federal Reserve Bank of St Louis, 1996, vol. 78, no. 3. A study by Michael Sarel, an IMF economist, estimates that below 8 per cent inflation has little impact on growth if anything, he points out, the relationship is positive below that level that is, inflation helps rather than hinders growth. See M. Sarel, 'Non-linear effects of inflation on economic growth', IMF Staff Papers IMF Staff Papers, 1996, vol. 43, March.
3 See: M. Bruno, 'Does inflation really lower growth?', See: M. Bruno, 'Does inflation really lower growth?', Finance and Development Finance and Development, 1995, vol. 32, pp. 358; M. Bruno and W. Easterly, 'Inflation and growth: In search of a stable relationship', Review of Federal Reserve Bank of St Louis Review of Federal Reserve Bank of St Louis, 1996, vol. 78, no. 3.
4 In the 1960s, Korea's inflation rate was much higher than that of five Latin American countries (Venezuela, Bolivia, Mexico, Peru and Colombia) and not much lower than that of Argentina. In the 1970s, the Korean inflation rate was higher than that found in Venezuela, Ecuador and Mexico, and not much lower than that of Colombia and Bolivia. The information is from A. Singh, 'How did East Asia grow so fast? Slow progress towards an analytical consensus', 1995, UNCTAD Discussion Paper, no. 97, table 8. In the 1960s, Korea's inflation rate was much higher than that of five Latin American countries (Venezuela, Bolivia, Mexico, Peru and Colombia) and not much lower than that of Argentina. In the 1970s, the Korean inflation rate was higher than that found in Venezuela, Ecuador and Mexico, and not much lower than that of Colombia and Bolivia. The information is from A. Singh, 'How did East Asia grow so fast? Slow progress towards an analytical consensus', 1995, UNCTAD Discussion Paper, no. 97, table 8.
5 There are many different ways to calculate profit rates, but the relevant concept here is returns on assets. According to S. Claessens, S. Djankov and L. Lang, 'Corporate growth, financing, and risks in the decades before East Asia's financial crisis', 1998, Policy Research Working Paper, no. 2017, World Bank, Washington, DC, fig. 1, the returns on assets in forty-six developed and developing countries during 198896 ranged between 3.3 per cent (Austria) and 9.8 per cent (Thailand). The ratio ranged between 4 per cent and 7 per cent in forty of the forty-six countries; it was below 4 per cent in three countries and above 7 per cent in three countries. Another World Bank study puts the average profit rate for non-financial firms in 'emerging market' economies (middle-income countries) during the 1990s (19922001) at an even lower level of 3.1 per cent (net income/assets). See S. Mohapatra, D. Ratha and P. Suttle, 'Corporate financing patterns and performance in emerging markets', mimeo., March 2003,World Bank, Washington, DC. There are many different ways to calculate profit rates, but the relevant concept here is returns on assets. According to S. Claessens, S. Djankov and L. Lang, 'Corporate growth, financing, and risks in the decades before East Asia's financial crisis', 1998, Policy Research Working Paper, no. 2017, World Bank, Washington, DC, fig. 1, the returns on assets in forty-six developed and developing countries during 198896 ranged between 3.3 per cent (Austria) and 9.8 per cent (Thailand). The ratio ranged between 4 per cent and 7 per cent in forty of the forty-six countries; it was below 4 per cent in three countries and above 7 per cent in three countries. Another World Bank study puts the average profit rate for non-financial firms in 'emerging market' economies (middle-income countries) during the 1990s (19922001) at an even lower level of 3.1 per cent (net income/assets). See S. Mohapatra, D. Ratha and P. Suttle, 'Corporate financing patterns and performance in emerging markets', mimeo., March 2003,World Bank, Washington, DC.
6 C. Reinhart and K. Rogoff, C. Reinhart and K. Rogoff, This Time is Different This Time is Different (Princeton University Press, Princeton and Oxford, 2008), p. 252, fig. 16.1. (Princeton University Press, Princeton and Oxford, 2008), p. 252, fig. 16.1.
THING 7.
1 On Lincoln's protectionist views, see my earlier book On Lincoln's protectionist views, see my earlier book Kicking Away the Ladder Kicking Away the Ladder (Anthem Press, London, 2002), pp. 278 and the references thereof. (Anthem Press, London, 2002), pp. 278 and the references thereof.
2 This story is told in greater detail in my earlier books: This story is told in greater detail in my earlier books: Kicking Away the Ladder Kicking Away the Ladder is a heavily referenced and annotated academic but by no means difficult-to-read monograph, focused particularly on trade policy; is a heavily referenced and annotated academic but by no means difficult-to-read monograph, focused particularly on trade policy; Bad Samaritans Bad Samaritans (Random House, London, 2007, and Bloomsbury USA, New York, 2008) covers a broader range of policy areas and is written in a more user-friendly way. (Random House, London, 2007, and Bloomsbury USA, New York, 2008) covers a broader range of policy areas and is written in a more user-friendly way.
THING 8.
1 For further evidence, see my recent book For further evidence, see my recent book Bad Samaritans Bad Samaritans (Random House, London, 2007, and Bloomsbury USA, New York, 2008), ch. 4, 'The Finn and the Elephant', and R. Kozul-Wright and P. Rayment, (Random House, London, 2007, and Bloomsbury USA, New York, 2008), ch. 4, 'The Finn and the Elephant', and R. Kozul-Wright and P. Rayment, The Resistible Rise of Market Fundamentalism The Resistible Rise of Market Fundamentalism (Zed Books, London, 2007), ch. 4. (Zed Books, London, 2007), ch. 4.
THING 9.
1 K. Coutts, A. Glyn and B. Rowthorn, 'Structural change under New Labour', K. Coutts, A. Glyn and B. Rowthorn, 'Structural change under New Labour', Cambridge Journal of Economics Cambridge Journal of Economics, 2007, vol. 31, no. 5.
2 The term is borrowed from the 2008 report by the British government's Department for BERR (Business, Enterprise and Regulatory Reform), The term is borrowed from the 2008 report by the British government's Department for BERR (Business, Enterprise and Regulatory Reform), Globalisation and the Changing UK Economy Globalisation and the Changing UK Economy (2008). (2008).
3 B. Alford, 'De-industrialisation', B. Alford, 'De-industrialisation', ReFRESH ReFRESH, Autumn 1997, p. 6, table 1.
4 B. Rowthorn and K. Coutts, 'De-industrialisation and the balance of payments in advanced economies', B. Rowthorn and K. Coutts, 'De-industrialisation and the balance of payments in advanced economies', Cambridge Journal of Economics Cambridge Journal of Economics, 2004, vol. 28, no. 5.
THING 10.
1 T. Gylfason, 'Why Europe works less and grows taller', T. Gylfason, 'Why Europe works less and grows taller', Challenge Challenge, 2007, January/February.
THING 11.
1 P. Collier and J. Gunning, 'Why has Africa grown slowly?', P. Collier and J. Gunning, 'Why has Africa grown slowly?', Journal of Economic Perspectives Journal of Economic Perspectives, 1999, vol. 13, no. 3, p. 4.
2 Daniel Etounga-Manguelle, a Cameroonian engineer and writer, notes: 'The African, anchored in his ancestral culture, is so convinced that the past can only repeat itself that he worries only superficially about the future. However, without a dynamic perception of the future, there is no planning, no foresight, no scenario building; in other words, no policy to affect the course of events' (p. 69). And then he goes on to say that 'African societies are like a football team in which, as a result of personal rivalries and a lack of team spirit, one player will not pass the ball to another out of fear that the latter might score a goal' (p. 75). D. Etounga-Manguelle, 'Does Africa need a cultural adjustment program?' in L. Harrison and S. Huntington (eds.), Daniel Etounga-Manguelle, a Cameroonian engineer and writer, notes: 'The African, anchored in his ancestral culture, is so convinced that the past can only repeat itself that he worries only superficially about the future. However, without a dynamic perception of the future, there is no planning, no foresight, no scenario building; in other words, no policy to affect the course of events' (p. 69). And then he goes on to say that 'African societies are like a football team in which, as a result of personal rivalries and a lack of team spirit, one player will not pass the ball to another out of fear that the latter might score a goal' (p. 75). D. Etounga-Manguelle, 'Does Africa need a cultural adjustment program?' in L. Harrison and S. Huntington (eds.), Culture Matters How Values Shape Human Progress Culture Matters How Values Shape Human Progress (Basic Books, New York, 2000). (Basic Books, New York, 2000).
3 According to Weber, in 1863, around a quarter of France's population did not speak French. In the same year, 11 per cent of schoolchildren aged seven to thirteen spoke no French at all, while another 37 per cent spoke or understood it but could not write it. E. Weber, According to Weber, in 1863, around a quarter of France's population did not speak French. In the same year, 11 per cent of schoolchildren aged seven to thirteen spoke no French at all, while another 37 per cent spoke or understood it but could not write it. E. Weber, Peasants into Frenchmen The Modernisation of Rural France, 1870-1914 Peasants into Frenchmen The Modernisation of Rural France, 1870-1914 (Stanford University Press, Stanford, 1976), p. 67. (Stanford University Press, Stanford, 1976), p. 67.
4 See H-J. Chang, 'Under-explored treasure troves of development lessons lessons from the histories of small rich European countries (SRECs)' in M. Kremer, P. van Lieshoust and R. Went (eds.), See H-J. Chang, 'Under-explored treasure troves of development lessons lessons from the histories of small rich European countries (SRECs)' in M. Kremer, P. van Lieshoust and R. Went (eds.), Doing Good or Doing Better Development Policies in a Globalising World Doing Good or Doing Better Development Policies in a Globalising World (Amsterdam University Press, Amsterdam, 2009), and H-J. Chang, 'Economic history of the developed world: Lessons for Africa', a lecture delivered in the Eminent Speakers Programme of the African Development Bank, 26 February 2009 (can be downloaded from: (Amsterdam University Press, Amsterdam, 2009), and H-J. Chang, 'Economic history of the developed world: Lessons for Africa', a lecture delivered in the Eminent Speakers Programme of the African Development Bank, 26 February 2009 (can be downloaded from: http://www.econ.cam.ac.uk/faculty/chang/pubs/ChangAfDBlecturetext.pdf).
5 See H-J. Chang, 'How important were the "initial conditions" for economic development East Asia vs. Sub-Saharan Africa' (ch. 4) in H-J. Chang, See H-J. Chang, 'How important were the "initial conditions" for economic development East Asia vs. Sub-Saharan Africa' (ch. 4) in H-J. Chang, The East Asian Development Experience: The Miracle, the Crisis, and the Future The East Asian Development Experience: The Miracle, the Crisis, and the Future (Zed Press, London, 2006). (Zed Press, London, 2006).
6 For comparison of the quality of institutions in today's rich countries when they were at similar levels of development with those found in today's developing countries, see H-J. Chang, For comparison of the quality of institutions in today's rich countries when they were at similar levels of development with those found in today's developing countries, see H-J. Chang, Kicking Away the Ladder Kicking Away the Ladder (Anthem Press, London, 2002), ch. 3. (Anthem Press, London, 2002), ch. 3.
THING 12.
1 For a user-friendly explanation and criticism of the theory of comparative advantage, see 'My six-year-old son should get a job', ch. 3 of my For a user-friendly explanation and criticism of the theory of comparative advantage, see 'My six-year-old son should get a job', ch. 3 of my Bad Samaritans Bad Samaritans (Random House, London, 2007, and Bloomsbury USA, New York, 2008). (Random House, London, 2007, and Bloomsbury USA, New York, 2008).