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Published by EH.NET (April 2004) 
 
Ha-Joon Chang, _Kicking Away the Ladder: Development Strategy in Historical 
Perspective_. London: Anthem Press, 2002. iv + 187 pp. $22.50 (paperback), 
ISBN: 1-84-331027-9. 
 
Reviewed for EH.NET by Douglas Irwin, Department of Economics, Dartmouth 
College. 
 
Ha-Joon Chang enlists economic history to mount a provocative critique of 
the "Washington Consensus" -- the standard set of policy recommendations 
that aim to promote economic development in poor countries. According to 
the consensus, developing countries should adopt a set of "good policies" 
and "good institutions" to improve their economic performance. The good 
policies include stable macroeconomic policies, a liberal trade and 
investment regime, and privatization and deregulation. The good 
institutions include democratic government, protection of property rights 
(including intellectual property), an independent central bank, and 
transparent corporate governance institutions and financial establishments. 
These policies have been embraced by the World Bank, the International 
Monetary Fund, and many mainstream economists, hence the term Washington 
Consensus. 
 
Chang highlights the paradox that many of today's high income countries did 
not pursue such policies when they were climbing the economic ladder of 
success in the nineteenth century. Rather, these countries implemented high 
tariffs and sectoral industrial policies, lagged in the introduction of 
democratic reforms, stole industrial technologies from one another, did not 
have independent central banks, and so forth. Therefore, in Chang's view, 
developed countries are hypocritical when they seek to deny developing 
countries access to these same policy tools and when they urge them to 
adopt democratic reforms and protect intellectual property. 
 
In some sense, this book pits Adam Smith (free market orthodoxy) against 
Friedrich List (managed intervention heterodoxy) and comes down on List's 
side. In Chang's view, developed countries preach Adam Smith's policies to 
developing countries today but pursued Friedrich List's policies themselves 
in the past. Developed countries are "kicking away the ladder" (in 
Friedrich List's memorable phrase) that they used to become richer and 
instead are trying to foist upon developing countries a set of policies 
wholly unsuited for their economic condition and contrary to their economic 
interests. This book has already achieved high status as an iconoclastic 
critique of neo-liberal "market fundamentalism" as pronounced by 
establishment economics and international institutions. 
 
Chang, who is Assistant Director of Development Studies at the University 
of Cambridge (UK), divides his slim book into four chapters. Each chapter 
focuses on the policies pursued a century ago by the leading rich countries 
of today (Britain, United States, Germany, Japan, and other European 
countries) and compares those policies to the ones that developing 
countries are urged to adopt the Washington Consensus. Chapter One 
introduces the book and asks "How Did the Rich Countries Really Become 
Rich?" Chapter Two looks at trade and industrial policies designed to allow 
developing countries to "catch up" with industrial countries. Chapter Three 
focuses on institutions and good governance. Chapter Four concludes with 
lessons from the past. 
 
Chang's book is provocative and interesting, but falls short of persuading. 
Perhaps the biggest disappointment is Chang's extremely superficial 
treatment of the historical experience of the now developed countries. He 
has simply chosen not to engage the work of economic historians on the 
questions he is raising. For example, chapter one -- "How Did the Rich 
Countries Really Become Rich?" -- does not contend with the work that 
economics historians have done on the topic. Given the broad question posed 
in this chapter, one might have expected Chang to confront such landmark 
works as Douglass North and Robert Thomas's _The Rise of the Western World_ 
(1973) or Nathan Rosenberg's and L.E. Birdzell's _How the West Grew Rich: 
The Economic Transformation of the Industrial World_ (1986). These works 
stress the importance of political systems that provide security to 
economic transactions and economic systems that allow for competition, 
broadly construed. But Chang does not explain why the lessons from these 
works are not relevant to developing countries today. 
 
Rather, in chapter 2, Chang elaborates on his contention that "infant 
industry promotion (but not just tariff protection, I hasten to add) has 
been the key to the development of most nations ... Preventing the 
developing countries from adopting these policies constitutes a serious 
constraint on their capacity to generate economic development." In my view, 
this statement is erroneous on two counts -- that infant industries were 
the key to economic development, and that developing countries are 
prevented from adopting such policies today. 
 
Just because certain trade and industrial policies were pursued and the 
economic outcome turned out to be good does not mean that the outcome can 
be attributed to those specific policies. Yet Chang does not advance our 
understanding beyond this "correlation therefore attribution" approach. 
Perhaps the success of developed countries came despite the distortions and 
inefficiencies created by their earlier policies because the broader 
institutional context was conducive to growth. 
 
For example, the United States started out as a very wealth country with a 
high literacy rate, widely distributed land ownership, stable government 
and competitive political institutions that largely guaranteed the security 
of private property, a large internal market with free trade in goods and 
free labor mobility across regions, etc. Given these overwhelmingly 
favorable conditions, even very inefficient trade policies could not have 
prevented economic advances from taking place. (As Adam Smith once 
commented, the effort of individuals to improve their condition "is 
frequently powerful enough to maintain the natural progress of things 
towards improvement, in spite ... of the greatest errors of 
administration.") 
 
And yet, in Chang's story, these other things get no credit for America's 
economic success; rather, it all comes down to infant industry promotion. 
Chang writes: "Although some commentators doubt whether the overall 
national welfare effect of protectionism was positive, the U.S. growth 
record during the protectionist period makes this scepticism look overly 
cautious, if not downright biased." But, once again, correlation is not 
causation. Chang produces no evidence that protectionism was responsible 
for the growth. He does not investigate the various channels and mechanisms 
by which trade policy affects growth and compare them to other factors 
leading to economic expansion. He does not undertake a counterfactual 
analysis to determine the magnitude of benefits and costs of infant 
industry policies. In the reasoning style of Paul Bairoch, if tariffs were 
high and growth was strong, then there must be a causal relationship 
between the two. There is no need to examine alternative explanations, such 
as whether any effects of tariff policy were swamped by the advantages of 
other aspects of the American economy. Instead, Chang makes sweeping 
statements like "It is also clear that the U.S. economy would not have got 
where it is today without strong tariff protection at least in some key 
infant industries." 
 
The implication is that protecting manufacturing industries accounts for 
the success of rich countries. But Stephen Broadberry (1998) has shown that 
the United States overtook the United Kingdom in terms of per capita income 
in the late nineteenth century largely by increasing labor productivity in 
the service sector, not by raising productivity in the manufacturing 
sector. Broadberry's research is not obscure, yet Chang makes no note of 
it. 
 
Attributing the economic success of various other countries to their trade 
and industrial policies alone grossly inflates their role. In Europe, 
Broadberry and others have showed that growth was related to the shifting 
of resources out of agriculture and into industry and services. Yet trade 
policies may have slowed this transition for some countries. Britain 
industrialized with the textile industry in the late eighteenth and early 
nineteenth century, but the Corn Laws during this period kept more labor 
and capital resources in agriculture, not industry. Similarly, to the 
extent that Germany's tariff code protected agricultural goods (where it 
was a net importer), it actually slowed that transition and may have 
retarded growth in the late nineteenth century. 
 
A broader problem afflicts Chang's approach -- sample selection bias. Chang 
only looks at countries that developed during the nineteenth century and a 
small number of the policies they pursued. He did not examine countries 
that failed to develop in the nineteenth century and see if they pursued 
the same heterodox policies only more intensively. This is a poor 
scientific and historical method. Suppose a doctor studied people with long 
lives and found that some smoked tobacco, but did not study people with 
shorter lives to see if smoking was even more prevalent. Any conclusions 
drawn only from the observed relationship would be quite misleading. Chang 
also overstates the degree to which developing countries today are 
prevented from pursuing interventionist trade and industrial policies. 
Trade agreements such as the General Agreement on Tariffs and Trade (GATT) 
pose few barriers to countries that wish to pursue activist trade policies, 
and indeed many countries did so during the years when import substitution 
was the rage among developing countries in the 1950s and 1960s. Article 
XVIII of the GATT allows governments to undertake trade measure to promote 
development, including the promotion of selected industries. Many countries 
are choosing not to do so because their past experience with such policies 
has not been successful. 
 
No economic historian will deny the importance of lessons from history in 
guiding policy today. The question is "which" economic history is relevant. 
(This point was raised in some insightful comments on Chang's work by Ken 
Sokoloff at last year's EHA meeting.) Which historical experience is most 
relevant for developing countries in Asia, Latin America, and Africa today 
-- the perceived failure of state-led development and import substitution 
in those countries in recent decades, or the experience of Britain and the 
United States in the nineteenth century? Certainly China and India have 
answered by saying that their past policies of inward-looking socialism 
have failed them. Both countries have done better over the past decade or 
two by shedding heavy-handed government involvement in regulating the 
economy and allowing a greater role for market forces, even though they 
have not embraced every aspect of the "Washington Consensus." In 
particular, China and India have decided to become much more open to world 
trade and investment and have reaped benefits by exposing long protected 
"infant industries" to global competition. 
 
Even if the policy lessons of the distant past are relevant, it is unwise 
to make policy recommendations based on America's experience a century ago 
without appreciating the broader institutional context of the U.S. growth 
experience and its differences from many developing countries today. In the 
U.S. case, competitive political institutions and limited government 
prevented policymakers from pursuing highly damaging policies. Governments 
in developing countries that are unaccountable, or possess unchecked power, 
can implement policies that have the potential to impose much greater costs 
on society for much longer periods of time. 
 
This book raises a fascinating set of questions and succeeds in being 
provocative, but I think it ultimately fails to be convincing. If Chang had 
focused in-depth on one particular question, such as the degree to which 
protectionist policies account for the success of today's developed 
countries, and came to terms with the work of economic historians more 
directly, he might have made more of a contribution. 
 
Reference:Broadberry, Stephen. "How Did the United States and Germany Overtake Britain? A
Sectoral Analysis of Comparative Productivity Levels, 1870-1990." _Journal of Economic
History_ 58 (1998): 375-407.
 
Douglas A. Irwin is professor of economics at Dartmouth College. Among his 
recent works are "Interpreting the Tariff-Growth Correlation of the Late 
Nineteenth Century," _American Economic Review_ (May 2002), "Tariffs and 
Growth in Late Nineteenth Century America," _The World Economy_ (January 
2001); and "Did Late Nineteenth Century U.S. Tariffs Promote Infant 
Industries? Evidence from the Tinplate Industry," _Journal of Economic 
History_ (June 2000). 
 
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