Ha-Joon Chang’s Kicking Away The Ladder Theory

With recent political changes such as Brexit and Trump, economists have been struggling to understand what’s going on. While there’s some concession with phrases such as “inclusive globalization” (which doesn’t mean much in practice), the global elite is upping its call for free trade.

I’d argue that it’s the macroeconomics of international trade which makes Post-Keynesian economics different from the orthodox. In recent times, economists have conceded a lot about the macroeconomics of fiscal policy and money, they have become more confident about their orthodoxies on international trade. Even with the former they are returning to their orthodox opinions with the argument that heterodox ideas make sense only if the zero lower bound (ZLB) is reached. But “free trade” is the holy cow which will be difficult for orthodoxy to ever abandon.

Ha-Joon Chang is a great writer and communicator on economics. In his 2002 book Kicking Away The Ladder: Development Strategy in Historical Perspective, he argues for a fresh look at how nations developed and how they used a mix of free trade and protectionism whenever it suited them more. Once they became advanced, they want to prevent others from adopting their strategy – they are kicking away the ladder they used to climb to top.

In a shorter article Ha-Joon Chang explains:

Central to the neoliberal discourse on globalization is the conviction that free trade, more than free movements of capital or labor, is the key to global prosperity. Even many of those who are not enthusiastic about all aspects of globalization–ranging from the free-trade economist, Jagdish Bhagwati, advocating capital control to some non-governmental organizations (NGOs) accusing the developed countries for not opening up their agricultural markets–seem to agree that free trade is the most benign, or at least a less problematic, element in the progress of globalization.

Part of the conviction in free trade that the proponents of globalization possess comes from the belief that economic theory has irrefutably established the superiority of free trade, even though there are some formal models which show free trade may not be the best. However, even the builders of those models, such as Paul Krugman, argue that free trade is still the best policy because interventionist trade policies are almost certain to be politically abused. Even more powerful for the proponents of free trade, is their belief that history is on their side. After all, the defenders of free trade ask, isn’t free trade how all the world’s developed countries have become rich? What are some developing countries thinking, they wonder, when they refuse to adopt such a tried and tested recipe for economic development?

A closer look at the history of capitalism, however, reveals a very different story (Chang, 2002). As we shall establish in some detail in this paper, when they were developing countries themselves, virtually all of today’s developed countries did not practice free trade (and laissez-faire industrial policy as its domestic counterpart). Rather, they promoted their national industries through tariffs, subsidies, and other measures.

and introduces the phrase “kicking away the ladder”:

Thus seen, contrary to the popular belief, Britain ‘s technological lead that enabled this shift to a free trade regime had been achieved “behind high and long-lasting tariff barriers” (Bairoch, 1993, p. 46). And it is for this reason that Friedrich List, the nineteenth-century German economist who is mistakenly (see section 3.2 below) known as the father of modern “infant industry” theory, wrote the following passages.

It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.

Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth [italics added] (List, 1885, pp. 295–6).

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