Saturday, 8 January 2011

Another thing they don't tell you about capitalism

Last month I reviewed Ha-Joon Chang’s book ‘23 things they don’t tell you about capitalism’. I know it sounds dry but, trust me, it’s not. It is a fascinating read, and I’ve been returning to it over the past few weeks.

In the book he tackles many myths about the global economy, one of which concerns the roots of under-development in Africa. There is a body of work which reduces poverty and economic stagnation in Africa to poor climate, lousy geography, ethnic division and the 'curse' of abundant natural resources which supposedly makes Africa's people 'lazy, corrupt and conflict prone'. It is the kind of ‘common-sense’ prejudice that Chang is able to powerfully dismiss.

He points out that throughout the 1960's & 70's African growth rates were 'respectable' at around 1.6%. This was not as spectacular as the 5-6% growth rates in East Asia at the time, nor as dynamic as the 3% growth rates in Latin America. But, he says, it compares ‘favourably with what today's rich countries achieved during their Industrial Revolution'.

But, from the 1980's onwards African growth rates collapse disastrously. Why? The answer lies in the imposition of free market and free trade policies, as conditions of aid, by Western-dominated institutions like the World Bank and IMF.

Chang shows that the remedies imposed on Africa were the exact opposite of the policies followed by Western countries at earlier stages of their own economic development.

As he says:

'with only a few exceptions, all of today's countries, including Britain and the US - the supposed homes of homes of free trade and free market - have become rich through the combination of protectionism, subsidies and other policies that today they advise developing countries not to adopt. Free market policies have made few countries rich so far and will make few rich in the future'.