Ed Glaeser on Ha-Joon Chang

Ed writes:

Those Who Do Not Know the Past - December 26, 2007 - The New York Sun: Mr. Chang alleges, with scant evidence, that [America and Britain] grew great because of these tariff barriers.... Mr. Chang... argues that since rich countries have public ownership and deficits, it is rank hypocrisy for us to try to forbid them to the poor. An alternative view is that economists shouldn't be required to endorse the worst policies of their own countries. While it is easy to quibble with some of Mr. Chang's more bizarre statements about American political history, such as his claim that "slavery was not as divisive an issue in antebellum politics as most of today believe it to have been," he is certainly correct that America was quite protectionist.... The most curious thing about Mr. Chang's retelling of American history is his suggestion that there is anything secret about this history of American protectionism. The Tariff of Abominations and the Smoot-Hawley Tariff are both mainstays of high school history classes....

The book would have made a more serious contribution if it shed more light on whether American or English protectionism helped or harmed these countries. Post hoc does not imply propter hoc.... The high physical costs of crossing the Atlantic in the age of sail made it natural, with or without tariffs, for the Lowells to want to weave cotton on this side of the pond. Mr. Chang is going to have to do better than just point out that Americans and Englishmen had tariffs to make the case that tariffs produced growth.

There is a substantial empirical literature that looks at the relationship between trade openness and economic development.... My own research in this area found that openness had little impact on middle income places, but is particularly valuable for the poorest places. Certainly, there is no empirical consensus that openness is either good or bad for growth.

The lack of consensus on the connection between growth and openness does not imply that Mr. Chang's protectionism is equally attractive as the open borders urged by the Washington consensus. Adam Smith and David Ricardo didn't urge free trade because trade begets growth, but because trade makes goods cheaper for ordinary people.... Even if protectionism does encourage industrial growth, it only does so by hurting ordinary people, who have to pay more to buy the goods of inefficient domestic producers.

Mr. Chang's protectionist brief suggests that the costs that tariffs impose on ordinary consumers are worth paying since the government can use tariffs to promote the right industries. Smith would have been skeptical about putting such faith in the government, and today's developing countries certainly deserve no more trust than the government of George III.... The best thing to come out of this book is its challenge to the advocates of free markets to explain why England and America did so well despite embracing policies that were not always that free...

Comments

[Irineu]

Brad,

I thing Ed Glaeser was too kind with Chang.

Chang's argument is not only about protectionism, but it is an argument against the adoption of any institutions that the US and the UK did not have when their income was at the level of present-day developing countries, including central banks, and yes, bans on child labor and slavery.

His argument only makes sense if the economic environment that present day developing countries face today were the same as the one faced by the US in the 19th century.

It is so preposterous that it sounds like a parody or a joke. Chang managed to sell an ultra-conservative back-to-the-medieval-times agenda as a progressive one.

Regards,

Irineu

[kusaka]

and today's developing countries certainly deserve no more trust than the government of George III

Just that tells you everything. Elected governments deserve no trust, after all its just "the people" that elect them. Surely, our faith would be better placed in the foreign entities that clearly state their purpose as profit at whatever expense to the host population. Fucktard.

[R. Flanagan]

Oops , I'm on the right (politically ,not ethically) on this. And I'm not even a troll.

"The thing about tariffs is,they do the trick". "most modern...practices can be performed in most countries with almost equal efficiency" ...'free trade(an indirect quote) was more likely to provoke war than keep peace'....." I sympathize with those who would minimize rather than ....maximize economic entanglements......let goods be homespun"

Keynes in the 30s when he had recanted his life long classical position on free trade.

I'm not smart enough to cogently debate all you smart guys who'll say he was wrong. I wish he were still here to do it.

[John Emerson]

At least two of the very few completely successful development stories (Taiwan and South Korea) involved protectionism. For that reason I don't see how protectionism should be taken off the table. If a country decides to go the free trade route, OK. If not, OK too. But international organizations should not pressure or force nations to free trade.

I was in Taiwan in 1983 and it seems to have been pretty well understood that the nation and the Taiwan business class were being favored at the expense of the average Taiwanese, but that the average Taiwanese had a long-term interest in the development of the Taiwan economy. (It was framed in terms of one generation sacrificing for the benefit of the next, a powerful argument in a family-oriented society). I believe that this argument was basically valid.

Without understanding it in detail, I suspect that most poor nations following the free-trade development path will end up being banana republics, selling labor and resources and controlling no capital.

Aren't the big developing nations (India and China) ignoring the free-traders? Isn't free trade mostly being imposed on the weak, small nations?

I wish I trusted economists more. I just don't, and I never know when they're actually dazzling me with bullshit one more time, and when they actually are right about something. Economists should spend some time figuring out why they are not trusted, instead of whining and smearing people as Luddites. Economists' advocacy of free trade has been so absolute, so loud, and so influential that, unless they have been absolutely and in every way right, they have a lot to live down.

How did shock treatment go in Russia? What really happened in Argentina?

[Patrick Schoenfelder]

The big problem with free trade as a policy for developing nations is that there is no empirical evidence that it works and considerable evidence that protectionism does work.

England, the US, Germany, France, Japan, Taiwan, South Korea, the entire EU as a whole, and now China have all practiced restricted trade, either in the form of tariffs or other trade barriers and often both, during the period of their transition from undeveloped to developed economies.

There is, of course, considerable evidence that free trade and open economic systems benefit developed nations, often at the expense of undeveloped nations. When Adam Smith made his observations in the very late 18th century, he was observing an economy which was the most developed in the world and already through the first throes of the industrial revolution and the rise of modern banking and financial systems. By that time free trade was undoubtedly in the interest of Britain and its residents.

In the end, if economists want to be scientists, not philosophers, they need to be able to back their theories not just with tightly reasoned mathematical models but also with empirical evidence. I would be interested in seeing the sacred concept of the sovereignty of free trade defended empirically in the setting of developing economies.

[Ian Whitchurch]

'The high physical costs of crossing the Atlantic in the age of sail made it natural, with or without tariffs, for the Lowells to want to weave cotton on this side of the pond.'

http://ideas.repec.org/p/kud/kuiedp/0202.html seems to say they werent that high at all.

Ian Whitchurch

[Ian Whitchurch]

'The high physical costs of crossing the Atlantic in the age of sail made it natural, with or without tariffs, for the Lowells to want to weave cotton on this side of the pond.'

http://ideas.repec.org/p/kud/kuiedp/0202.html seems to say they werent that high at all.

Ian Whitchurch

[dsquared]

[The high physical costs of crossing the Atlantic in the age of sail made it natural, with or without tariffs, for the Lowells to want to weave cotton on this side of the pond]

I am with Ian. This is pretty ignorant. There is this place called Lancashire in England, which used to weave quite a lot of cotton, much of which was transported all over the place. Crossing the Atlantic in "the age of sail" (which does not overlap particularly much with the period during which the USA was developing - the Great Western was taking passengers across the Atlantic in 1835 for God's sake) was not expensive. Ship freight is not expensive, because ships are so big.

[McDuff]

I'm pretty sure there was a whole other section of the book which dealt with the Asian Tigers during the 1960s and 1970s with fairly similar conclusions, but then it's been a while since I read it and I might be getting it mixed up with Stiglitz. In any event the notion that trade liberalisation produces nothing but benefits to the working class of developing nations is pure baloney. Products getting cheaper is an undisputed benefit, but raw materials leaving the country and taking high-value-added jobs with them is (or should be) an undisputed cost.

South Korea did not allow uninhibited trade after the Korean War, and it nonetheless managed to achieve double-digit industrial growth for almost two decades. They are now pretty much guaranteed to make your computer and cell phone for you.

The message I remember getting from Chang's book is that the preaching of certain myths from certain western bibles is another kind of colonialism that rejects the capacity of these poor countries to make decisions about the best economic policy mix for themselves. Amazingly, despite horrific failures of trade liberalisation to produce the predicted magic in Africa people still believe, like communism, that this one-size fits all utopian pipe dream is the always and eternally correct answer.

I would also be much more open to the messages of those pushing trade liberalisation for poorer countries if there was a serious outcry against the EU's CAP and the USA's various corn-swaddling agriculture bills. In the absence of aught but crickets, I'll just say "goose" and "gander" and leave it there.