Are we “Kicking away the ladder”?

If I could provoke the average person in the high-income (developed) world to ask themselves one question regarding development, it would be this: Are your political leaders doing everything in their power to help the "developing world," or are they "kicking away the ladder"? Why do you think that might be?

Introduction

The most recent paper I have read that has had a major influence on my perception of international development is “Kicking away the Ladder” by Ha-Joon Chang (2012). Chang argues there are historical fallacies in the argument often made by mainstream economists that liberal institutions and principles were a significant contributing factor to western development in the past two centuries. Chang mentions six such institutions: democracy, bureaucracy, intellectual property rights, institutions of corporate governance, financial institutions, and welfare and labour institutions. Chang makes the case that most of these institutions were only adopted by developed industrialised countries after their rapid development periods. Chang argues that these developed nations are now ‘kicking away the ladder’ by trying to limit economic nationalism and imposing liberal institutions on developing countries, in many cases hindering development for their own benefit. This highly persuasive paper has run against the grain of my BSc, which has been heavily based on Neoclassical Economic Theory and New Institutional Theory. However, I read Chang critically, and I think that the broadness with which he uses the term ‘neoliberal’ misses the subtleties in some theories that have often been labeled ‘neoliberal’, such as New Institutional Theory (Campbell et al 2001). Nonetheless, Chang’s paper made me question theories I had studied but also the ways global power dynamics and geopolitics influence their implementation.

Potential Limitations of Chang’s Paper

The way Chang points out the fallacies in the historical argument of “liberal western development” is persuasive and undermines many of the historical evidence-based claims of neoclassical economic theory and the New Institutional Theory in development (Slattery et al. 2013, Campbell et al 2001). However, I think Chang overplays the extent to which mainstream economic development theories emphasize the importance of the six liberal institutions he mentions. For example, some are present in the New Institutional Theory such as bureaucracy, intellectual property rights, institutions of corporate governance. But this is not the case with, for example, democracy. It is quite difficult to find a new institutionalist who would say that democracy is key to supporting economic growth. In fact, much research suggests democracy is a result of economic development or that it has a negative effect on economic development (Barro 1996, Lipset 1959). I agree that countries such as the US and the UK, as well as IGOs such as the World Bank and IMF, strongly push, or simply coerce, less developed countries towards democracy.

However, I am not sure whether many academics still posit that democracy is an important prerequisite for economic growth. This made me evaluate the importance of academic theories to policymakers, and whether development policymakers are more swayed by ideology, the policy goals of donors, and other considerations such as personal values.

Part of the New Institutional Theory that is compatible with Chang's critical view on democracy’s importance in economic development is the limited and open access order theory proposed by Douglas North et al. (2006). North et al. cite Lipset (1959) in claiming - similarly to Chang - that economic development promotes democracy and not vice versa. North et al. do not consider democracy a necessary condition to fulfilling the criteria of open access order. One example of a political open access order without democratic institutions would be the communist party of China. Authoritarian regimes, to the contrary, often have to rely on performance-based legitimacy, as I learnt on my BSc in modules such as ‘Comparative Justice Systems’ taught by Dr Stybnarova (Cassani 2017). 8By introducing semi-competitive and participatory institutions within the Chinese Communist Party China and its markets, China fulfills all criteria of the open access order theory without being a democracy. Since 1978, China has had a rich web of adherent organizations mixed with contractual organizations, which is what according to North et al. creates political and economic competition leading to thriving markets and self- sustaining economic growth, without a mention of democratic principles.

Chang on Protectionism, Property Rights and Patent Law

However, Chang’s most controversial critique, concerning property rights, does conflict with North et al.'s argument. North subscribes to the neoclassical idea that individual property rights are primary drivers of capitalistic development (Friedman 1962). Chang’s central argument regarding property rights and free trade notes that most developed countries today either developed due to their resource gains in their colonies or used tariffs and other protective measures to develop their industries and implemented free trade and respect for international and intellectual property rights and patent law much later. Chang points to the example of Switzerland not having patent law until 1907. Furthermore, there is substantial evidence that protective measures such as tariffs have been successful in driving economic growth and development in the West in the previous centuries. Empirical research supports the effectiveness of these protective policies today in for example Nigeria, Pakistan and other developing countries (Hickey 2015, Asif et al. 2021). These findings highlighted by Chang completely shifted the focus of my questions I had about international development. I now started to ask: Would leaders of high income countries ever be willing to support empirically proven methods for development such as tariffs even though these methods run against their own interests? Furthermore is this approach even justified in democracies, where politicians are generally elected to the interests of their electorate?

The Problem of Motivations of Developed Countries in Development Programmes

Chang's argument against free trade and property rights raises the question of motivations of developed countries imposing neoliberal policies they did not use themselves for their own success. I believe it is crucial to recognize if the pressures for these policies are placed on low-income countries to keep them dependent on the donor, or if there has been an academic failure to recognize and communicate the inefficacy of this neoliberal approach. While reading Chang I realized that there are two layers of international development success in practice. Firstly, there is a need for effective strategies of development. Secondly, there is a requirement that this will provide the donor with significant benefits for themselves. Perhaps, development is best achieved by a pragmatic approach that adopts strategies that may not be the best of all strategies for the less developed countries but has some benefit for developed countries. While this is not an ideal solution, it may be more desirable than pretending that self-interest does not underlie much of international development. I realized that state-led international development is not charity, however much we might want it to be, but instead is part of geopolitical conflict. For example, if the US implements a successful development program in Nigeria and helps it to become an independent sustainably prospering country, it has no guarantee that Nigeria will not then independently choose to take Chinese investment in infrastructure.

Conclusion and Implications for My Thinking about Development

To conclude, Chang’s historical analysis is persuasive in arguing that when Western ‘advanced economy’ countries industrialized and developed, they did not have many of the liberal institutions and policies they now insist are crucial for ‘developing’ countries. Chang is not generous to some of the more mainstream development economics theories - for example, New Institutional Theory does not insist that phenomena such as democracy and welfare institutions are necessary for development. However, Chang’s argument concerning international and intellectual property rights does conflict with the majority of theories I have read, including NIT. For Chang, having weak property and patent rights are not crucial for driving economic success, and perhaps even beneficial as such a situation can aid national technological advancement.

Debates about how ‘advanced economies’ developed, including the exploitative aspects of that growth, fascinate me. Chang’s article gave me another topic of great interest; how

disingenuous are Western countries and IGOs in their prescriptions for development to the rest of the world? Chang’s article increased my desire to undertake a research master’s to study questions like these. On the master’s, I want to explore whether it is possible to have an international development system that is of mutual benefit to developed and less developed countries, and part of that question for me is whether large- scale or smaller-scale development projects are more effective and in what circumstances. I also want to investigate how significant is the role of geopolitics and economic self-interest within large-scale and smaller scale projects. The perfect place for me to do this is at the Oxford MPhil, for its resources, lectures, seminars, and the supervision of some of the best development academics in the world.

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