Unger’s proposals are long and complex, and his texts virtually devoid of references. It’s hard to compare his views to anyone else’s, or to try to figure out if they have any solid grounding. Yet many of his ideas resonate in the more concrete commentaries provided by two recent books that attack our econ-omy’s foundations and assumptions.
The first is Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, by a rising star raised in South Korea who now works in Cambridge’s faculty of economics. In his lifetime, Ha-Joon Chang’s native country has grown fourteen times richer, a feat that took the United States over 150 years. Though South Korea is sometimes cited as a neo-liberal success story, its policies have veered far from orthodox economic advice. Inspired by his own country’s success, Chang has made his name as a leading heterodox economist by doing something unusual within the economic profession: looking past the theory to the historical record.
The policies the most affluent countries are now pushing on the poor, he found, are the exact opposite of those that enriched them in the first place. Citing a nineteenth-century German economist named Friedrich List, he calls this “kicking away the ladder” — the nurture of infant industries — they used to climb to their position of dominance. For instance, the US and the UK, the world’s leading advocates of free trade, have had the highest import tariffs of any country in the past 200 years.
Countries don’t get rich by opening their economies and letting international markets work their magic, Chang shows. Trade is good, he argues, when properly timed and with the right rules, which are different for each country. Markets on their own are more likely to lock you in place than propel you upward. Samsung subsidized its infant electronics division with proceeds from its textile production and sugar refining; Nokia’s light manufacturing section subsidized the company’s money-losing electronics division for seventeen years. Now both are world leaders in high-tech products. To grow, poor countries, like businesses, will have to defy the market. “In the end,” Chang writes, “economic development is about acquiring and mastering advanced technologies.”
It’s a message shared by Erik S. Reinert, a Norwegian economist whose ambitious How Rich Countries Got Rich . . . and Why Poor Countries Stay Poor attempts to revive an “other cannon” of Continental and nineteenth-century US economic thinking focused on the emulation and assimilation of knowledge as the motor of economic growth, rather than on the interplay of abstract market forces.
In between his graduate studies and his recent return to academia, Reinert, who also has an mba from Harvard Business School, had consulted the presidents of Peru and Ireland, officials of the European Union, and Norway’s indigenous Saami. In his book, he repeatedly contrasts Harvard’s use of case studies illustrating the creation of wealth with mainstream economists’ use of models focused on the efficiency of exchange.
For Reinert, everything starts with innovation and production, and it happens in historical time. Prosperity isn’t caused by the accident of market forces, he writes. Rather, it springs from the technological advances created by human creativity when there are synergies between diverse types of manufacture and craft. These advances mean that a dynamic economy doesn’t settle into the equilibria economists like to talk about. Instead, it’s the chain of imbalances forged by innovation that’s the best way to think about growth.
Like Chang and Unger, Reinert believes that rich countries are now denying poor ones the very tools they used to enrich themselves. And he believes you address poverty not just by treating its symptoms, but primarily from “the inside,” by improving societies’ systems of production and expanding those that work best.
In their arguments that societies need the freedom to improvise their own approaches to economic development, Chang and Reinert leave behind the conventional debate over how much the state should intervene in the econ-omy, breaking open what Reinert calls the “black box” that is “the complex, heterogeneous and chaotic world of the real economy.” Unger goes furthest in suggesting ways to reimagine our economics and politics, insisting that placing ingenuity at the economy’s core means overhauling our politics.
Throughout its thirty-year history, the champions of neo-liberal economic doctrine — usually summarized as liberalization, deregulation, and privatization — have fought to marginalize politics, insisting their model was the only game in town. Margaret Thatcher declared, “There is no alternative.” American economists later devised the Orwellian term “Washington Consensus.” But with his signature wit, Thomas Friedman put it best, equat-ing market fundamentalism with a “golden straitjacket”: “It is not always pretty or gentle or comfortable,” Friedman wrote. “But it’s here and it’s the only model on the rack this historical season.” Even the most extreme proposals aired by mainstream politicians and economists at the time of writing — like a partial and temporary nationalization of banks — amount to little more than readjusting the strait-jacket’s straps.
