The Korean economist Ha-Joon Chang in his book Kicking Away the Ladder: Development Strategy in Historical Perspective researches the historical way of the formation of the developed counties. In his research, he concluded that practically all the developed countries, during the period of their economic development, had been using tariff protection. Thus, illustrating this situation he gave examples of the USA, Great Britain, Germany, and other developed countries. From that followed that the statement that the developed countries had been able to develop their industry and agriculture, using the methods of the open trade or the free market approach, was no more than the myth.
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Nowadays, this myth is used by the developed states to prevent the industrialization of poor countries. The emergence in the developing countries of domestic manufactures means the reduction of the marketing outlets for transnational corporations. That is why, the developed states, on the ground of the economical advancement, persuade or even force the poor countries to act in a manner, which contradicts the way they have been developing themselves. The developed countries, which have been using protectionism in the early stages of their economic development, now prohibit its usage by the others. Ha-Joon Chang calls this situation “kicking away the ladder” (Chang 14). In other words, the developed countries “kick the ladder” with the help of which they have reached the top and in such a way they stop the development of the other countries.
Alice Amsden states that to “to minimize the inefficiencies of import substitution, countries built a complex set of institutions that amounted to a ‘‘control system’’ (Amsden 98).
The system, which is meant by Amsden, is based on the principle of mutual benefit for both the government and the enterprise from the cooperation between them. The government provides the standard set of the prerogatives for the domestic enterprises, including the restrictions of the import, the convenient tariffs, and the cheap credits for the leading firms. The benefit for both sides is obvious. The enterprise obtains the opportunity for further development, while the government, within the development of the firm, reaches certain economic growth, such as the export target, the investment rate, and others. The success of the enterprise means the increased tax revenue for the government, which is the basis of its economic power.
A typical example of this principle is South Korea, which is famous for its export development. The leading firms of the country are export-oriented due to the special tariff protection of the home market provided by the state. In return for this support from the government, every Korean enterprise has a definite export goal. South Korea is an example of the cooperation between the government and the enterprises. In this county, the meetings devoted to the problems of the protection of the business are regularly arranged. Apart from the support from the government, there also exists a special program provided by the Korean Development Bank, which offers credits to the “export enterprises recommended by the Ministry of Commerce and Industry”(Amsden101). In such a way, the higher the export lever of the enterprise is the greater opportunity for the cheap loans it has. This principle describes the impact of the government on the regulation of the economic processes. As Cypher and Dietz put it “South Korea would be seen as successful examples of state-led development” (242).
Amsden, Alice. Escape from Empire. The Developing Journey through Heaven and Hell, Cambridge: The MT Press, 2007. Print.
Chang, Ha-Joon. Kicking Away the Ladder. Development Strategy in Historical Perspective, London: Anthem Press, 2003. Print.
Cypher, James, and Diets James. The Process of Economic Development, New York: Madison Ave, 1997. Print.