The first chapter revisits a story on Lexus (rich countries) and the Olive tree (poor countries). It talks about facts and myths concerning globalization. The chapter is subdivided into five sections. The first section narrates the official history of globalization. The author (Ha-Joon Chang) narrates Toyota’s emergence in the automobile industry. He also mentions Toyota’s failure with its first car in the US market. However, he explains that half a century later, Toyota is currently a globalization icon with numerous brands namely Lexus, among others. He also revisits the story of Samsung, which began as exporters of fish but later turned to semiconductor technology. Samsung has since advanced in technology. Like Toyota, they now boast of presence in most parts of the world (Chang 1-21).
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The author also explores the impacts of free trade and foreign investment on developing economies. Later, the author talks about the real history of globalization, in which he mentions the Korean War and its effects on the two economies. He also gives evidence of the basic commodities exported by Korea during that era. The tremendous economic achievement made by South Korea is also mention in this section. The book also unveils information on neo-liberals and neo-idiotic, the latter of which, was brought by rich countries (the United States and its allies) through international organizations namely WTO, World Bank, and IMF.
He disagrees with neo-liberals’ view of Korean emergence. He continues by saying that rich countries run the world economy. In his last section, Chang poses the question of whether bad Samaritans are winning. He also agrees with Thomas Friedman that unless poor (Olive tree) countries use their economic policies, they would never join rich (Lexus) countries (Chang 1-21).
The second chapter talks about the double life of Defoe Daniel. In essence, it explores how rich countries managed to acquire their wealth. This chapter is divided into six sections, the first of which talks about Britain and how it ruled the world. The second talks about the British economy, which he says has double facets. The third section talks about America’s emergence into the fray as well as its involvement in the bid for supremacy. The author also mentions Abraham Lincoln’s contribution to the fight for supremacy. Later on, he refers to other countries as the guilty secrets. In the last section, he gives a detailed view of lessons learned from history. The author also explains British history in Asia. British are accused of trading in narcotics, which led to war with China.
He gives evidence of the poor economic performance of countries under colonization in Asia as compared to their rich counterparts. Through this, he tries to explain how the rich countries amassed wealth from their poor counterparts. He also mentions Latin America and Africa, which experienced slowed growth due to neo-liberal programs. He also attributes income inequality to neo-liberal policies with a significant fall in growth for the countries involved.
In essence, he posits that the official history as given by the rich countries is a complete opposite of what took place. The rich countries control all major financial organizations in the world. This has led to the implementation of bad Samaritan regulations that they desire. In this regard, countries that borrow money from these organizations are forced to implement policies that align with the interests of bad Samaritan countries instead of fixing their economic issues (Chang 23-45).
In the third chapter, the author tries to explore what free trade does to the economies of poor countries. The chapter is divided into five sections. The first section explores contributions made by free trade in the world. The second object to poor theories brought about by the rich countries. Moreover, poor results from these theories are condemned in the section. The author also explores disconnects that exist in international trade systems.
Moreover, it investigates the notion of industries for agriculture. Lastly, the author attributes fewer ideologies to free trade. The book claims that free trade came because of over protection of British industries that became complacent and counterproductive. The country then started campaigning for trade (free trade) to maintain the status quo. Chang icons David Ricardo’s theory that emphasizes specialization in areas of strength but qualifies it for regions that aim to maintain the status quo.
The chapter also explores Britain’s colonization of America with restrictions mainly on tariffs and goods to be manufactured. In this regard, it was prohibited from exposing similar products to those of the British. America’s high tariffs during Abraham Lincoln’s tenure are also mentioned as influential in its rapid growth. However, the US also championed free trade after the Second World War.
The two countries, the United States and Britain were therefore championing free trade. In essence, the author claims that all the rich countries used nationalistic policies to rise economically. Moreover, they moved into free trade policy to maintain their status quo after amassing wealth. However, poor countries have been forced into free trade policies, which have dwarfed their ability to grow (Chang 49-66).
In the third chapter, the author tries to explore what foreign capital does to the economies of poor countries. The chapter is divided into five sections. The first section questions the essentiality of foreign capital. The second explores it further by questions the modalities of financial institutions, which he describes as the Mother Teresa of foreign capital. He goes on to condemn the influence of foreign capital by considering their policies as more hazardous than that of military power. The author claims that the results of foreign investment bring about a borderless world. Moreover, worsens the situation by calling such plans the worst.
The book attributes the loss of revenues to free trade. Chang claims that poor countries have been forced to rely heavily on tax tariffs, which have negated its ability to increase revenues. Moreover, he goes on to say that before industrialization, developing countries used to grow in double digits.
In essence, the author claims that free trade is not helping developing countries. For instance, he claims that free trade has restricted poor counties to rely on sectors of lower productivity growth than their rich counterparts. This, therefore, results in reduced freedom for developing countries that practice free trade. Therefore, he recommends that poor counter be allowed to regulate foreign investment, use subsidies, and protection. This, he claims, will help develop their economies. He compares South and North Korea, which are a complete opposite of one another in terms of economic development. He, therefore, believes that the acquisition of advanced technologies is essential for economic growth. However, this has to involve mastery of foreign technologies as seen in the case of South Korea (Chang 69-85).
The fifth chapter is on man’s ability to exploits another. This chapter is divided into six sections. The first section explores state ownership while the second compares it to private ownership. The chapter also provides success stories of state-owned businesses and puts a case for public enterprise. In the second last section, the author talks about the short-comes of privatization. Lastly, calls it a black cat white cat game.
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The author gives an example of Andrew Jackson who reneged from renewing the license of the second bank in the USA (quasi-central Bank). He claimed that foreign ownership of the bank was quite high and would amount to greater ramifications in case of war between the two countries. Leaders of developing countries would be branded names if they attempted to follow in Andrew Jackson’s footsteps. In essence, rich countries are controlling their poor counterpart’s economies.
The author examines issues that face state-owned enterprises. He names these as the ‘free-rider’ and ‘principal-agent’ problems. Chang claims that these issues trouble both public and private enterprises. Moreover, he states that private firms also face the difficulties brought about by market forces. In essence, private firms exploit opportunities to the fullest since they enjoy soft budget constraints.
The author gives examples of state-owned enterprises that have succeeded despite economic difficulties. These include Singapore Airlines, which has always given profit since its inception. Others include corporations in Taiwan, China, South Korea, and Finland, among others. The author then goes on to emphasize the need for state-owned enterprises. Also, he claims that private enterprises have numerous pitfalls since they face various challenges. In essence, this chapter puts a case for state-run enterprises as opposed to privatized ones (Chang 89-106).
Chapter 6 contains eight sections that talk about property rights and their impacts on developing countries. The authors narrate how he witnessed hawkers who sell pirated software in South Korea. He wonders why ideas cannot be borrowed in the face of problems facing developing countries. For instance, developing countries lack adequate facilities and ideas to develop new technologies as compared to their developed counterparts. However, they are forced to buy a product from developed countries yet are not allowed to borrow from the idea. Throughout the chapter, he mentions the difficulties brought but due to patent issues.
Moreover, it elaborates on the difficulties developing countries face to achieve economic development with such patent rights in place. He also mentions the pharmaceutical company’s resolve to take South Africa to court over licensing issues concerning HIV/Aids drugs. He argues that original drugs are expensive and therefore cannot be accessed by people from poor African countries; however, they still ended up sanctioning the sale of cloned drugs.
The chapter also talks about the arms race that has taken center stage for economic development. Developed countries like Britain, among others, are accused of creating barriers to the outflow of information on advanced technologies in arms. He goes on to name countries that abolished patent laws to aid their companies in advancing technology. For instance, Philips, a Dutch company is said to have borrowed the idea of making bulbs from America.
Moreover, he mentions Switzerland, which had not patented for and this allowed Albert Einstein to change the world of physics. Besides, he quotes Isaac newton’s famous say, which emphasized the fact that ideals develop cumulatively. Therefore, the one who does the finishing work should not stake claim to complete ownership of the idea (Chang 109-130).
The seventh chapter has three sections, which mocks the ability of the IMF to achieve its goals. IMF is accused of introducing policies that hinder development in developing countries in the interest of their rich counterparts. Quite often poor counties run into payment crises and they are forced to sign agreements with IMF before getting the loan. However, according to Chang, these conditions carry several conditions that eventually lead to stagnated growth in developing countries.
Of great concern to Chang is IMF’s emphasis on microeconomic policies, which affect every citizen. The Bad Samaritans are said to demand monetary discipline from developed countries with a reservation on their (poor countries) ability to live within means. However, the author points out that results have shown the exact opposite of economic development through the tough fiscal policies introduced by the IMF. He also argues that neo-liberalists focus on the rate of inflation due to their overdependence on growth and investments.
Chang uses Brazil’s example to demonstrate that inflation is sometimes good for the growth of a country. He points out the constant economic growth of the country at a rate of 4.5% between 1960 and 70swith an inflation rate of 42%. He compares this to their growth rate of 1.3% between 1996 and 2005 with an inflation rate of 7.1%. He also uses other examples such as South Korea, among others, to emphasize this fact.
However, he also alludes to the fact that inflation, like that experienced by Argentina in the 1980s, can be bad. In essence, he argues that the IMF applies Keynesianism for rich countries but applies monetarism for their poor counterparts. This worsens the situation of poor countries, which in most cases spark riots (Chang 135-142).
Chapter 8 gives case study examples of Zaire and Indonesia where bad governance led to an economic downturn. The author gives an example of DR Congo’s former president Mobutu who made away with over 15 billion dollars during his tenure in office. This is similar to Indonesia’s case in which president Suharto made away with more than 15 billion dollars. He uses these examples to show that democracy is essential for growth.
However, he also mentions the fact that some of the rich countries only attained democracy after prosperity. What surprises the author is despite the corruption in both countries, Zaire’s per capita fell by thrice during the dictator’s rule. On the other hand, Indonesia’s per capita grew more than thrice. However, bad Samaritans propagate a popular view that corruption is the biggest hindrance to economic growth. He, therefore, feels that rich countries are using corruption as an excuse for reducing aid to poor countries.
This has created socialism for rich countries but free enterprise for poor countries. Moreover, he evaluates the method through which rich countries get out of recession as opposed to their poor counterparts as adequate proof of exploitation. He also argues that rich countries’ suggestion that the failure of their policies is attributed to corruption is false. He states that these policies are wrong. However, he concurs that corruption is objectionable.
The author also gives examples of Italy, Japan, China, and Korea as countries that have seen economic growth despite widespread corruption. He also claims that solutions are given by bad Samaritan countries to solve it usually worsens it. In essence, he believes that economic development has the capability of reducing corruption although the latter depends on a conscious effort by a given country (Chang 145-165).
Chapter 9 talks about culture and its relation to economic growth. He begins by describing a comment by an Australian consultant who described the work ethic of Japan as easy-going. However, a century later, Japan has emerged as an influential economic power. Moreover, he narrates how the British viewed Germans (as slow-witted people). He also read about such views on Africans from a Cameroonian engineer and writer.
The author wonders why these countries (Japan and German) have become so rich that they have overtaken both Britain and Australia, which were apprehensive of their culture. He, therefore, continues to explore if the culture has the capability of influencing economic development. He thinks that culture is less influential to the economic development of upcountry than is viewed by neo-liberal countries. He argues that culture is amorphous and cannot be utilized as a way of determining the economic prospects of a country; otherwise, poor countries are destined to remain so forever.
The author also argues that before economic developments in East Asia, Westerners apprehensive of Confucian culture. However, after the emergence of these (East Asia) economies, Westerners attributed it to the same culture. This is contradictory and therefore proves that culture has less to do with economic growth than is believed by the west. He goes on to divulge the culture of Confucianism.
According to Chang, Confucianism was responsible for lawlessness and it discouraged entrepreneurship, among others. It, therefore, comes as a surprise that westerners credit it for the gain in East Asian economies. The author, therefore, feels that it is impossible to define the right culture for economic growth given its ambiguity. For instance, he mentions that in societies with poor economic conditions, preaching hard work may not help in achieving cultural change or habits (Chang 167-206).
Chang’s book on bad Samaritans gives a thorough description of the emergence of free trade from developed counties led by the United States and Britain. He also relates it to their status as rich countries that had achieved magnificent economic growth through nationalistic policies before turning to free trade to sell their products and control international markets. He points out in chapter seven of ’23 things they don’t tell you about capitalism’ that free-market policies seldom make developing (poor) countries rich.
In this chapter, he argues that rich countries never utilized free trade policies to achieve economic growth. He believes that they used nationalistic policies like subsidies, high tariffs, and protectionism to achieve their feat. This is similar to his views in the bad Samaritans where he faults Britain and the United States for bringing free trade policies that worsened the state of most developing countries (Kim and White 1).
Chang’s argument against free trade is similar in both books with depth and clarification on the latter book. He argues that the IMF, which is majorly controlled by rich countries, has instituted difficult conditions for poor countries.
These have continued to worsen their state and increase the stagnation of their economies. Moreover, free trade has brought about inequality in the market coupled with patent rights that bar developing countries from borrowing technology for their developed counterparts. Chang further argues that free trade policies have failed to reduce economic downturns in developing states. He also faults the rich countries’ argument that corruption has caused these (free trade) policies. In essence, the two books are similar in their ideology and disapproval of free trade in poor countries (Kim and White 1).
Chang, Ha-Joon. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, London: Bloomsbury Press, 2008. Print.
Kim, Hannah, and White Gregory. 23 Things They Don’t Tell You About Capitalism. 2010. Web.