"Bad Samaritans" by Ha-Joon Chang

If your conservative friends and relatives won't read the books you recommend because they're "shrill" or "angry" or off-putting in some other way, try giving them Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang. Chang is a Korean economics professor from the prestigious University of Cambridge.  He has written a very readable, understandable book explaining why everything you know about economics -- particularly the economics of developing countries -- is wrong. But he doesn't pound the table about it because, well, he doesn't have to -- the facts are sufficient.

Chang speaks both from scholarship and from deep experience: He was born in South Korea when it was one of the world's poorest countries, and he lived through its transition into a relatively advanced, wealthy nation. So he knows first-hand that Korea's story, told accurately, has a lot to do with trade -- but not free trade. He recalls, for example, import controls so severe that a tin of Spam smuggled from an American military base was something to daydream about.

South Korea, according to Chang, got where it is through high tariffs, state-owned businesses, restrictions on foreign capital, budget deficits, low interest rates, tolerance of inflation, and a host of other practices that the International Monetary Fund (IMF), the World Trade Organization (WTO), and the World Bank wouldn't let a developing nation use today. What's up with that?

If confronted with these facts, the neo-liberals who dominate economics today would say that Korea is exceptional. But Chang retells the history of Britain and the United States to show that, contrary to their national myths, they too became rich through protectionism. In fact, Chang can find no example a poor country that achieved wealth through the IMF-endorsed policies of free trade, fiscal discipline, and government non-intervention.

He explains why by examining the reasoning behind neo-liberal economics. The theory of comparative advantage says that if one nation is good at building computers and another is good at growing sugar, they're both better off if they specialize and trade computers for sugar. This is the logic behind the IMF's development policies: The sugar-growing country shouldn't use tariffs or subsidies to build up its own computer-building industry, because that would be inefficient. Do what you're good at.

And Chang agrees that this logic holds in the short term. He also thinks that, in the short term, his six-year-old son would be more productive if he quit school and got a factory job, as children used to do. But in the long term the sugar-growing country, like the six-year-old factory worker, is locked into an inferior position. The United States would have been locked into a similar position -- trading cotton and timber for English manufactured goods -- if Alexander Hamilton hadn't convinced the new national government to favor its infant industries with high tariffs.

Along the way, Chang shatters other myths -- for example, the myth that democracy and free trade go together. Again, he states his case plainly and calmly: "Market and democracy clash at a fundamental level. Democracy runs on the principle of 'one person, one vote'. The market runs on the principle of 'one dollar, one vote'. ... Therefore, democratic decisions usually subvert the logic of the market." Neo-liberals realize this at some level, which is why they advocate "depoliticizing" economic policy -- turning economic decisions over to undemocratic institutions like a central bank or the WTO. "To put it bluntly, they want democracy only if it is largely powerless." (That's probably the most "shrill" line in the whole book.)

In short, Bad Samaritans (the title is Chang's name for the IMF and its allies, who impose unworkable policies on developing countries) covers much the same ground as Naomi Klein's Shock Doctrine, but without the polemics. Chang's book is not going to send the faithful out to march in the streets, but it may speak to large numbers of people who can't get past the first few paragraphs of Klein.