Bad Samaritans

Ha-Joon Chang, an economist who grew up in South Korea during its rapid industrialization, argues that the free market and free trade policies promoted by wealthy nations and international institutions are not only historically inaccurate prescriptions for economic development but actively harm the developing countries they claim to help. Drawing on economic history, theory, and personal experience, Chang contends that virtually all of today's rich countries became wealthy through protectionism, subsidies, and state intervention: the very policies they now forbid poor countries from using.

The book opens with a fictional 2061 Economist article about a Mozambican company achieving a breakthrough in hydrogen fuel cell technology. Chang models this imaginary firm on Samsung, which began as a food exporter before becoming a global electronics giant. The parallel is deliberate: in 1961, South Korea had a per capita income of $82, less than half that of Ghana, and was widely dismissed as a developmental failure. Chang recounts his own childhood during Korea's transformation, describing a small cement-brick house where a black-and-white television was a neighborhood luxury. His parents' generation had survived Japanese colonial rule, war, and famine. By the 1970s, under President Park Chung-Hee's Heavy and Chemical Industrialization programme, a state-led push into sectors like steel and shipbuilding, per capita income grew more than fivefold in seven years. Chang acknowledges the dark side of this miracle, including exploited factory workers and political repression under military dictatorship, but insists the standard explanation for Korea's success is wrong. Korea did not follow free market principles; it nurtured selected industries through tariff protection, subsidies, state-owned banks, government enterprises like the steelmaker POSCO, and strict control over foreign exchange and investment. Chang introduces the term "Bad Samaritans" for the rich countries and international institutions, particularly the IMF, World Bank, and WTO (which he calls the "Unholy Trinity"), that push neo-liberal policies, meaning privatization, deregulation, trade liberalization, and fiscal austerity, on developing nations, often in the honest but mistaken belief that these policies reflect how wealthy countries themselves became rich. He cites the German economist Friedrich List's 1841 accusation that Britain was "kicking away the ladder" by preaching free trade after having climbed to supremacy through protectionism.

In the opening chapters, Chang dismantles what he calls the "official history of globalization." He begins with the Toyopet, Toyota's first passenger car exported to the United States in 1958, which failed so badly it was withdrawn. The Japanese government had expelled General Motors and Ford in 1939 and bailed out Toyota with central bank money in 1949; without these interventions, Chang argues, there would be no Lexus today. He challenges Thomas Friedman's "Golden Straitjacket," the prominent globalization writer's formula prescribing privatization, low inflation, balanced budgets, and trade liberalization as the only path to prosperity. Chang shows that the first era of globalization (1870–1913) was largely imposed through colonialism and unequal treaties, that most rich countries maintained high tariffs, and that nations forced into free trade grew far more slowly than those that chose protectionism. Developing countries grew at 3.0% per capita annually during the 1960s and 1970s under protectionist policies but only about 1.7% since the 1980s under neo-liberal reforms.

Chang then examines the historical record in detail. Drawing on the work of Daniel Defoe, the novelist, spy, and economist best known for Robinson Crusoe, he describes how Tudor monarchs developed England's woollen manufacturing industry through tariff protection, export bans on raw wool, and recruitment of skilled foreign workers over nearly a century. Robert Walpole, Britain's first prime minister, introduced reforms in 1721 that raised tariffs on imported manufactures, lowered tariffs on raw materials, and introduced export subsidies. Britain's average tariff on manufacturing imports in 1820 was 45–55%, among the highest in the world, and the country did not adopt genuine free trade until around 1860, only after its manufacturers had become globally dominant. In the United States, Alexander Hamilton, the early statesman and economic thinker, provided the blueprint for infant industry protection in his 1791 Report on the Subject of Manufactures. President Abraham Lincoln raised tariffs to their highest level in US history during the Civil War, and tariffs on manufactured imports remained at 40–50% until World War I. France, Germany, and Japan, countries typically cast as the protectionist counterpoints to Britain and America, actually maintained lower tariffs than those two nations until the latter converted to free trade.

The middle chapters apply this historical framework to specific policy areas. On trade, Chang uses the analogy of sending a six-year-old child to work: Just as a child needs protection to develop capabilities, developing industries need temporary insulation from competition. Mexico's per capita income grew at only 0.3% annually during 2001–2005, despite participating in NAFTA (the North American Free Trade Agreement), compared to 3.1% during the earlier period of import substitution industrialization, when the country used tariffs and domestic production to replace imports. On foreign investment, Chang notes that Finland classified enterprises with more than 20% foreign ownership as "dangerous" until 1987, yet became a globalization icon through Nokia, whose electronics division lost money for 17 years before becoming profitable. He argues that foreign direct investment, in which foreign firms buy or build businesses in another country, is not unambiguously beneficial, since transnational corporations use transfer pricing to shift profits to low-tax jurisdictions, rarely transfer their most valuable activities abroad, and can destroy domestic competitors.

On state-owned enterprises, Chang challenges the assumption that private ownership is always superior, presenting successful examples including Singapore Airlines and the Korean steelmaker POSCO, which the World Bank rejected as non-viable but which became the world's third-largest steel producer. He argues that the standard objections to public enterprises apply equally to large private firms with dispersed ownership. On intellectual property, Chang documents how rich countries systematically violated others' intellectual property when developing: The US did not protect foreigners' copyrights until 1891, Switzerland had no patent law until 1888, and the Netherlands abolished its patent law from 1869 to 1912. He argues that the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, the WTO rules setting minimum intellectual property protections worldwide, costs developing countries an estimated extra $45 billion a year in technology license payments, nearly half of total foreign aid.

On macroeconomic policy, Chang challenges the insistence on low inflation and fiscal austerity. Brazil grew at 4.5% per capita annually during the 1960s and 1970s with average inflation of 42% but only at 1.3% between 1996 and 2005 with 7.1% inflation. He characterizes the global regime as "Keynesianism for the rich, monetarism for the poor," noting that wealthy countries run deficits during their own downturns while prescribing austerity for poor countries in crisis. On corruption, Chang contrasts Zaire (now the Democratic Republic of Congo) under its dictator Mobutu Sese Seko with Indonesia under its authoritarian president Suharto. Mobutu stole an estimated $5 billion while Zaire's income fell to one-third of its 1965 level; Suharto stole far more, yet Indonesia's income tripled, because the corrupt money mostly stayed in the country. Chang argues that democracy and free markets clash at a fundamental level, since democracy runs on "one person, one vote" while markets run on "one dollar, one vote." On culture, he shows that the Japanese were once considered lazy and the Germans dishonest, arguing that cultural traits attributed to people in poor countries are consequences of economic conditions rather than inherent characteristics.

The epilogue presents a pessimistic future scenario set in 2037 to illustrate the stakes of continuing current policies. Chang distills his central principle: Developing countries must deliberately promote higher-productivity activities, primarily manufacturing, accepting short-term sacrifices for long-term capability building. He calls for tilting the playing field in favor of developing countries rather than imposing equal rules on unequal players, and notes that the period from the Marshall Plan to the 1970s, when rich countries allowed poor countries policy autonomy, produced the best economic results ever recorded for both groups.