The Political Economy of Development,
Post-colonial Analysis and “Bad Samaritans”
Fernando López
HISTORICAL AMNESIA AND “BAD SAMARITANS”

The suspicion has rearisen, in some of the views held by structuralists, that hidden behind the excessive emphasis and profusion of literature on the connection between institutions and development lurks the interest of orthodox economics in covering up the failures of “good policies” and their underpinning theories; in particular, this view is found in the hypothesis that the less developed countries would not achieve prosperity by following the same route as developed nations (Chang, 2006; Coatsworth, 2008: 9-12). Some are discussing the concept of institutions as “restrictions” (Chang and Evans, 2007), and others are reformulating both the question on the origin of wealth and poverty as posed by Olson (2007) as well as the answer based on “the economic policies” and on the “institutions.”

A historical analysis of industrialized countries reveals a radically different outlook than that usually described by the reinterpretations of the past from a contemporary perspective. This produces a dual conclusion: history contradicts the proposals of the dominant discourse equally in regard to “good policies” as to “good government”; recommendations for developing countries on economic and institutional matters are an attempt to take away the ladder to prevent them access to progress (Chang, 2004). And there are two jobs to be done: on the one hand, to deconstruct the neoliberal discourse that is a mythological means of representing the past (Jenkins, 2009: 87), substituting myth for the hard data, the ideological-political construction for the documentary reconstruction; and on the other, to strike at the heart of the neoclassical methodology that underpins the discourse and political recommendations (Chang, 2004, 2008; Chang and Grebel, 2006; López Castellano, 2007b, 2009).

The first realization is that “good government” in its historical sense has followed a “long and turbulent path toward institutional development” which in the European case has taken various centuries (Labandeira, 2009). This conclusion is self-evident if we itemize the components of “good government”: a democratic system, an efficient and corruption-free bureaucracy and judiciary, protection of property rights, financial institutions, a fiscal system, social welfare and labor laws. Universal suffrage was introduced between 1907 (in New Zealand) and 1971 (Switzerland); modern bureaucracy in the twentieth century; the capacity to engender political legitimacy and the implementation of fiscal and administrative mechanisms in relatively recent times.

As regards “good policies,” the orthodox view labels the adoption of interventionism and protectionism in developing countries during the second half of the twentieth century as a “historical anomaly,” arguing that it responded to “mistaken” theories (newly-formed industry, structuralism) and to political demands (building the nation, co-opting interest groups). Economic liberalization would be the correct response to this erroneous development strategy, and the Washington Consensus the ideal “development agenda” for such reform. However, studies on the relationship between prosperity and protectionism or free trade in light of historical economic reality show the opposite (Bairoch, 1994). Apart from some exceptions, all of today's developed countries actively implemented industrial, commercial and technological policies to promote newly established industries during their modernization stages. That is, they implemented policies that contradict the orthodox preachings and that are now recommended for developing countries. The analysis of their “modernization strategies” reveals that the protectionism and free trade respond to the level of development and relative standings in international competition (Chang, 2004, 2008; Chang and Grebel, 2006).

England or the United States are two such examples, two myths of the laissez-faire approach that ignore Adam Smith's “advice” not to develop manufacturing industries and protect “fledgling industries” (Reinert, 1995, 2007; Chang, 2008). Only an episode of “historical amnesia,” the result of a rewriting of history, could explain how such paradigmatic cases as the so-called “golden age of capitalism” could be forgotten. During the three decades after the Second World War, both rich and developing countries –with well- designed intervention programs and strict controls on the movement of international capital–saw levels of growth that far outstripped those of the “first globalization” (1870-1913) (Chang, 2008: 77-80; Hobsbawn, 1998; Sunkel, 2006).

Chang argues strongly against these “bad Samaritans” and the operational arm of its “bad” policies –the “impious trinity” of multilateral organizations: the International Monetary Fund (IMF), the World Bank (WB) and the World Trade Organization (WTO) –to explain why rich nations recommend to under-developed countries strategies that prevent them from attaining prosperity, in a comparable way to the trade policies imposed on colonies by their colonial overlords (Thiérault, 2002). These institutions relate globalization to an improved quality of life and financial prosperity, accuse state regulation of the financial system as “financial repression,” punish the supposed “irrationality” of the state, and endorse the privatization of welfare services (Chang, 2008: 157).