On Friday 6 October, Ha-Joon Chang joined James Putzel for a conversation on the state of the world economy as part of the Cutting Edge Issues in Development Lecture Series for 2023/24. Ha-Joon Chang has worked on a wide range of issues related to economic development, especially trade and industrial policies, productive capabilities development, institutions and development, global economic system, the history of economic development in today’s rich countries, and the political economy of development. In addition to numerous journal articles and book chapters, he has published 17 authored books (five co-authored) and 11 edited books (seven co-edited). His latest book is Edible Economics. His writings have been translated and published in 45 languages and 46 countries. Worldwide, his books have sold around 2.5 million copies. Read what MSc students Nato Balavadze, Margot Barranco and Makayla Amaris Levitt took away from the lecture below.
You can watch the lecture back on YouTube or listen to the podcast.
We are living through a crisis of such great severity that terms like “overlapping emergencies” or “polycrisis” have been coined to describe the current scenario. Last Friday, in a conversation between Professor Ha-Joon Chang and Professor James Putzel, discussion of multiple crises unfolded, including a looming debt crisis in developing countries, an ecological crisis, a global supply chain crisis and a geopolitical crisis. However, Professor Chang’s most remarkable characteristic is his ability to discuss the most serious issues with the perfect combination of simple explanations, deep analysis and a great sense of humour and optimism.
What struck me most is the persistent and multifaceted nature as well as the interconnectedness of the global crises, yet the lack of a conceptual framework to at least interpret them. While the urgent need to reform capitalism is evident, the system has managed to resist the significant changes.
In one of the examples, Professor Chang explained that after the Wall Street Crash of 1929, a number of regulations were introduced; however, regulatory reforms were lacking after the Global Financial Crisis. By adopting a zero-interest-rate policy to stabilize the system, what Chang referred to as the “abolishing of capitalism”, the developing countries were lured into borrowing. However, they now struggle to repay their debts in the face of increasing rates and inflation. He emphasised the necessity for greater international cooperation to overcome those deficiencies in the global economic system.
Professor Chang advocated for adopting historical perspectives when analysing these global events. This comes as no surprise, given his scrupulous analysis of history, where Chang has shed light on the “unofficial history of capitalism” and how successful countries became wealthy. Regarding the Cold War II between China and the US, he remains optimistic and in general challenges us to consider whether we are currently facing a worse crisis than in the 1970s, for example. This brings to mind one of the sayings attributed to Gramsci: “Pessimism of the intellect, optimism of the will”.
After the formal event, we continued our conversation with the speakers at the White Old Horse pub. I had the opportunity to ask him a question about the emerging multipolar world order and whether it should be viewed positively. Without hesitation he answered, emphasizing again the importance of the historical account of the processes and highlighting that there’s no universally applicable answer, much like the absence of a ‘one-size-fits-all’ solution for a sound industrial policy.
Nato Balavadze
For the second Cutting-Edge Lecture, Professor Ha-Joon Chang engaged in a dense discussion with LSE Professor James Putzel. The conversation left me, and perhaps the audience, more worried than hopeful regarding the effects of the climate crisis, the worldwide development financing gaps, the looming debt crisis in Sub-Saharan Africa, the impacts of the Covid-19 pandemic, and the myriad of other issues collectively shaping the current ‘state of the world economy.’
Among the several ideas and issues discussed during the lecture was Professor Chang’s famous argument in favour of infant industry protection. Drawing on multiple articles and his renowned book ‘Kicking Away the Ladder‘, he elucidated how global economic governance institutions dissuade developing countries from implementing industrial policies by advocating for ‘good practices’. These often include the liberalization of international trade at the cost of the development of productive and efficient industries in developing countries. The promotion, or coercion via the threat of taking attempting states to international trade courts, of Washington Consensus-inspired policies has been heavily criticized but remains the norms of the global economic order.
However, Professor Chang here opened a window of opportunity into substantial change. He underscored the necessity of creating a political space that empowers developing countries to formulate and implement industrial policies. This idea brings novelty for two main reasons: first, it speaks directly to the complex political organization of the world economy and the very political nature of industrial discussions. By emphasizing the political dimension, he directed the audience’s attention to the often-overlooked competing national and international political narratives surrounding industrial and trade policies. Second, as he insisted on the need for developing countries to capture modern and green industrial capacities, Professor Chang reminded the audience that developing countries are at the forefront of the fight against climate change. Current debates on who will lead the decarbonization of the global economy might leave the door open for the protection of green industries in the developing world.
Far from being an expert on international trade or industrial policies myself, I have found Professor Chang’s lecture to be incisive and, as a matter of fact, cutting-edge. While he has been arguing for the protection of infant industry for more than two decades, Professor Chang’s insights felt extremely relevant, providing a beam of hope in the dark list of challenges faced by the world’s economy.
Margot Barranco
Chang begins this conversation by grabbing his ingredients and discussing the current climate crisis and its relationship with ‘sustainable economics’. He stresses that “there are the usual problems of meeting the sustainable development goals and inequality industrialization, whatever had been set in front of us but now we have these added challenges of climate crisis which is really reaching the point of no return”. The correlation between how the current climate crisis and the shocks from the pandemic have heavily impacted many developed countries, where many haven’t recovered in combination with “the rising failure to adequately address that the problems of the global financial system that was so blatantly revealed in the 2008 financial crisis”. Chang extends this argument noting that “we live in the world, which is financially, and macroeconomic resource screwed up that for over a decade there was no effective capital market, we got so used to zero interest rate but when you think about it this is like almost operational capitalism and the capital market has been basically suspended”. These arguments force the listener to step back and take a wider perspective regarding how large global events impact the economy and Chang poses an important question: why hasn’t there been a more sufficient way of cleaning up the consequences of the Global Financial Crisis in the correct way? It’s put into evaluation that “there’s no real price in the capital market” and that after the 1929 Stock Market Crash.
We continue to mix and add into the bowl, the conversation of the global economic crisis. Chang covers how the commercial banking sector and investment banking sector were responsible for the 2008 Financial Crisis which introduced the welfare state through the Social Security Act. Chang notes that “the Americans would say the Federal Deposit Insurance corporation and deposit insurance stabilizes the banking system, there were so many institutional reforms that are on the recognition that all supervise the crooked financial system that has destroyed the economy and didn’t even make people take responsibility”. Though this might seem very opinionated, there’s good reason. I think that economic accountability is crucial and in particular individuals, corporations, and states who ‘control’ or regulate the global economy play an important role ethically ensuring economic transparency. Chang is arguing that economic transparency has been on the decline giving relevant criticisms about how the 2008 Financial Crisis happened, central banks, Nobel Peace prize winners have links to “exotic financial instruments, open up capital markets in developing countries” has catastrophic impacts on developing countries and an exploitation of their markets. This position draws from a larger idea of how many involved in the world of economics aren’t held accountable nor deprived of symbols of change like the Nobel Peace Prize when grave atrocities of financial failure severely impact many developing countries.
“Economics is politics. To make the distinction, there is a strong link. As an economic can constrain political development, politics can constrain economic development.”
Ha-Joon Chang
Putzel furthers the conversation regarding developing countries pointing out how “more and more African countries especially the poorest ones are facing a new debt crisis since about the 1970s and 1980s and wondering if you can explain how that’s linked with the financial crisis”. Critically questioning whether a lack of institutional reports or interest rates should be held responsible. Chang’s response points towards the complicated relations between financial crisis, economics, and interest rates using the central Bank of England as an example “when we try to save the system by cutting interest rates and ‘quantitative easing’ which was flooding the volume with money its only channelled it back to central banks”. Chang connects this point to how the stock markets in the US and UK were breaking new records during the pandemic every week and poses another thought-provoking question: how this is possible? Noting that the ethics of the financial economy is completely disjointed.
A highlight of Chang’s discussion was his examples on how developing countries faced various crises first from functioning in the global economy that came with the financial crisis, the ending of super growth in China which reduced their earnings in exports from the commodity boom, and then the pandemic. This has put many developing countries in the mouths of multilateral financial institutions that encourage borrowing money from the private sectors so bonds can be issued, increasing interest rates and inflationary pressures from the pandemic resulting in the disruption of supply chains where developing countries are finding it impossible to repay debt.
Transferring from the bowl to the oven, the impacts of economics and the economy today continue to showcase the mounting evidence and fundamental impacts of structural global change. Chang speaks from the belly of the people, the plight and advocacy for how the economy are not in favour of the working class noting “that four companies control 70% of the trading grain and we see during the pandemic how impactful the pandemic was on incomes as so many people and so many countries become almost entirely dependent on low paid service, that’s not right, it’s terribly dysfunctional”. Chang’s use of depreciating humour to give genius correlations about the realities we live in add comfort, humility, and engagement with an audience. From “we’re just in a hyper time management system invented by the Japanese in the 1970s and 80s” to generating admirable and knowledgeable factoids like “the Philippines is the most high-tech economy in the world but only has $3500 pocket income” and “that GPS of all these things were initially developed as a result of the US defence research policy”. Chang even highlights the topic between Western and Eastern states “there is a conflict, the US is not going to let this military dominance be taken over by China but at the same time so it’s not China who’s been invading states”. Showcasing how interlinked the economy and politics are and how truly complicated and vast economics are proving the importance of making it digestible for the average listener.
As we pull our dish from the oven to the counter to cool, Chang continues the discussion by making the correlation between technology and investments that “at least 30% of research in the US is financed by the government” and how the US and the UK are more explicit about industrial policies in developing nations. Chang adds teaspoons of suggestions that there’s going to be a lot more reassertion of what we say not what we have done economically. From climate, agriculture, land destruction, resource extraction, pollution, and the severe impacts of fuel, Chang says that “we have new problems of the human scale from ice melting at the poles to over consumption of fuel” developing countries are being hit the hardest by the economy and climate change.
Finally diving into our meal, from ecological to technological to military to financial and economic crisis’s, a delectable read, Ha-Joon Chang’s newest book Edible Economics, The World in 17 Dishes provides a witty, insightful, and compiling purpose noting that his book “explains the world, I started graduate study coming to the UK arriving in the place that was of a culinary disaster, everything had been drawn back during World War II”. Chang expressed that the purpose of this book is to explain “how to learn about the global economy, that democracy is meaningless unless everyone understands it”. The key takeaway from Chang’s book is his personal “crusade with economic illiteracy” stating that he’s “written many books trying to draw in the ordinary citizen into the discussion of economics in a natural way”. Personally, I think Chang has achieved his purpose as each chapter is dedicated to a particular food and a story, fact, or history about that food that transitions into an economic story. It’s a book that bridges people’s relationship with food to economics in a full circle where Chang “gives you the food first then the economics, so even if you’re not interested in economics at least you got information about a new food, and it’s now in paperback!”.
And, with a bellyful and humorously feast of a discussion Ha-Joon Chang jokingly notes “if you come from a country with less than $10,000 per capita income, you can go ahead and pirate-copy my book”. Let’s just say, I found myself on Amazon minutes later undoubtingly purchasing the paperback version!
Makayla Amaris Levitt
The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.
