The Myth of Free Trade

Democracy Now! (March 10): This is a transcript and an excerpt of Amy Goodman interview with Ha-Joon Chang, author of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.

"AMY GOODMAN: —talking about the hypocrisy of the West? But explain what that is, what the US has done or what the West has done with poorer countries when they’re in trouble, and then what we do when we’re in trouble.

HA-JOON CHANG: That’s right, yeah. For example, when the developing countries go into financial crises like the rich countries are experiencing today, they were told by the IMF and the World Bank, and ultimately the rich country governments which control these institutions, that they have to cut spending; ideally, they should run budget surplus. They have to raise interest rate to 30, 50, even 80 percent in some countries. And basically, they have to tighten the belt. Now that the rich countries have the financial crisis, they have cut interest rate to practically zero. You know, I mean, when South Korea had its financial crisis back in 1997, the IMF insisted that the country runs budget surplus equivalent to one percent of GDP. This year in the US alone, budget deficit is estimated to be equivalent to something like 12 percent of GDP.
Now, I mean, how do you explain that? I mean, that these policies are not good enough for you? I mean, “We’ll use one set of policy, which we think are the good ones, but you have to use something else.” You know, the American writer Gore Vidal once upon a time famously said that the American economic system is socialism for the rich and capitalism for the poor, and the international macroeconomic policies have been like that. I mean, it’s what I call monetarism for the poor and Keynesianism for the rich. So when the rich countries have a fall in demand, they think nothing of boosting it up by printing money and increasing government spending; the poor countries shouldn’t do that.
Now, it’s not only the macroeconomic policy where this hypocrisy has a role. For example, the rich countries have been telling the developing countries to adopt free trade and told them, “Look, I mean, all countries in history probably, with the possible exception of Japan, have become richer through free trade. So how do you think that you guys can manage it otherwise?” Well, actually, if you look at the British history, American history, you find that today’s rich countries used protectionism, center, left and right, when they were developing countries. You know, I mean, for about one century, until the Second World War, the United States was actually the most protectionist country in the world. You know, there’s something there when Pat Buchanan said free trade is not free American, because in its 200 years of history, it has practiced free trade only for about fifty years"

AMY GOODMAN: One of the people you take on big time in your book is Thomas Friedman. Your first chapter, “The Lexus and the Olive Tree Revisited: Myths and Facts About Globalization.” We only have a minute to go, but what do you think are the myths that need to be debunked in this country?

HA-JOON CHANG: Well, basically, the myth is that America has been founded on the free market; the government has done very little; it has thrived under free trade. But actually, if you look at the history, this is actually the country that has succeeded most with protectionist policies. This is a country which has huge industrial policy, only that it’s called research funding in defense industry and research funding in health research. It actually spends, in proportional terms, a lot more money than Japan or European countries in supporting research and development, thereby steering the industries into certain directions. So let’s put it this way. I mean, this country has to basically come to terms with what it has done. I mean, it has been haunted by this ideology that, “Oh, we never did anything other than free market and free trade.” It’s time to give that up."

Read more or watch the entire program here.