When you are playing catch up then it is not a matter of great significance to protect IP in your own country. Doing the already done, with fewer mistakes on the way, is the way to go forward. But when you have reached the technological frontier then it becomes critical. Development is always uneven. A middle income country will have some world class ideas somewhere, if only the copyright for Shakira’s pop songs. Even the poorest may have forests full of species untested for pharmaceutical and other biological effects. IP protection can go both ways.

1) Chang never claims protectionism is the be all and end all of economic success. However, the role of institutions, educations, to economic growth has been covered ad nauseum in the recent economic literature, and is widely recognized as important. Protecting protectionism and other forms of state intervention, on the other hand, has fallen out of favor under the ideological pressure of the Washington Consensus. Chang’s sin is to point this out.

2) Choice quote from that review:

Certainly China and India have answered by saying that their past policies of inward-looking socialism have failed them. Both countries have done better over the past decade or two by shedding heavy-handed government involvement in regulating the economy and allowing a greater role for market forces, even though they have not embraced every aspect of the “Washington Consensus.” In particular, China and India have decided to become much more open to world trade and investment and have reaped benefits by exposing long protected “infant industries” to global competition.

What a lot of nonsense. He never argued that centralized price-setting is superior to free (internal) markets, as this quote imputes. Today, China is the mercantile state par excellence. It is open to world trade and investment but it retains an extensive system of state intervention based on forced savings, subsidies, industrial espionage, public infrastructure spending, etc – in other words, much the same things the rich world used to get rich in the first place.

Meanwhile, states that don’t bother with this fall into a dependency relation with the rich world that locks them into the export of commodities in which they enjoy a comparative advantage, but which don’t have any prospects of generating the long-term growth needed for convergence with the First World.

From Douglas Irwin’s review for the Economic History Association:

Perhaps the biggest disappointment is Chang’s extremely superficial treatment of the historical experience of the now developed countries. He has simply chosen not to engage the work of economic historians on the questions he is raising. For example, chapter one — “How Did the Rich Countries Really Become Rich?” — does not contend with the work that economics historians have done on the topic. Given the broad question posed in this chapter, one might have expected Chang to confront such landmark works as Douglass North and Robert Thomas’s The Rise of the Western World (1973) or Nathan Rosenberg’s and L.E. Birdzell’s How the West Grew Rich: The Economic Transformation of the Industrial World (1986). These works stress the importance of political systems that provide security to economic transactions and economic systems that allow for competition, broadly construed. But Chang does not explain why the lessons from these works are not relevant to developing countries today….

For example, the United States started out as a very wealth country with a high literacy rate, widely distributed land ownership, stable government and competitive political institutions that largely guaranteed the security of private property, a large internal market with free trade in goods and free labor mobility across regions, etc. Given these overwhelmingly favorable conditions, even very inefficient trade policies could not have prevented economic advances from taking place. (As Adam Smith once commented, the effort of individuals to improve their condition “is frequently powerful enough to maintain the natural progress of things towards improvement, in spite … of the greatest errors of administration.”)

And yet, in Chang’s story, these other things get no credit for America’s economic success; rather, it all comes down to infant industry promotion. Chang writes: “Although some commentators doubt whether the overall national welfare effect of protectionism was positive, the U.S. growth record during the protectionist period makes this scepticism look overly cautious, if not downright biased.” But, once again, correlation is not causation. Chang produces no evidence that protectionism was responsible for the growth. He does not investigate the various channels and mechanisms by which trade policy affects growth and compare them to other factors leading to economic expansion. He does not undertake a counterfactual analysis to determine the magnitude of benefits and costs of infant industry policies. In the reasoning style of Paul Bairoch, if tariffs were high and growth was strong, then there must be a causal relationship between the two. There is no need to examine alternative explanations, such as whether any effects of tariff policy were swamped by the advantages of other aspects of the American economy. Instead, Chang makes sweeping statements like “It is also clear that the U.S. economy would not have got where it is today without strong tariff protection at least in some key infant industries….

A broader problem afflicts Chang’s approach — sample selection bias. Chang only looks at countries that developed during the nineteenth century and a small number of the policies they pursued. He did not examine countries that failed to develop in the nineteenth century and see if they pursued the same heterodox policies only more intensively. This is a poor scientific and historical method. Suppose a doctor studied people with long lives and found that some smoked tobacco, but did not study people with shorter lives to see if smoking was even more prevalent. Any conclusions drawn only from the observed relationship would be quite misleading.”

(I very much recommend reading the full review. )

To use an analogy, I think that people take a ‘crude Darwinian’ approach to theories, thinking that the weak will die and the strong survive, so like small rodentoids turning into sturdy deer, Western thought will get more robust. It doesn’t look at uglier Darwinian success stories, like leeches, which have lasted far longer than deer and will probably last long after.

So, as a Russian once said ‘What is to be done’(Against neo-liberalism)? Unless politicians and journalists get smarter, or less cult-like, I think it will be here to stay for a while.

*I’ve probably asked this before, but have you seen The Trap by Adam Curtis? It is available on googlevideo and youtube