Bad Samaritans

Despite the strong title, Bad Samaritans is a well balanced analysis of third-world economic policies. I was initially drawn to the book after seeing the author give a talk at Stanford. He admitted to being outside the mainstream, yet had some good ideas. In spite of a thick accent, he spoke good idiomatic English. Luckily, in the book, the English comes through without the accent.

The main thrust of the book is that the current world economic powers are acting as "Bad Samaritans", encouraging developing countries to adopt "harmful" neo-liberal policies that actually retard development. He supports his thesis primarily through historical analysis. As a Korean, he devotes many pages to the Korean transformation, documenting the poor condition of post-World War II Korea, and the way it went about its rapid economic transformation. Korea's transformation "toolkit" included such anti-neo-liberal policies as foreign exchange controls, tariffs, and subsidies. However, all of these worked to rapidly transform Korea's economy.

He also points out that many of the countries that are now very adamant about free trade and intellectual property rights were countries that got their start through intellectual "piracy" and restrictive trade (including US, Western Europe, Japan)

While objecting to many policies of the World Bank, WTO and IMG, he is not an ideologue, and provides a fairly balanced picture of different economic policies. In some cases, he turns arguments on their head, pointing out that there is a problem with public ownership of companies. However, this problem "agent" problem is also present in large corporations. Democracy is shown to be uncorrelated to economic development. Even corruption is shown to have a somewhat ambiguous relationship to development. (Corrupt bribes that go to a Swiss bank account are bad, while other bribes serve as "auctions" and may even enhance economic development by bypassing red tape.)

The goals of the large developed countries make sense from the point of view of those countries. After all, they want open markets to sell their goods, while also having low cost areas of production and resource extraction. In the short run the neo-liberal policies provide the best benefit for the big countries. They also provide an apparent benefit for the developing countries. Open borders mean free access to McDonalds and Nike. An American visiting a free-trading country will feel right at home, and will be more likely to send tourist dollars there. Americans are also more likely to get cheap goods from there. The developing country will probably earn more than they would under a protectionist regime.

However, the developing country would also be more likely to find themselves in continuous serfdom to the developed countries. If all the developing countries shot up to first world levels, the developed countries would see a significant decrease in their standard of living. Increased demand for scarce natural resources would drive up prices. Without low-cost production centers, the cost of goods (and some services) would significantly increase. Without an intellectual superiority, there would be little left to export. It is thus in the best interest of the rich countries to keep the poor countries relatively poor. The poor countries should still grow, just not at rates that would cause them to surpass the rich world.

One poignant example given in the book is the comparison of children to countries. A six year old would economically add more value by going to work, rather than being a "leach" off his parents and going to school. However, over the long run, by going to school, the child can learn more and make a greater lifetime contribution to society. A high school graduate could get a job. However, sacrificing 4 years of earnings for a college degree may be the better long term option. Similarly, countries may be better off growing parts of their economy in a more "sheltered" style until they are ready to be sprung on the world. Companies like Samsung and Nokia both benefited from this "infant" support, making the world the better for it.