10/14/2020 Ha-Joon Chang on Economic Development

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Dr. Ha-Joon Chang on Economic

Development

Ha-Joon Chang is Reader in the Faculty of Economics

and Director of the Centre of Development Studies at the
University of Cambridge.

Dr. Ha-Joon Chang on Economic

Interviewer: Dr. Ivano Cardinale
Development
Production: Dr. Ricardo Leizaola
from ISRF
Interview date: 18 September 2017
Place: Centre of Development
Studies, University of Cambridge

The excerpts of this video are

highlights of the discussion that run
for over an hour. The full transcript
of the discussion and a biographical
statement is available in the tab
below.

The topics discussed in the video

include:

Alternative de nitions of
economic development
From de nitions to policies

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10/14/2020 Ha-Joon Chang on Economic Development
Excerpts Full transcript
What is economic development?
People have debated about the de nition for
ages. Now, broadly, there are, I think, two-
and-a-half de nitions, if I may say so. The
rst de nition is basically con ating
economic development with economic
growth. So as output per capita grows, there is
economic development. This view is adopted
by most neoclassical economists, who form
the vast majority of the economic profession
today. But then there is another de nition,
which has roots from the classical school and
the Marxist school and also what I call the
developmentalist tradition, people like
Alexander Hamilton, Friedrich List, and the
development economists of the 1950s and
‘60s, people like Simon Kuznets, Albert
Hirschman and so on. In these alternative
traditions, economic development is de ned
not purely in terms of quantitative growth but
qualitative change.
This de nition is based on the understanding
of the economy mainly as something based in
the sphere of production. So, for these people,
economic development happens only when
www.economicsppf.com/ha-joon-chang.html
The role of the state in
development
The political economy of
development
Bio
there is fundamental structural
transformation in the productive structure of
the economy and also the underlying
capabilities that make that productive
transformation possible. It’s a much more
nuanced and qualitative de nition of
economic development…
Then I said two-and-a-half de nitions
because there has been more recently a variant
of the neoclassical de nition, which is
apparently more progressive, but in the end
even less forward-looking than the standard
neoclassical de nition. This is a de nition
that more or less equates economic
development with poverty reduction….. This is
not strictly speaking the same as the
neoclassical de nition, but it is quite strongly
linked to it because it is mainly about people
as consumers, what kind of incomes they
have. It is not about the transformation of the
productive structure. It is not about people
taking up di erent professions, turning
themselves from subsistence farmers into
manufacturing workers and so on. So, in that
sense, it’s rooted in the same world view as
neoclassical economics.
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Your answer seems to suggest that di erent
economic schools have di erent de nitions
of development, which might lead to di erent
policies. Could such de nitions and policies
be so much in contrast that pursuing
development as de ned by one school might
hinder development as de ned by another
school?
That’s right, yes. It is not just academic
theoretical di erences because they give very
di erent policy implications. So if you take
what I call the productivist view, the view that
economic development is in the
transformation of the productive sphere, yes,
then you will necessarily recommend
economic policies that will encourage the
accumulation of new technologies, acquisition
of new skills by workers, transformation of
the social arrangements to back those. So the
most famous policy recommendation in this
tradition is the so-called infant industry
argument. The argument that governments of
economically-backward nations need to
provide trade protectionism, subsidies and
other supports to young industries so that
they can have the space to develop their
productive capabilities and eventually catch
up with the more advanced producers from
abroad.
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Ha-Joon Chang on Economic Development
Now, for this to happen, you would need to
provide tari protection. You might even need
to ban the imports of certain foreign products.
You might put restrictions on foreign direct
investment. You might set up state-owned
enterprises in the large capital-intensive
sectors with high risk because, typically, in
developing countries, there are no large
capitalists that can take such risks in the
beginning. So you recommend these kinds of
policies. If you took the neoclassical view,
then, basically, economic growth happens
ultimately as a consequence of people trading.
So as people want to buy better things then
they are ready to o er higher prices and
entrepreneurs will spot the opportunity,
produce new things. In that world, you also
assume that technologies are freely available,
and therefore everyone has equal productive
capability.
So if, for example, countries like Guatemala
are not producing things like BMWs, it’s not
because they cannot, but because it doesn't
make economic sense. You have all these
assumptions about the economy, which
basically suggests that free trade and free
market policies are the best. At most, you
would provide some public goods like
infrastructure and basic education, but,
beyond that, you don't really have to do
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anything other than keeping competition alive

by opening your borders, by deregulating From these two di erent visions of how the
businesses. Competition in the market economy works and develops in the long run
provides the natural spur to economic growth especially, you’d come up with completely
and whatever happens happens… di erent sets of economic policies.

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A co-production of Goldsmiths Economics and ISRF.

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