Speaking on an International Monetary Fund podcast, Chang said lessons from South Korea’s transformation could help developing economies, including African countries, pursue industrialisation and economic diversification.
South Korea began a major development programme in 1962, using five-year plans, industrial policy and a nationalised banking system. When Chang was born in 1963, South Korea’s income per person was less than half Ghana’s, a third of Senegal’s and a sixth of South Africa’s.
South Korea largely exported rice, fish, vegetables and tungsten ore before developing industries such as automobiles, steel and shipbuilding. Economic growth reached 10%, 12% and sometimes 15% during parts of Chang’s childhood.
Chang said developing economies need a period of protection to give emerging industries time to improve productivity before competing with established foreign companies. “Developing countries need a period of protectionism in the beginning if they’re going to develop the economy,” Chang said.
Chang said tariffs could be misused, but misuse did not make protection inherently ineffective. Britain, the United States, Japan, South Korea and Taiwan used tariffs, subsidies or other forms of state support during industrialisation.
However, Chang cautioned that protection alone would not produce competitive industries. Governments must provide infrastructure, banking systems, export support and other services while requiring supported companies to raise productivity.
International trade also remains essential because developing economies require foreign currency to import machinery, technology and new ideas. Chang rejected the argument that free trade was necessarily the best approach, instead supporting managed trade that combines temporary protection with stronger export capacity.
Chang also challenged the idea of a single model of capitalism, noting that countries combine markets, regulation, private ownership and state participation in different ways.
For Africa, Chang’s argument points to the need for industrial policies that support domestic production rather than continued dependence on primary commodity exports.
Chang said sustainable development required financial stability, stable production and social agreement around a long-term national vision, not only inflation control.
Chang also called for wider economic literacy, arguing that public understanding of economics was necessary to build social consensus around development priorities.
–IMF/ChannelAfrica–
