Escape from Empire Paperback – 2 Oct 2009
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"A valuable contribution to the appraisal of international development disappointments, not least because of the meticulous analysis of American economic foreign policy in the twentieth century."-- Patrick Shea, "Political Studies Review"
"This distinguished book by an American economist shows how the U.S. changed from a benevolent to an aggressive empire, slashing growth and unleashing financial crises."--Luiz Carlos Bresser-Pereira, former Finance Minister of Brazil and Emeritus Economics Professor at the Getulio Vargas Foundation
"One of the most enchanting books in generations to unravel how giants battle imperial know-it-alls and make their own way."--Yoon-Dae Euh, President, Korea University, and Vice Chair, National Economic Advisory Council of Korea
"A thrilling account of how daredevils of economic development soar to heaven and outwit hell. At last, a shrewd study of the two postwar American empires, one permissive and the other ideological. I salute Alice Amsden for this bold and scholarly attempt."--G.K. Chadha, Chancellor, Jawaharlal Nehru University, and Member of the Prime Minister's Economic Advisory Council
"Amsden wittily demonstrates how countries that enrich themselves avoid experts' mistakes and succeed on their own responsibility. Listen hard, Russia!"--Sergey Glazyev, Member of Russian Parliament and Economist, Russian Academy of Science
"Amsden reveals with sparkle and insight how much developing countries can achieve when allowed to think for themselves."--Guo Shuqing, Chairman of the Board, China Construction Bank
"A valuable contribution to the appraisal of international development disappointments, not least because of the meticulous analysis of American economic foreign policy in the twentieth century." Patrick Shea Political Studies Review
A valuable contribution to the appraisal of international development disappointments, not least because of the meticulous analysis of American economic foreign policy in the twentieth century.--Patrick Shea, "Political Studies Review"
A valuable contribution to the appraisal of international development disappointments, not least because of the meticulous analysis of American economic foreign policy in the twentieth century.--Patrick Shea , Political Studies Review
About the Author
Alice H. Amsden was Barton T. Weller Professor of Political Economy in the Department of Urban Studies and Planning at the Massachusetts Institute of Technology.
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Only twelve of more than a hundred countries under colonial rule gained any manufacturing experience. As Amsden notes, "unlike Britain, Japan promoted colonial manufacturing." Some of the twelve, especially China and India, have become economic powers. But as she writes, "global absolute power has become a relic of the past. Absolutism cannot be preserved by the United States, nor can it be acquired by China." And yet still, as the International Labour Organisation reports, half the world's workers - 1.4 billion people, the highest number ever recorded - earn less than $2 a day.
Developed countries' states import low-paid immigrant labour, to keep wages low, rob developing countries of their skilled labour and stop rival producers emerging. At home, they promote the interests of finance capitalists, whose incomes depend on mergers and privatisations not on developing manufacturing. Abroad, they promote palliative economics and oppose the development of manufacturing. They sponsor NGOs, `small is beautiful' and petty-bourgeois trade, not production.
Countries need to defend their manufacturing industries against economic aggression. As Amsden observes, contrary to the prevailing wisdom, "Keynes believed that in times of depression and world strife, haggling over tariffs might inflame hostilities, whereas leaving tariffs in place might lead to peace. Contrary to popular belief, protection might increase trade, not decrease it. Industrialization needed raw materials, manufactured parts, components, and machinery. Some of these inputs would be purchased locally, others would be imported. If an industrializing country grew faster than under free trade by virtue of tariffs, it might import more of these inputs, not less. Trade would boom." Tariffs are a useful defence against economic aggression. States should attach performance standards to state subsidies.
She concludes, "To break the chains of static comparative advantage that for centuries bound them to mining minerals and manufacturing miniature dolls, developing countries must again be free to choose their own model."
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Escape From Empire does raise important questions. Why is it that economic take-off and industrialization only took place in a limited number of countries, which all had manufacturing experience before World War II? Why are Asian countries, and especially Japan's former colonies, so well represented in this group? Why is it that the US couldn't ignite growth in its own Latin American backyard, while the Chinese economy benefits from being in the middle of a fast-growing Asian region? How to account for the rapid development of countries like China or Vietnam whose authorities do not follow the Washington Consensus script? How can government efficiently manage the economy without falling prey to nepotism and rent-seeking behavior? Do development theories vary with academic fashion, or are there important ideas that policymakers need to apply consistently?
The problem is that instead of providing new answers to these questions, Amsden offers old wine in new bottles, and spices her recipe with a heavy dose of political correctness. For her, the 1960s and 1970s were a golden age of economic experimentation and high growth, followed by a dark age of ideological tightening and sluggish performance. America was the benevolent hegemon that allowed countries to experiment with their own solutions, in a kind of laissez-faire that applied to government policies as opposed to market solutions. It then turned into a stern school-teacher that imposed market fundamentalism and discredited all attempts at state-led development. Only since the turnoff the twenty-first century did emerging economies retrieve the room of maneuver that allowed them to challenge the Washington-led orthodoxy. It is to this journey through heaven and hell that Alice Amsden conveys her readers, making it clear that, fort her, the developmental state comes from heaven, and the United States comes from hell.
The era of experimentation Amsden refers to as the hallmark of the 1960s and 19870s does not designate hippy counterculture--although she alludes to alternative lifestyles and drug use, which she compares to receiving foreign aid: "it felt good, but it had a lot of bad side effects." Nor does it refer to experimenting with democracy and opening up political space: like in her book on South Korea, Amsden has few words in favor of democracy or free elections, and she thinks democratization comes as a consequence of economic development rather than as condition. She likes her state strong and authoritarian, and her civil society subdued and obedient. What she means by experimentation is that, following World War II and until the neoliberal 1980s, developing countries were allowed to follow their own development paths, as long as they stayed clear of communism.
In particular, they were free to tinker with various forms of state intervention and industrial policies. Some countries stroke a winning formula: performance-based subsidies, which was first experimented in South Korea and Taiwan, and which allowed them to grow at a fantastic rate. The idea is straightforward: nothing comes for free. In order to get government subsidies, including cheap credit, tariff protection, and entry restrictions, business groups had to reach a certain export target, output level, investment rate, or management practice. This hands-on approach to policy management violated every tenets of the free market mantra. Governments got relative prices wrong, they picked winners, they invested to overcapacity, they managed trade, and they went against the law of comparative advantage. And the surprising thing is that they got away with it beautifully.
Does this provide a policy for would-be globalizers? The world today is a thoroughly different place than what it was a generation ago. Recipes that worked in the past may no longer apply. Indeed, there is a strong case to be made that South Korea and other Asian developmental states depended more on free market and entrepreneurial initiative than earlier accounts of their successes have led us to believe. The principal challenge of emerging countries, the so-called "middle-income trap", doesn't come from US hegemony or the Washington consensus. These economies find themselves between a rock and a hard place. On one hand they are no longer able to compete with the cheap inputs of lower-level exporters, but on the other hand they lack capacity to compete with the high-technology production of higher income countries. Middle-income countries also confront other challenges: they face increased inequality, they are exposed to the risk of financial crisis, and their political system often oscillates between populism and authoritarianism.
I was very disappointed by this book. Amsden doesn't really engage neoclassical economics on its own turf. There is no discussion on the law of comparative advantage, on the benefits of free trade and competition, or on increasing return to scale and monopolistic competition for that matter. She engages on a smear campaign against Anne O. Krueger and the World Bank. On the other hand, she lionizes economists like Raul Prebisch, whose theories of center/periphery and import substitution have led to a dead-end. The book is short on theory and concepts. Amsden's attack on free market theory is not well argumentated and often falls into caricature. She insists on the need to experiment, but she doesn't talk about the experiences that failed, with catastrophic consequences for the population. Her dismissal of US foreign influence borders on paranoia.
In addition, Amsden has a very peculiar approach to academic writing. She thinks catchwords, quips and funny phrases can substitute for academic rigor and sound reasoning. She has some bon mots for sure, like when she states that the British empire is best remembered as "a place where the sun never sets and wages never rise", or when she highlights the difference between the two periods of American hegemony by writing that "the first lifted all boats, while the second lifted all yachts". This will amuse at first, then bother and irritate. Is it really up to an academic writer to mimic journalists and magazine editors, often with less talent? As a conclusion, you can easily escape from Escape from Empire: it is a dispensable book that fails to convince.
While there's something correct about this idea it shares all difficulties of Keynsean critique of neoliberal capitalism because it was the exhaustion of Keynsean and developmental model that gave a rise to neoliberalism. The real problem is that capitalism turned barbarian not because of some ideologies but because of inherent structural tendencies.
So this book is very good as description of the rise and fall of Third World developmentalism but not as an explanation. I'd like to give 3.5 stars.
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