Sacrifice the Present for the Future Investment Doctrine
Economic catch-up is a society choosing to under-consume now so it can invest more.
Chang argues the biggest problem with the UK economy that almost no one names is that it has not invested for thirty years. The UK has invested only 16-17% of GDP, against an OECD average around 21%, US and Germany at 22%, France and Switzerland at 23-26%, Korea at 29%, and China at 39%. The framework reframes investment ratios as a society's collective decision to sacrifice present consumption for future capacity.
It also reframes the role of the state. Chang's books on Britain in the 18th century, the US in the 19th, and Germany in the late 19th century show that today's rich countries all used heavy intervention — protection, subsidies, state-owned enterprise — to develop. Korea, Taiwan, and China have done the same in the modern era. The 'free market' story rich countries tell developing countries is historical hypocrisy.
The doctrine is not pure statism. Chang explicitly says the question is whether a society can build a mechanism — political consensus, financial channels, government-private cooperation — to defer consumption and direct capital toward long-horizon bets that pay off over five, ten, fifteen years.
- Investment ratio is a moral and political choice as much as an economic one.
- Today's rich countries did not get rich through free markets — they got rich through directed investment.
- Long-horizon bets need long-horizon capital, which needs deliberate institutions to exist.
- Quantity matters but quality matters too — investing for the sake of it picks bad projects.
- Imitation requires understanding the full toolkit, not just the visible parts.
- Measure the gapPull the country's gross fixed capital formation as a share of GDP and compare it to peers. Chang's reference numbers are UK 16-17%, OECD 21%, US/Germany 22%, France/Switzerland 23-26%, Korea 29%, China 39%.
- Locate the obvious unspent groundStart with the no-brainer infrastructure that years of underinvestment have left visible — broken rail, slow internet, deteriorating public buildings. These are easy wins because the deficit is unambiguous.Pro tipChang names rail and internet as the visible markers of UK underinvestment — including being unable to upload videos from his Tesco car park.
- Identify the cutting-edge betsBeyond infrastructure, decide which frontier sectors deserve directed investment — AI, quantum, nanomaterials. This requires conversation between government, finance, scientists, and entrepreneurs.WarningInvestment that always pays off is not pushing the boundary — accept some failures, manage the batting average.
- Build the channelling institutionsPick the levers — state-owned banks, subsidies, trade protection, public R&D, pension fund mandates. The Korean Hyundai story used banned imports for 12 years, subsidised loans, and heavy R&D investment.
- Confront the financial-sector vetoAn over-strong, short-term-oriented financial sector blocks long-horizon investment. Chang argues for a 'new deal' with finance — restricting share buybacks, lengthening shareholder horizons.WarningIf finance is set up to extract dividends and buybacks, no industrial policy will land.
- Adapt to local culture, not against itChang says copying Korea or Germany line-by-line is wrong. Build mechanisms that fit British culture — for example, channelling capital toward the country's existing creative-industry and scientific strengths.
In 1976 Hyundai produced 10,000 cars while Ford made 1.9m and GM 4.8m. Korea banned all car imports for 12 years and Japanese imports for another 10, channelled subsidised loans through state-owned banks, and the company invested heavily in R&D and design.
Brexiters cited Singapore but did not flag that Singapore's model rests on state ownership of 90% of land, 85% public housing, and a heavy state-owned enterprise share of GDP — tools the UK does not have.
Chang built this view across decades of work on industrial policy, including 'Kicking Away the Ladder' and 'Bad Samaritans'. The trigger he uses in this interview is the gap between UK rhetoric about being a tech leader and the reality of investing only two-thirds of what comparable countries invest.