Rich countries didn't follow free trade rules when they were developing. They now insist: do as we say, not as we didby Michael Lind / January 20, 2003 / Leave a comment
According to the Washington consensus which governed thinking about global economic development during the 1980s and 1990s, the only way for poor countries to catch up with the US, the EU and Japan was to adopt policies of free trade and free investment. This prescription, however, produced rather discouraging results. Shock therapy failed in post-communist Russia and eastern Europe, while the liberalisation of capital flows was a big factor in the Asian financial crisis. Moreover, the data is now in and it turns out that most third world countries grew faster before they abandoned industrial policy tools like import substitution tariffs than in the period in which they followed the advice of the IMF, the World Bank and free-trade evangelists like Jeffrey Sachs, Jagdish Bhagwati and Paul Krugman.
The failure of free-trade globalism to help the developing world has not been an accident, according to Ha-Joon Chang, an economist at Cambridge University. He argues that the rules of the world economy are designed not to help poor countries develop into modern economies, but to lock in the advantages of the present industrial leaders. The US and other advanced industrial countries are not only selfish but hypocritical. They would deny to newly-industrialising countries the very practices that they used in the past to become economic superpowers.
“When they were in catching-up positions, the now-developed countries protected infant industries, poached skilled workers… and wilfully violated patents and trademarks,” Chang observes. “Once they joined the league of the most developed nations, they began to advocate free trade and prevented the outflow of skilled workers and technologies; they also became strong protectors of patents and trademarks… the poachers turned gamekeepers.”
Both recent and more remote history undermines the free trade dogma: “All countries, but especially developing countries, grew much faster when they used ‘bad’ policies during the 1960-1980 period than when they used ‘good’ ones during the following two decades,” argues Chang. Inasmuch as the “bad” policies like infant industry protection and non-tariff barriers were used successfully to industrialise Britain, the US, Germany, Japan and others, Chang concludes that the developed countries “are in effect ‘kicking away the ladder’ by which they have climbed to the top.” His metaphor comes from the German-American economist Friedrich List, who wrote in 1841: “It is a very common device that when anyone has attained the summit of greatness, he kicks away the ladder by which he…