Last month, Michael Lind argued that free-trade globalism locks in rich-world advantage and kicks away the ladder. He is wrongby P L / February 20, 2003 / Leave a comment
Eight years ago, in “The Next American Nation”, Michael Lind terrified Americans with the threat of “ever-increasing low-wage, high-skill competition” from the third world, to which free-traders allegedly had “no answer.” But after this menace failed to materialise, Lind changed his tune. Developing countries, far from being hypercompetitive are, in fact, unable to compete with rich countries, he now argues (Prospect, January 2003). At least he is consistent about one thing. He pins the blame on free trade, which he dismisses as utterly “discredited.” But in fact, it is Lind’s views that are-or should be-discredited.
Lind’s argument is this. Developing countries that adopt free trade are failing to prosper, let alone catch up with rich ones. Most enjoyed much faster economic growth in the more interventionist 1960s and 1970s than in the more liberal 1980s and 1990s. In order to catch up with the rich world, newly industrialising countries ought to protect their infant industries-as Britain, the US, Germany, Japan and others once did. More broadly, Lind is disdainful of mainstream economic analysis, appealing instead to the lessons of history. But his grasp of history is as shaky as his knowledge of economics.
Lind ascribes the rapid development of the US, Germany and others in the latter half of the 19th century and the first half of the 20th to protectionist policies inspired by Friedrich List’s ideas about economic nationalism. He quotes various statesmen who believed in protectionism and points to various protectionist measures countries employed, and deduces from this that those measures are responsible for their countries’ development.
But the true historical picture is different. The main reason why Britain, followed by the US and northern Europe, developed so fast in the 19th century was the rapid pace of technological innovation. Free trade (adopted by nearly all countries bar the US) provided an added boost during the long boom from 1850 to 1875. Free capital flows were important too: British savings financed the development of the new world. America’s openness to European workers was also crucial; around 35m Europeans set sail for the resource-rich and labour-scarce US in the century after 1820. Lind’s claim-that protectionism explains how America and others got rich in the 19th century-does not stand up.
Nor does his contention that the raising of trade barriers that began in the late 19th century, gathered pace in the early 20th and culminated in the full-blown protectionism…