Kicking Away the Ladder. Development Strategy in Historical Perspective

When they reached the technological frontier, the NDCs used a range of policies in order to help themselves pull away from their existing and potential competitors. Britain, given the duration for which it held the position of ‘frontier economy’, is most visible in this respect, but other countries also used similar measures when they could. Britain used measures to control transfer of technology to its potential competitors (for example, controls on skilled worker migration or machinery export), and put pressure on the less developed countries to open up their markets, by force if necessary. However, the catch-up economies that were not formal or informal colonies did not simply sit down and accept these restrictive measures. They employed a wide variety of measures to overcome the obstacles created by these restrictions, even resorting to ‘illegal’ means, such as the poaching of workers and smuggling of machinery.[11]

2.2. The Catch-up Strategies

In this section, I examine the experiences of a range of NDCs – Britain, the USA, Germany, France, Sweden, Belgium, the Netherlands, Switzerland, Japan, Korea and Taiwan – and consider what kinds of industrial, trade and technology (ITT) policies they used when they themselves were developing countries. I show that in most of these countries, the policies that were used are almost the opposite of what the present orthodoxy says they employed ‘and currently recommends that the currently developing countries should also use’.

2.2.1. Britain

As the intellectual fountain of the modern laissez-faire doctrines, and as the only country that can claim to have practised a total free trade at one stage in its history, Britain is widely regarded as having developed without significant state intervention. However, this could not be further from the truth.

Britain entered its post-feudal age (thirteenth and fourteenth centuries) as a relatively backward economy. Before 1600, it was an importer of technology from the Continent.[12] It relied on exports of raw wool and, to a lesser extent, of low-value-added wool cloth (what was then known as ‘short cloth’) to the then more advanced Low Countries, especially the towns of Bruges, Ghent and Ypres in Flanders, now part of Belgium.[13] The British monarchs of this time taxed these products mainly for revenue reasons, but since cloth was taxed more lightly than raw wool, this encouraged import substitution in wool cloth and a certain amount of export success.[14] Edward III (1327-77) is believed to have been the first king who deliberately tried to develop local wool cloth manufacturing. He wore only English cloth to set an example to the rest of the country,[15] brought in Flemish weavers, centralized trade in raw wool and banned the import of woollen cloth.[16]

The Tudor monarchs gave further impetus to the development of this industry with what can only be described as a deliberate infant industry promotion policy. The celebrated eighteenth-century merchant, politician and novelist, Daniel Defoe, describes this policy in his now-almost-forgotten book, A Plan of the English Commerce (1728).[17] In it, he describes in some detail how the Tudor monarchs, especially Henry VII (1485-1509) and Elizabeth I (1558-1603), transformed England from a country relying heavily on raw wool export to the Low Countries into the most formidable wool-manufacturing nation in the world.[18]