Kicking Away the Ladder. Development Strategy in Historical Perspective

According to Defoe, Henry VII had, prior to his coronation in 1485, ‘been a kind of a Refugee in the Court of his Aunt the Dutchess of Burgundy [italics original],.[19] There, he was deeply impressed by the prosperity in the Low Countries based on wool manufacturing, and from 1489 onwards he put in place schemes to promote British wool manufacturing. The measures used included sending royal missions to identify locations suited to wool manufacturing,[20] poaching skilled workers from the Low Countries,[21] increasing duties on, and even temporarily banning the export of, raw wool. Ramsay also documents the legislation in 1489, 1512, 1513 and 1536, which banned the exports of unfinished cloths, save for coarse pieces below a certain market value. This, he observes, reflected the then ‘influential view that if it was preferable to export wool in the form of cloth rather than in the raw state then it was likewise better to ship cloth fully dressed and dyed than in a semi-manufactured state, “unbarbed and unshorn” ‘.[22]

As Defoe emphasizes, Henry VII realized that, given Britain’s technology gap with the Low Countries, this transformation was going to take a long time, and therefore he took a gradualist approach.[23] Therefore, he raised export duties on raw wool only when the industry was better established. As soon as it became clear that Britain simply did not have the capacity to process all the raw wool it produced, he withdrew the ban on raw wool export he had imposed.[24] According to Defoe, it was not until the time of Elizabeth I (1587), nearly a hundred years after Henry VII started his import substitution policy (1489), that Britain was confident enough about its wool manufacturing industry’s international competitiveness to ban raw wool export completely.[25] This eventually drove the manufacturers in the Low Countries to ruin.

According to Defoe’s analysis, other factors besides this import substitution policy helped the achievement of British victory in the wool industry under Elizabeth 1. Some of these factors were fortuitous, such as the migration of Protestant Flemish textile workers following the war of independence from Spain in 1567. However, other elements were deliberately created by the state. In order to open new markets, Elizabeth I dispatched trade envoys to the Pope and the Emperors of Russia, Mogul, and Persia. Britain’s massive investment in building its naval supremacy allowed it to break into new markets and often to colonise them and keep them as captive markets.[26]

It is difficult to establish the relative importance of the above-mentioned factors in explaining the British success in wool manufacturing. However, it does seem clear that, without what can only be described as the sixteenth-century equivalent of modern infant industry promotion strategy put in place by Henry VII and further pursued by his successors, it would have been very difficult, if not necessarily impossible, for Britain to achieve this initial success in industrialization: without this key industry, which accounted for at least half of Britain’s export revenue during the eighteenth century, its Industrial Revolution might have been very difficult, to say the least.[27]

The 1721 reform of the mercantile law introduced by Robert Walpole, the first British Prime Minister, during the reign of George I (1714-27) signified a dramatic shift in the focus of British industrial and trade policies.

Prior to this, the British government’s policies were in general aimed at capturing trade (most importantly through colonialization and the Navigation Acts, which required that trade with Britain had to be conducted in British ships[28]) and at generating government revenue. The promotion of wool manufacturing, as discussed above, was the most important exception to this, but even this was partly motivated by the desire to generate more government revenue. In contrast, the policies introduced after 1721 were deliberately aimed at promoting manufacturing industries. Introducing the new law, Walpole stated, through the king’s address to Parliament: ‘it is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreign raw material’.[29]