Kicking Away the Ladder. Development Strategy in Historical Perspective

The 1721 legislation, and its subsequent supplementary policy changes, included the following measures.[30] First of all, import duties on raw materials used for manufactures were lowered, or even dropped altogether.[31] Second, duty drawbacks on imported raw materials for exported manufactures – a policy that had been well established in the country since the days of William and Mary – were increased.[32] For example, the duty on beaver skins was reduced and in case of export a drawback of half the duty paid was allowed.[33] Third, export duties on most manufactures were abolished.[34] Fourth, duties on imported foreign manufactured goods were significantly raised. Fifth, export subsidies (‘bounties’) were extended to new items like silk products (1722) and gunpowder (1731), while the existing export subsidies to sailcloth and refined sugar were increased (in 1731 and 1733 respectively).[35] Sixth, regulation was introduced to control the quality of manufactured products, especially textile products, so that unscrupulous manufacturers could not damage the reputation of British products in foreign markets.[36]

Brisco sums up the principle behind this new legislation as follows: ‘[manufacturers] had to be protected at home from competition with foreign finished products; free exportation of finished articles had to be secured; and where possible, encouragement had to be given by bounty and allowance’.[37] What is very interesting to note here is that the policies introduced by the 1721 reform, as well as the principles behind them, were uncannily similar to those used by countries like Japan, Korea and Taiwan during the postwar period, as we shall see below (section 2.2.7).

With the Industrial Revolution in the second half of the eighteenth century, Britain started widening its technological lead over other countries. However, even then it continued its policy of industrial promotion until the mid-nineteenth century, by which time its technological supremacy was overwhelming.[38]

The first and most important component of this was clearly tariff protection. As we saw from table 2.1, Britain had very high tariffs on manufacturing products as late as the 1820s, some two generations after the start of its Industrial Revolution, and when it was significantly ahead of its competitor nations in technological terms. Measures other than tariff protection were also deployed.

First of all, Britain banned the imports of superior products from some of its colonies if they happened to threaten British industries. In 1699, the Wool Act prohibited exports of woollen products from the colonies, killing off the then superior Irish wool industry (see section 2.3). In 1700, a ban was imposed on the imports of superior Indian cotton products (‘calicoes’), debilitating what was then arguably the world’s most efficient cotton manufacturing sector. The Indian cotton industry was subsequently destroyed by the ending of the East India Company’s monopoly in international trade in 1813, when Britain had become a more efficient producer than India (see section 2.3). By 1873, two generations after the event, it was already estimated that 40-45% of all British cotton textile exports went to India.[39]

By the end of the Napoleonic Wars in 1815, however, there were increasing pressures for free trade in Britain from the increasingly confident manufacturers. By this time, most British manufacturers were firmly established as the most efficient in the world in most industries, except in a few limited areas where countries like Belgium and Switzerland possessed technological leads over Britain (see section 2.2.6). Although a new Corn Law passed in 1815 (Britain had had numerous Corn Laws dating back to 1463) meant an increase in agricultural protection, the pressure for freer trade was building Up.[40]

Although there was a round of tariff reduction in 1833, the big change came in 1846, when the Corn Law was repealed and tariffs on many manufacturing goods abolished.[41] The repeal of the Corn Law is these days commonly regarded as the ultimate victory of the Classical Liberal economic doctrine over wrong-headed mercantilism. Although we should not underestimate the role of economic theory in this policy shift, many historians more familiar with the period point out that it should probably be understood as an act of ‘free trade imperialism‘[42] intended to ‘halt the move to industrialisation on the Continent by enlarging the market for agricultural produce and primary materials’.[43]

Indeed, many key leaders of the campaign to repeal the Corn Law, such as the politician Robert Cobden and John Bowring of the Board of Trade, saw their campaign in precisely such terms.[44] Cobden’s view on this is clearly revealed in the following passage: