Kicking Away the Ladder. Development Strategy in Historical Perspective

The development literature is certainly full of theoretically-based propositions (e.g., free trade benefits all countries) and may also draw extensively on contemporary experiences (e.g., the literature on the East Asian ‘developmental state’). However, we rarely now see discussions that are based on the historical experiences of the now-developed countries (hereafter NDCs). To be sure, there are some scattered historical references, but these are often based on highly-stylized characterizations of historical experiences, and moreover tend to refer only to Britain and the USA. The supposed free-trade, free-market histories of these countries are held up as examples for developing countries. Yet these discussions of the British and US experiences are extremely selective and thus misleading, as will become clearer later in this book.

The upshot is that, unfortunately, with a few notable exceptions, there have been few serious studies over the last few decades which deploy the historical approach in the study of economic development.[25] This is why one of the aims of this book is to reaffirm the usefulness of the historical approach by applying it to the critique of the current popular discourses on ‘good policies’ and ‘good governance’. Saying this, however, may give the reader the mistaken impression that the book’s main aim is to prove the validity of an approach, using a policy issue as the raw material. That is not the main aim of this book. It is rather to discuss a contemporary problem with the help of history. I would further argue that, given current debates on ‘good’ policies and institutions, this approach is particularly relevant at the moment.

The book will naturally focus on the nineteenth and the early twentieth centuries, roughly between the end of the Napoleonic Wars (1815) and the beginning of the First World War (1914), the period when most of the now-developed countries were going through their Industrial Revolutions. However, in some cases, we will extend our time-frame. Britain, for example, deserves attention from the fourteenth century onwards, given its pioneer status in many areas of economic policy and of institutional development. Eighteenth-century Prussia is another special case that deserves attention, given its bureaucratic reforms and development of new methods of state-led industrial promotion. Other exceptions that merit discussion here are the post-Second World War experiences of countries like Japan and France, who were able to generate impressive economic growth on the basis of radical institutional transformation following the war.

An effort has been made to cover as many countries as possible. Although this attempt to bring in a wide range of evidence reinforces our main findings, it also necessarily invites criticism from specialists in the economic histories of these countries. This is to be expected and is very welcome. For not only do we hope to encourage development economists to reconsider the historical basis of their theories, we would also like to see economic historians take greater cognizance of the theoretical implications of their work. If this book succeeds in generating debate over the generalities and particulars discussed in the pages that follow, then it will have achieved its main aim.

Special effort is made to incorporate in the book examples from outside the more ‘important’, and thus better-known, countries (that is, Britain, the USA, Germany, France, and Japan) so that more general lessons can be drawn. However, coverage of other countries necessarily remains less extensive due to the sheer paucity of English-language studies on them. I have tried in part to overcome this problem with the help of research assistants who speak other languages, but the limitations of such methods are patent. In addition, it should be pointed out that there is still great value in looking at the experiences of the supposedly better-known countries, particularly because there exist many myths and misconceptions about their histories.

The distinction between policies and institutions that I adopt in the book is necessarily arbitrary. In common-sense usage, we might say that institutions are more permanent arrangements while policies are more easily changeable. For example, raising tariffs for certain industries would constitute a ‘policy’, whereas the tariff itself could be regarded as an ‘institution’. However, such simple distinctions quickly break down. For example, patent law might be regarded as an ‘institution’, but a country could adopt a ‘policy’ of not recognizing patents as indeed Switzerland and the Netherlands did until the early twentieth century. Similarly, when we examine competition law we will do so in the context of corporate governance institutions, but also as a part of industrial policy.

1.3. The Chapters