Kicking Away the Ladder. Development Strategy in Historical Perspective

If this is the case, the currently recommended package of ‘good policies’, which emphasizes the benefits of free trade and other laissez-faire ITT policies, seems at odds with historical experience. With one or two exceptions (e.g., the Netherlands and Switzerland), the NDCs did not succeed on the basis of such a policy package. The policies they had used in order to get where they are now – that is, activist ITT policies – are precisely those that the NDCs say the developing countries should not use because of their negative effects on economic development.

So are the developed countries, and the international development policy establishment (IDPE) that they control, recommending policies that they find beneficial for themselves, rather than those beneficial for the developing countries? Is there any parallel between this and the nineteenth-century British push for free trade against the protectionist policies of the USA and other NDCs which were trying to catch up with it? Is it fair to say that the WTO agreement that puts restrictions on the ability of the developing countries to pursue activist ITT policies is only a modern, multilateral version of the ‘unequal treaties’ that Britain and other NDCs used to impose on semi-independent countries? In other words, are the developed countries ‘kicking away the ladder’ by which they climbed up to the top beyond the reach of the developing countries? The answer to all these questions, unfortunately, is yes.

The only possible way for the developed countries to counter the accusation that they are ‘kicking away the ladder’ would be to argue that the activist ITT policies which they had previously pursued used to be beneficial for economic development but are not so any more, because ‘times have changed’. In other words, it may be argued, the ‘good policies’ of yesterday may not be ‘good policies’ of today.

Apart from the paucity of convincing reasons as to why this may be the case,[5] the poor growth records of the developing countries over the last two decades suggest that this line of defence is simply untenable. During this period, most developing countries have gone through ‘policy reforms’ and implemented ‘good’ – or at least ‘better’ – policies, which were supposed to promote growth. Put simply, the result has been very disappointing.

The plain fact is that the Neo-Liberal ‘policy reforms’ have not been able to deliver their central promise – namely, economic growth. When they were implemented, we were told that, while these ‘reforms’ might increase inequality in the short term and possibly in the long run as well, they would generate faster growth and eventually lift everyone up more effectively than the interventionist policies of the early postwar years had done. The records of the last two decades show that only the negative part of this prediction has been met. Income inequality did increase as predicted, but the acceleration in growth that had been promised never arrived. In fact, growth has markedly decelerated during the last two decades, especially in the developing countries, when compared to the 1960-1980 period when ‘bad’ policies prevailed.

According to the data provided by Weisbrot et al. in the 116 (developed and developing) countries for which they had data, GDP per capita grew at the rate of 3.1 per cent p.a. between 1960 and 1980, while it grew at the rate of only 1.4 per cent p.a. between 1980 and 2000. In only 15 of the 116 countries in the sample – 13 of the 88 developing countries[6] – did the growth rate rise by more than 0.1 percentage points p.a. between these two periods.[7]

More specifically, according to Weisbrot et al., GDP per capita grew at 2.8 per cent p.a. in Latin American countries during the period 1960-1980, whereas it was stagnant between 1980 and 1998, growing at 0.3 per cent p.a. GDP per capita fell in Sub-Saharan Africa by 15 per cent (or grew at the rate of -0.8 per cent p.a.) between 1980 and 1998, whereas it had risen by 36 per cent between the period 1960-1980 (or at the rate of 1.6 per cent p.a.). The records in the former Communist economies (the ‘transition economies’) – except China and Vietnam, which did not follow Neo-Liberal recommendations – are even more dismal. Stiglitz points out that, of the 19 transition economies of Eastern Europe and the former Soviet Union,[8] only Poland’s 1997 GDP exceeded that of 1989, the year when the transition began. Of the remaining 18 countries, GDP per capita in 1997 was less than 40 per cent that of 1989 in four countries (Georgia, Azerbaijan, Moldova and Ukraine). In only five of them was GDP per capita in 1997 more than 80 per cent of the 1989 level (Romania, Uzbekistan, Czech Republic, Hungary and Slovakia).