Kicking Away the Ladder. Development Strategy in Historical Perspective

However, the benefits of institutional catch-up should not be exaggerated, as not all ‘global standard’ institutions are beneficial or necessary for all developing countries. To refer to some examples that I will discuss in depth later, stringent intellectual property rights may not be beneficial for most developing countries. Equally, some other institutions, such as anti-trust regulations, may not be all that necessary for them, which means that the net result of adopting such institutions may even be negative, given that the establishment and maintenance of these institutions demand resources, in particular skilled human resources, which are often scarce. There is also the question of whether introducing ‘advanced’ institutions in countries that are not ready for them implies that these institutions might not function as well as they should. Moreover, we should not lose sight of the fact that the currently developing countries actually have much higher levels of institutional development when compared to the NDCs when they were at equivalent stages of development (see section 3.3.3 of Chapter 3). If this is indeed the case, there may actually be relatively little room for effective improvement in institutions for these countries in the short run.

From this perspective, we could also say that there is an element of ‘kicking away the ladder’ in the dominant development discourse on institutional upgrading, in so far as some of the institutions demanded of the developing countries are irrelevant or harmful given their stage of development, and to the extent that they are costly to run.

1.4. A ‘Health Warning’

What this book is about to say will undoubtedly disturb many people, both intellectually and morally. Many of the myths that they have taken for granted or even passionately believed in will be challenged, in the same way that many of my own assumptions were challenged in the process of researching it. Some of the conclusions may be morally uncomfortable for some readers. Of course, I claim no moral superiority for the arguments put forward. I hope, however, to reveal some of the complexities surrounding these issues which have long been obscured by ahistorical and often moralistic arguments.

Chapter 2 Policies for Economic Development: Industrial, Trade and Technology Policies in Historical Perspective

2.1. Introduction

In the previous chapter, I pointed out that there have been surprisingly few attempts to apply lessons learned from the historical experiences of developed countries to problems of contemporary development. Also, as will become clearer further on, the few references to these historical experiences tend to be full of myths that support the orthodox version of the history of economic policy in the NDCs, which emphasize the benefits of free trade and laissez-faire industrial policy. The story, which underlies virtually all recommendations for Washington Consensus-type policies, goes something like the following.[1]

From the eighteenth century onward, the industrial success of laissez-faire Britain proved the superiority of free-market and free-trade policies. Through such policies, which unleashed the entrepreneurial energy of the nation, it overtook interventionist France, its main competitor at the time, establishing itself as the supreme world economic power. Britain was then able to play the role of the architect and hegemon of a new ‘Liberal’ world economic order, particularly once it had abandoned its deplorable agricultural protection (the Corn Laws) and other remnants of old mercantilist protectionist measures in 1846.

In its quest for this Liberal world order, Britain’s ultimate weapon was its economic success based on a free-market/free-trade system; this made other countries realize the limitations of their mercantilist policies and start to adopt free (or at least freer) trade from around 1860. However, Britain was also greatly helped in its project by the works of its classical economists such as Adam Smith and David Ricardo, who theoretically proved the superiority of laissez-faire policy, in particular free trade. According to Willy de Clercq, the European Commissioner for External Economic Relations during the early days of the Uruguay Round (1985-9):