Kicking Away the Ladder. Development Strategy in Historical Perspective

The third possible objection to my argument, which particularly concerns the issue of institutional development, is that the ‘world standard’ in institutions has risen over the last century or so, and therefore that the current developing countries should not consider the NDCs of 100 and 150 years ago their role models.

I must say that I agree with this point wholeheartedly. On one level, it would be absurd to argue otherwise. In terms of per capita income, India may be at a similar level of development to that of the USA in 1820, but that should not mean that it should re-introduce slavery, abolish universal suffrage, de-professionalize its bureaucracy, abolish generalized limited liability, abolish the central bank, abolish income tax, abolish competition law, and so on.

Indeed, in many respects, the heightened global standard in institutions has been a good thing for the developing countries, or at least for the reformers in them. Unlike their counterparts in the NDCs of yesteryear, the reformers in today’s developing countries do not have to struggle too hard against views that the introduction of things like female suffrage, income tax, restrictions on working hours, and social welfare institutions would spell the end of civilization as we know it. They also don’t have to re-invent certain institutions like central banking and limited liability, the logic behind which the NDCs in earlier times had found difficult to understand.

Therefore, the developing countries should exploit to the utmost these advantages of being latecomers and try to achieve the highest level of institutional development possible. Moreover, as I have pointed out earlier in this chapter (section 4.2), the higher levels of institutional development may indeed be the reason why today’s developing countries could, when they were allowed to use ‘bad policies’ during the 1960s and 1970s, generate much higher growth rates than the NDCs had managed at comparable stages of development.

What I am worried about, however, is the view that institutions are simply matters of choice and therefore all countries should try to reach the (quite highly-set) ‘minimum global standard’ right away or after a minimal transition period. While accepting that latecomer countries do not have to spend as much time as the pioneer countries had done in developing new institutions, we should not forget that it took the NDCs typically decades, and sometimes even generations, to establish certain institutions whose need had already been perceived. It usually took them another few decades to make them work properly by improving administration, closing various loopholes and strengthening enforcement. In addition, we should not forget that, when compared to the NDCs in earlier times, today’s developing countries already have high standards of institutional development, which in the 1960s and 1970s proved quite capable of supporting high rates of economic growth. Given this, it may be unreasonable to ask them to raise the quality of their institutions dramatically in a short time span.

4.5 Concluding Remarks

Why do the international development policy establishment, and the NDCs that control it, not recommend the policies that were used over the last several centuries by most of the successful developers? Why do they try to impose on today’s developing countries certain ‘best practice’ institutions, which had not been used by the NDCs at comparable stages of development?

Why then are the advanced countries so ignorant of their own historical development? Is it because of the natural tendency for people to interpret history from the viewpoint of their current intellectual and political agenda, which can often obscure the historical perspective? Or is it because, as it has happened repeatedly, countries have vested interests in imposing policies and institutions which they themselves had not used during their own development, but which are beneficial for them once they have reached the technological frontier? In short, are the developed countries trying to ‘kick away the ladder’ by insisting that developing countries adopt policies and institutions that were not the ones that they had used in order to develop?

The discussion in this book proposes that this is indeed what they are doing. I do accept that this ‘ladder-kicking’ may be done out of genuine (if misinformed) goodwill. Some of those NDC policy makers and scholars who make the recommendations may be genuinely misinformed: thinking that their own countries developed through free trade and other laissez-faire policies, they want developing countries to benefit from these same policies. However, this makes it no less harmful for developing countries. Indeed, it may be even more dangerous than ‘ladder-kicking’ based on naked national interests, as self-righteousness can be a lot more stubborn than self-interest.