Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

the post-colonial period (1950–99) ranged between 1.1% points (Bangladesh: from -0.2% to 0.9%) to 6.4% points (Korea: from -0.4% to 6.0%). In Africa, per capita income growth rate was around 0.6% during the colonial period (1820–1950). In the 1960s and the 1970s, when most countries in the continent became independent, growth rates rose to 2% for the middle-income countries. Even the poorest countries, which usually find it difficult to grow, were growing at 1%, double the rate of the colonial period. H-J. Chang, (2005), Why Developing Countries Need Tariffs – How WTO NAMA Negotiations Could Deny Developing Countries’ Right to a Future (Oxfam, Oxford, and South Centre, Geneva), downloadable at http://www.southcentre.org/publications/SouthPerspectiveSeries/WhyDevCountriesNeedTariffsNew.pdf), Tables 5 and 7.

12

Maddison (2003), The World Economy: Historical Statistics (OECD, Paris), Table 8.b.

13

Average tariffs in Latin America were between 17% (Mexico, 1870–1899) and 47% (Colombia, 1900– 1913). See Table 4 in M. Clemens & J.Williamson (2002), ‘Closed Jaguar, Open Dragon: Comparing Tariffs in Latin America and Asia before World War II’, NBER Working Paper, no. 9401 (National Bureau of Economic Research, Cambridge, Massachusetts). Between 1820 and 1870, when they were subject to unequal treaties, per capita income stood still in Latin America (growth rate of -0.03% per year). Annual per capita income growth rate in Latin America rose to 1.8% during 1870–1913, when most countries in the region acquired tariff autonomy, but even that was no match for the 3.1% growth rate in per capita income that the continent achieved during the 1960s and the 1970s. The Latin American income growth figures are from Maddison (2003), Table 8.b.

14

For example, between 1875 and 1913, the average tariff rates on manufactured products rose from 3–5% to 20% in Sweden, from 4–6% to 13% in Germany, from 8–10% to 18% in Italy and from 10–12% to 20% in France. See H-J. Chang (2002), p. 17, Table 2.1.

15

Chang (2005), p. 63, Tables 9 and 10.

16

Sachs and Warner (1995), p. 17. The full quote of the relevant passages: ‘Export pessimism combined with the idea of the big push to produce the highly influential view that open trade would condemn developing countries to long-term subservience in the international system as raw materials exporters and manufactured goods importers. Comparative advantage, it was argued by the Economic Commission of [sic] Latin America (ECLA) and others, was driven by short-term considerations that would prevent raw materials exporting nations from ever building up an industrial base. The protection of infant industries was therefore vital if the developing countries were to escape from their overdependence on raw materials production. These views spread within the United Nations system (to regional offices of the United Nations Economic Commission), and were adopted largely by the United Nations Conference on Trade and Development (UNCTAD). In 1964 they found international legal sanction in a new part IV of the General Agreement on Tariffs and Trade (GATT), which established that developing countries should enjoy the right to asymmetric trade policies. While the developed countries should open their markets, the developing countries could continue to protect their own markets. Of course, this “right” was the proverbial rope on which to hang one’s own economy!’

17

According to an interview in the magazine Veja, 15 November 1996, as translated and cited by G. Palma (2003), ‘The Latin American Economies During the Second Half of the Twentieth Century – from the Age of ISI to the Age of The End of History’ in H-J. Chang (ed.), Rethinking Development Economics (Anthem Press, London), p. 149, endnotes 15 and 16.

18

Chang (2002), p. 132, Table 4.2.

19

A. Singh (1990), ‘The State of Industry in the Third World in the 1980s: Analytical and Policy Issues’, Working Paper, no. 137, April 1990, Kellogg Institute for International Studies, Notre Dame University.

20

The 1980 and 2000 figures are calculated respectively from the 1997 issue (Table 12) and the 2002 issue (Table 1) of World Bank’s World Development Report (Oxford University Press, New York).

21

M. Weisbrot, D. Baker and D. Rosnick (2005), ‘The Scorecard on Development: 25 Years of Diminished Progress’, September 2005, Center for Economic and Policy Research (CEPR), Washington, DC, downloadable from http://www.cepr.net/publications/development_2005_09.pdf

22

Some commentators argue that recent advance in globalization has made the world more equal. This result is highly disputed, but, even if it were true, it has happened because, to put it crudely, a lot of Chinese have become richer, not because income distribution has become more equal within countries. Whatever happened to ‘global’ inequality, there is little dispute that income inequality has increased in most countries, including China itself, over the past 20–25 years. On this debate, see A. Cornia (2003), ‘Globalisation and the Distribution of Income between and within Countries’ in H-J. Chang (ed.), Rethinking Development Economics (Anthem Press, London) and B. Milanovic (2005), Worlds Apart – Measuring International and Global Inequality (Princeton University Press, Princeton and Oxford).

23

For example, see D. Rodrik and A. Subramaniam (2004), ‘From “Hindu Growth” to Growth Acceleration: The Mystery of Indian Growth Transition’, mimeo., Kennedy School of Government, Harvard University, March 2004. Downloadable from http://ksghome.harvard.edu/~drodrik/IndiapaperdraftMarch2.pdf