Kicking Away the Ladder. Development Strategy in Historical Perspective

shift in French government economic policy, because ‘the destruction of absolutism seemed connected in the minds of the revolutionaries with the introduction of a more laissez-faire system’.[127] In the immediate post-Revolutionary years, there were some efforts to promote industry, and especially technological, development by various governments, particularly that of Napoleon. This was done through schemes such as the organization of industrial exhibitions, public competitions for the invention of specific machinery and the creation of business associations to facilitate consultation with the government.[128]

After the fall of Napoleon, the laissez-faire policy regime became firmly established, and persisted until the Second World War. The limitations of this regime are regarded by many historians as one of the major sources of the country’s relative industrial stagnation during the nineteenth century.[129]

This can be best illustrated with reference to trade policy. Challenging the conventional wisdom that pitches free-trade Britain against protectionist France during the nineteenth century, Nye examines detailed empirical evidence and concludes that ‘France’s trade regime was more liberal than that of Great Britain throughout most of the nineteenth century, even in the period from 1840 to 1860 [the alleged beginning of fully-fledged free trade in Britain.[130] Table 2.2, which comes from Nye, shows that when measured by net customs revenue as a percentage of net import values (a standard measure of protectionism, especially among historians), France was always less protectionist than Britain between 1821 and 1875, particularly up until the early 1860s.[131] As we can see from the table, the contrast in the degree of protectionism implemented by the two countries was particularly large in the earlier periods, but was still significant in the decades following Britain’s shift to free trade in 1846 with the repeal of the Corn Laws.[132]

Table 2.2
Protectionism in Britain and France, 1821-1913
(measured by net customs revenue as a percentage of net import values)
Years	Britain	France
1821-5	53.1	20.3
1826-30	47.2	22.6
1831-5	40.5	21.5
1836-40	30.9	18.0
1841-5	32.2	17.9
1846-50	25.3	17.2
1851-5	19.5	13.2
1856-60	15.0	10.0
1861-5	11.5	5.9
1866-70	8.9	3.8
1871-5	6.7	5.3
1876-80	6.1	6.6
1881-5	5.9	7.5
1886-90	6.1	8.3
1891-5	5.5	10.6
1896-1900	5.3	10.2
1901-5	7.0	8.8
1906-10	5.9	8.0
1911-13	5.4	8.8

Source: Nye 1991, p. 26, Table I.

It is interesting to note that the partial exception to this century-and-a-half-long period of liberalism in France, namely, the rule of Napoleon III (1848-70), was the only period of economic dynamism in France during this period. Under Napoleon III, the French state actively encouraged infrastructural developments and established various institutions of research and teaching. It also contributed to the modernization of the country’s financial sector by granting limited liability to, investment in and overseeing of modern, large-scale financial institutions like Credit Mobilier, Credit Foncier (the Land Bank) and Credit Lyonnais.[133]

On the trade policy front, Napoleon III signed the famous Anglo-French trade treaty (the Cobden- Chevalier treaty) of 1860, which reduced French tariffs quite substantially and heralded a period of trade liberalism on the Continent that lasted until 1879.[134] However, as we can see from Table 2.2, the degree of protectionism in France was already quite low on the eve of the treaty (lower than in Britain at the time), and therefore the reduction in protectionism that resulted from this treaty was relatively minor.

The treaty was allowed to lapse in 1892 and many tariff rates, especially the ones on manufacturing, were subsequently raised. However, this had few positive effects of the kind experienced by countries like Sweden during the same period (see section 2.2.5 below), because there was no coherent industrial upgrading strategy behind this tariff increase. If anything, the new tariff regime was actually opposed to such a scheme – the author of the tariff regime, the politician Jules Meline, was explicitly against large-scale industrialization, because of his belief that France should remain a country of independent farmers and small workshops.[135]

The French government was almost as laissez-faire in its attitude towards economic matters as the then very laissez-faire British government, especially during the Third Republic. Given its political instability and divisions, France was basically run by the permanent bureaucracy, which was itself dominated by the very conservative and technocratic Ministry of Finance. The government budget was made up largely of expenditure in general administration, law and order, education, and transport – the classic areas of involvement of the ‘minimal state’. The regulatory role of the state also remained minimal.[136]

The Ministry of Commerce and Industry, the potential centre of industrial policy, was not created in its modern form until 1886; even then it controlled the smallest budget of any ministry. It concentrated largely on promoting exports and setting tariffs, and its industrial promotion activities ‘other than a rare subsidy, consisted largely of organising exhibitions, looking after the Chambers of Commerce, gathering economic statistics, and distributing decorations to businessmen’.[137] Even in these limited areas it was not very effective. Moreover, tariffs during this period were largely protective of existing industrial structures (especially agriculture) and were not of the proactive kind that was aimed at industrial upgrading.[138]

It was only after the Second World War that the French elite was galvanized into reorganizing their state machinery in order to address the problem of the country’s relative industrial backwardness. During this time, especially until the late 1960s, the French state used indicative planning, state-owned enterprises and what is these days – somewhat misleadingly – termed ‘East-Asian-style’ industrial policy in order to catch up with the more advanced countries. As a result, France witnessed a very successful structural transformation of its economy, and finally overtook Britain in terms of both output and (in most areas) technology.[139]

2.2.5. Sweden