throughout most of the nineteenth century and the first half of the twentieth century. For example, between the 1820s and the 1860s, the degree of protectionism actually remained lower in France than in Britain.
The
Despite its frequent identification as the home of infant industry protection, Germany never really used tariff protection extensively. Until the late nineteenth century, it had one of the most liberal trade regimes in the world, although some key heavy industries did receive substantial tariff protection.
However, this does not mean that the German state was
Although the subsequent development of the private sector, partly due to the success of such attempts, made direct state intervention unnecessary and unpopular, the state still played an important ‘guiding’ role. This was particularly the case in relation to some heavy industries in the late nineteenth and early twentieth centuries (which during this time were also given strong tariff protection). This was also the period when the German state pioneered the establishment of social welfare institutions in an attempt to defuse revolutionary agitation and establish social peace (see section 3.2.6.A in chapter 3 for . further details).
Therefore while Germany can hardly be described as the same kind of
Although its does not require as dramatic revision as the cases discussed above, the Swedish experience also contains some myths that need dispelling.
In general, Sweden’s tariff protection during its catch-up period was not extensive, despite the country’s economic backwardness. However, the Swedish state seems to have used tariff protection strategically – to promote textile industry in the early nineteenth century and to bolster the mechanical and electrical industries later In the nineteenth century. It is interesting to note that its tariff regime for the textile industry in the early nineteenth century was in fact a classic late twentieth-century ‘East Asian’ (and also an eighteenth-century British) promotional strategy, involving as it did high tariffs on final products and low tariffs on raw material imports.
Another point worth noting is that from an early stage Sweden also developed interesting forms of public-private cooperation In infrastructural development and in some key industries, especially iron. This collaboration is remarkably similar to that which we find in East Asia during the postwar period. The early emphasis it placed on education, skill formation and research is also notable.
When it first opened up and embarked on its modern industrial development, Japan could not use tariff protection to promote new industries because of the unequal treaties that it was forced to sign, which bound its tariff rate to below five per cent. Other means for industrial promotion had to be found, and so the Japanese state set up model factories in key industries (which were soon privatized for revenue and efficiency reasons), provided subsidies to key industries and invested in infrastructure and education. However, given the importance of tariffs as a tool for industrial promotion at the time (when other policy tools had not yet been invented and/or were considered ‘too radical’), its lack of tariff autonomy was a considerable handicap.
It was only in the early twentieth century, with the termination of the unequal treaties in 1911, that Japan was able to establish a more comprehensive industrial development strategy that included tariff protection as a key element. Japan’s vastly superior performance during the postwar period, when it came up with an impressive array of ‘innovations’ in ITT policy tools, also shows how the ability to use a wider range of policy tools can make state intervention more effective.
One important fact that has emerged from my discussion in this chapter is that the NDCs shifted their policy stances according to their relative position in the international competitive struggle. Part of this is deliberate ‘ladder-kicking’, but it also seems to be due to natural human tendency to reinterpret the past from the point of view of the present.
When they were in catching-up positions, the NDCs protected infant industries, poached skilled workers and smuggled contraband machines from more developed countries, engaged in industrial espionage, and willfully violated patents and trademarks. However, once they joined the league of the most developed nations, they began to advocate free trade and prevent the outflow of skilled workers and technologies; they also became strong protectors of patents and trademarks. In this way, the poachers appear to have turned gamekeepers with disturbing regularity.
Nineteenth-century Britain upset many countries, in particular Germany and the USA, which regarded Britain’s preaching of virtues of free trade as hypocrisy, given that during the eighteenth century Britain used infant industry protection measures more strongly than any other country. The same sentiment might be expressed today, when American trade negotiators preach the virtues of free trade to the developing countries, or when Swiss pharmaceutical firms argue for strong protection of intellectual property rights.
2.4.2. ‘Not by tariff alone’: diverse models of infant industry promotion
As has been shown above, virtually all successful NDCs used infant industry protection during their catching-up periods. Of course, this does not allow us to conclude that such policies therefore automatically guarantee economic success. We know of too many examples from history and contemporary experience that contradict such a naive proposition. However, there is a remarkably persistent historical pattern, stretching from eighteenth-century Britain to late twentieth-century Korea, in which successful economic development was achieved through infant industry protection measures. This pattern is simply too strong to be dismissed as a fluke. Therefore, those who believe in the virtues of free trade and
Important as tariff protection may have been in the development of most NDCs, it was – I repeat – by no means the only, nor even necessarily the most important, policy tool used by these countries in promoting infant industries. There were many other tools, such as export subsidies, tariff rebates on inputs used for exports, conferring of monopoly rights, cartel arrangements, directed credits, investment planning, manpower planning, R&D supports and the promotion of institutions that allow public-private cooperation. Tariffs were not, and are not, the only policy tool available to a state intent on developing new industries or upgrading old ones. In some countries, such as Germany up to the late nineteenth century or Japan before the restoration of its tariff autonomy in 1911, tariff protection was not even the most important tool for infant industry promotion.
Indeed, there was a considerable degree of diversity among the NDCs in terms of their policy mix, depending on their objectives and the conditions they faced. For example, the USA used tariff protection more actively than Germany, but the German state played a much more extensive and direct role in infant industry promotion than its US counterpart. As another example, Sweden relied upon public-private joint activity schemes far more than, say, Britain did.
Thus, despite some remarkably strong historical patterns, there is also considerable diversity in the exact mix of policy tools used for industrial promotion across countries. This, in turn, implies that there is no ‘one- size-fits-all’ model for industrial development – only broad guiding principles and various examples from which to learn.
