| Denmark (3,764) | |||||
| Germany (3,833) | |||||
| The Netherlands (3,950) | |||||
| 4,000-5,000 | Australia (4,433) | Belgium (4,130) | Turkey (4,422) | ||
| Switzerland (4,207) | Thailand (4,422) | ||||
| Canada (4,231) | Brazil (4,862) | ||||
| 5,000-6,000 | UK (5,032) | Mexico (5,098) | |||
| New Zealand (5,178) | Colombia (5,359) | ||||
| USA (5,307) | |||||
| Australia (5,505) | |||||
Source: Maddison 1995. The 1750 figures are extrapolated from 1820 data, with annual growth rate taken as 0.4 per cent for both the UK and France. 0.4 per cent is the weighted average of estimates by economic historians of England (de Vries 1984). It is widely accepted among economic historians that the French growth rate at the time was similar to that of England (Crouzet 1967).
Chapter 4
Lessons for the Present
4.1. Introduction
The discussion so far shows how the policies and institutions used by now-developed countries in the early stages of their development differ significantly from those that have commonly assumed to have been used by them, and even more from the guidelines recommended to, or rather more frequently demanded of, today’s developing countries.
In the next two sections of this chapter, I summarize the principal conclusions of chapters 2 and 3, and discuss whether we can really conclude that the current push for ‘good policies’ and ‘good governance’ by the developed countries amounts in fact to ‘kicking away the ladder’. Section 4.4 then considers some possible objections to my argument, while the final section draws some conclusions, and suggests new directions of research that have emerged from the present study.
4.2 Rethinking Economic Policies for Development
In Chapter 2, I looked at the policies that had been used by the now-developed countries (NDCs) during their development, from fourteenth century England down to the East Asian NICs in the late twentieth century.
My discussion confirms to a remarkable extent the observation made by List 150 years ago – a time when many would have laughed at the suggestion that, within two generations, Germany would be economically challenging Britain or that the USA would become the world’s leading industrial power. A consistent pattern emerges, in which all the catching-up economies use activist industrial, trade and technology (ITT) policies – but not simply tariff protection, as I have repeatedly pointed out – to promote economic development, as had been the case since before List’s time. The policy tools involved in such promotional efforts may have become more varied, complex and effective since List’s time, but the general pattern has remained remarkably true to type.
Whatever the exact policy method used, there seems to be a number of common principles that run through the lengthy series of successful development strategists starting from Edward III in the fourteenth century, through to Robert Walpole, Frederick the Great and Alexander Hamilton in the eighteenth century, to the nineteenth century US, German, or Swedish policy-makers, right down to their twentieth century East Asian or French counterparts.
As has been repeatedly observed over the last few centuries, the common problem faced by all catch-up economies is that the shift to higher-value-added activities, which constitutes the key to the process of economic development, does not happen ‘naturally’.[1] This is because, for a variety of reasons, there exist discrepancies between social and individual returns to investments in the high-value-added activities, or infant industries, in the catch-up economies.[2]
Given such discrepancies, it becomes necessary to establish some mechanisms to socialize the risk involved in such investments. Contrary to the popular view, this does not have to involve direct policy intervention such as tariff protection or subsidies, but could be done by establishing institutions which can socialize the risk involved in such projects (more on this later – see section 4.3). However, the institutional solution has significant limitations. First of all, institutions are by nature embodiments of general rules, and therefore may not be effective
