Tuesday, 9 September 2008

Protectionism makes you rich

I don't know if Peter Mandelson is the most evil person in Europe, but I bet he's in the top 5.

Neoliberal economists claim rich countries got that way by removing their barriers to trade. Nothing could be further from the truth. As Ha-Joon Chang shows in his book Kicking Away the Ladder, Britain discovered its enthusiasm for free trade only after it had achieved economic dominance. The industrial revolution was built on protectionism: in 1699, for example, we banned the import of Irish woollens; in 1700 we banned cotton cloth from India. To protect our infant industries, we imposed ferocious tariffs (trade taxes) on almost all manufactured goods.

By 1816 the US had imposed a 35% tax on most imported manufactures, which rose to 50% in 1832. Between 1864 and 1913 it was the most heavily protected nation on earth, and the fastest-growing. It wasn't until after the second world war, when it had already become top dog, that it dropped most of its tariffs. The same strategy was followed by Japan, South Korea, Taiwan and almost every other country that is rich today. Within the ACP nations, the great success story of the past 30 years is the country whose protectionism has been fiercest: during the 1980s and 1990s, Mauritius imposed import tariffs of up to 80%. Protectionism, which can be easily exploited by corrupt elites, does not always deliver wealth; but development is much harder without it.

The first goal of any society is to provide enough food and labour to sustain itself, under no circumstances should this be "outsourced", handed over to a third party or bartered away.