Kicking away the ladder: Infant industry promotion in historical perspective

Abstract

This article introduces a new dimension in the debate on infant industry promotion by pointing out that, historically, the developed countries themselves did not develop on the basis of free trade policy and laissez-faire industrial policy that they currently recommend to, or even force upon, the developing countries. It first critically examines the "official history of capitalism", which sees the last few centuries as a continuous, if sometimes disrupted, advance of the free trade system. Then it shows how virtually all of today's developed countries, especially the UK and the USA, the supposed homes of free trade, used tariff protection and subsidies to develop their industries when they were in catching-up positions. It then criticizes the orthodox counter-argument that, while using protection in the early days of their economic development, today's developed countries never used it as much as today's developing countries have done. Finally, pointing out that the supposedly "good" policies of free trade and laissez-faire industrial policy have led to a collapse in growth in the developing countries during the last two decades, the article argues for a total rethink on trade policy and, more broadly, development strategy, for developing countries. Above all, it recommends that the global rules need to be rewritten in such a way that developing countries are allowed more actively to use tariffs and subsidies for infant industry promotion in accordance with their development…