Chang begins the article with a short overview of the free trade in history. Britain was the first country to dominate the free-trade market, although it lost its positions after the First World War and was finally out place after the Second World War, when international regulations made it finally give up. Beginning in the 1980s, interventionist policies were given away as neoliberalism was rising. The World Trade Organization produced a new economic system together market policy changes throughout the countries.Â Back in the nineteenth century most countries practiced free trade, with low tariffs, except for the US with its protectionist laws. The fact that most countries did not have income taxes, properly balanced budgets and Central banks, with a restricting golden standard policy, makes them look limited in terms of nowadays.
Britain remained protectionist during the most time in its history. A good example is wool, which was imported in the thirteenth century, and already extensively exported in the eighteenth. Robert Walpole’s 1721 policy reformed changed aims from gaining revenues by the government to promoting of manufacture. The cancellation of Corn Law in 1846 eliminated majority of tariffs and promoted free trade in Britain, which did not last long, as Britain’s world domination was soon over and tariffs had to be reintroduced. Alexander Hamilton was the first to commence infant industry argument in the USA. He believed US companies could not succeed worldwide without government backup in the initial stage. Civil War was started because of both slavery and the tariffs and their opponents. The USA ended up working for the development of free trade only after the end of the Second World War. Germany did not follow strict tariff policies; however monopoly of manufacture was supported for certain goods. Nineteenth century brought in big investments in the overall infrastructure. Starting with the second half of the nineteenth century, Prussia minimized influence into economy and transcended from direct influence to guidance. France was leading interventionist economic policy, originally Colbertism. Later it became more liberal than in Britain, and the rule of Napoleon III made its economy most dynamic in history. France started changing its backwards policy and catching up with more advanced economies after the Second World War. Sweden used tariff protection and state-emitted subsidies to support its economy, as well as close public-private cooperation, industrial espionage and investments in education. The Netherlands dominated in naval trade in the seventeenth century; mid-nineteenth to mid-twentieth centuries marked the period of least government support to the economy. This lead to slow industrialization, and World War II was followed by introduction of interventionist policies. Small size and early beginning of industrial revolution, together with leadership in lots of industries worldwide allowed Switzerland to avoid protection of infant industry. Its political structure did not help introducing the protectionism as well. However refusal of the government to introduce the international policy for patents allowed â€œborrowingâ€ of technologies, e.g from Germany, for free.
Japan failed to use tariff protection till 1911, but it had other tools, as government subsidies â€“ both to â€œmodel factoriesâ€ and privatized ones. 1920s brought strong German influence, leading to fighting unnecessary competition, encouraging of mergers and introduction of cartels. Japan’s progress was insignificant till the end of World War II, when it began its rapid development. The East Asian NDC and Japan used key principles of economic development, previously practiced by European developing countries in the seventeenth century, although new technologies were implemented, and more sophisticated policies were run.
Most of the NDCs used tariff protection for their infant industry development. Technological advancement of Sweden and the Netherlands allowed both avoid using non-tariff means of economy protection. Tariff protection was the primary, but not the only way of supporting economy.
Nowadays NDC seem to be introducing much higher tariffs than the ones back in the beginning of the twentieth century. This can be explained by the different ratio of per capita income in PPP between the poorest and the richest NDC. It grew dozens of times from two to four back in the twentieth century to fifty or even sixty to one. All countries had a great influence by both World Wars.
The lesson, taken from the history is that using â€œbadâ€ methods led to better results, i.e. significant development of economies. Nowadays â€œgoodâ€ methods are only approved by those NDCs that used â€œbadâ€ methods back in the past, be it eighteenth or nineteenth century. Current development countries are trying to â€œkick the ladderâ€ from the modern developing states in order to keep their own domination.