The US government put this logic into practice more diligently than any other country for over a century (1816-1945). During this period, the USA had one of the highest average tariff rates on manufacturing imports in the world. Given that the country enjoyed an exceptionally high degree of ‘natural’ protection due to high transportation costs, at least until the 1870s, it seems reasonable to say that throughout its industrial catching-up the US industries were the most protected in the world. When the maverick American right-wing populist politician Pat Buchanan says that free trade is an ‘un-American’ thing, he does in a way have a point.
It is certainly true that the US industries did not necessarily need all the tariff protections that were put in place, and that many tariffs eventually outlived their usefulness. However, it is also clear that. the US economy would not have got where it is today without strong tariff protection at least in some key infant industries. The role of the US government in infrastructural development and supporting R&D, which continues to this day, also needs to be noted.
The pre-revolutionary French state was actively involved in industrial promotion. However, this ‘Colbertist’ tradition was largely suppressed due to the libertarian ideologies of the French Revolution and the ensuing political stalemate that over the next century and half produced a series of weak and visionless (if not actively backward-looking) governments.
Thus, despite its public image as an inherently dirigiste country, France ran a policy regime in many ways more laissez-faire than either Britain or especially the USA 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 laissez-faire period in French history was largely associated with the country’s relative industrial and technological stagnation – a fact that indirectly proves the validity of the infant industry argument. It is largely because of the country’s industrial success through the decidedly interventionist strategy pursued after the Second World War that it has come to acquire its current image as inherently interventionist.
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 laissez-faire in the way that its French counterpoint was during most of the nineteenth and the first half of the twentieth centuries. As the early Prussian experience from the eighteenth century onwards best illustrates, infant industries could be – and were – promoted through means other than tariffs, including state investment, public-private cooperation and various subsidies.
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 laissez-faire state as France in the nineteenth and early twentieth centuries, state intervention in Germany’s main catching-up period was not as extensive as some people think, particularly in relation to tariff protection.
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.