Much debate has ensued in the blogosphere over Free Trade, particularly both Obama and Clinton obstensively campaigning against it. Unfortunately it is a matter that isn’t debated much in economic’s circles. Below is a excerpt from a review on this book. Clicking the book picture takes you to Amazon.
Chang offers some fascinating vignettes of men and books that were infinitely more important in the economic development of the rich countries than Adam Smith’s The Wealth of Nations. These include a precis of a virtually unknown book by Daniel Defoe, A Plan of the English Commerce (1728), on Tudor industrial policy in developing England’s woolen manufacturing industry. As a result of many of Defoe’s ideas, manufactured woolen products became Britain’s most important export industry. Chang continues with a short life of Robert Walpole, the chief architect of the mercantilist system. By 1820, thanks to Walpole’s protectionist policies, Britain’s average tariff on manufactured imports was between 45 and 55 percent, whereas such tariffs were 6-8 percent in the Low Countries, 8-12 percent in Germany and Switzerland, and around 20 percent in France.
Turning to the United States, Chang focuses on Alexander Hamilton, the first American secretary of the treasury and the man who coined the term “infant industry.” Although he did not live to see it, by 1820 Hamilton’s 40 percent tariff on manufactured imports into the United States was an established fact. Hamilton provided the blueprint for U.S. economic policy until the end of the Second World War. The 19th and early 20th century U.S. tariffs of 40 to 50 percent were then the highest of any country in the world. Throughout this same period, it was also the world’s fastest growing economy. Much like contemporary China, whose average tariff was over 30 percent right up to the 1990s, neither American nor Chinese protectionism inhibited foreign direct investment but rather seemed to stimulate it. With the U.S. abandonment of overt protectionism after it became the world’s richest nation, it still found measures to advance its economic fortunes beyond what market forces could have achieved. For example, the U.S. government actually paid for 50 to 70 percent of the country’s total expenditures on research and development from the 1950s through the mid-1990s, usually under the cover of defense spending.
The Third World was not always poor and economically stagnant. Throughout the golden age of capitalism, from the Marshall Plan (1947) to the first oil shock (1973), the United States was a Good Samaritan and helped developing countries by allowing them to protect and subsidize their nascent industries. The developing world has never done better, before or since. But then, in the 1970s, scared that its position as global hegemon was being undermined, the United States turned decisively toward neoliberalism. It ordered the unholy trinity to bring the developing countries to heel. Through draconian interventions into the most intimate details of the lives of their clients, including birth control, ethnic integration, and gender equality as well as tariffs, foreign investment, privatization decisions, national budgets, and intellectual property protection, the IMF, World Bank, and WTO managed drastically to slow down economic growth in the Third World. Forced to adopt neoliberal policies and to open their economies to much more powerful foreign competitors on unequal terms, their growth rate fell to less than half of that recorded in the 1960s (1.7 percent instead of 4.5 percent).
–Tom Friedman’s Folly: The Lies Behind Free Trade, Chalmers Johnson
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