Apologists for China’s mercantilist trade policies typically point to the system of tariffs and quotas that America had during the 19th century in defense of China’s policies. That’s the tack taken by Ha-Joon Chang in his book, Bad Samaritans, reviewed here by Edward Glaeser, professor of economics
Mr. Chang’s main charge is that free trade advocates from wealthy countries are hypocrites, because the history of America and the United Kingdom is full of protectionism. Mr. Chang alleges, with scant evidence, that the two nations grew great because of these tariff barriers. First world economists have reaped the benefits of protection, he suggests, but are now trying to deprive the world’s poor of the wonders of tariffs.
Mr. Chang also takes aim at other free market policies such as privatization and fiscal prudence. Again he argues that since rich countries have public ownership and deficits, it is rank hypocrisy for us to try to forbid them to the poor. An alternative view is that economists shouldn’t be required to endorse the worst policies of their own countries.
In his review Dr.Glaeser concentrates on the mixed empirical evidence on the value of free trade for developing countries but I think there’s an important difference between 21st century China and 19th century America that both Chang and Glaeser don’t address. America didn’t just grow via its foreign trade but by its huge, internal, free market, still the largest free market in the world other than the one created by NAFTA. Our constitution deliberately denied to the individual states the right to regulate trade with other states.
I’d be happy if China were to emulate 19th century America but that’s not what the Chinese are doing. The Chinese are trying to grow primarily through foreign trade and, as I’ve written before, I don’t think that “beggar your neighbor” strategy is sustainable or will result in a prosperous China as its end product.
But I’d really appreciate an explanation of why developing countries must emulate the failures of developed countries. Why can’t China cultivate its internal market, have free trade, or adopt a green approach to development? Other than that imitation is easier than innovation, I mean? Youth wants to know.
I think Chang should take into consideration that on relative terms, Britain and America were free trade economies in the 19th century. Britain more-so since 1846, the U.S. more-so during periods of Democratic Party strength. I won’t belabor the point, but identifying the Tarrif of Abominations as evidence of U.S. protectionism is only half the story if you overlook that the tariff helped elect Andrew Jackson to the Presidency and inaugurate a period of reduced tariffs.
But I would say another difference is that the Hamilton/Clay/Lincoln economic system was based not solely on protective tariffs for infant industries, but also on using that revenue for improvement of the transportation and financial infrastructure. These types of expenditures would have increased productivity, reduced prices and generally expanded the economy. But this isn’t the 19th century anymore. Third World countries are more likely to use such revenue to simply redistribute wealth without improving the country’s relative competitiveness.