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‘Bad Old Days’ 1960-80 (%) ‘Brave New World’ 1980-2004 (%) All Developing Countries3.02.2 Latin America and the Caribbean3.10.5 Sub-Saharan Africa1.6-0.3.

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Presentation on theme: "‘Bad Old Days’ 1960-80 (%) ‘Brave New World’ 1980-2004 (%) All Developing Countries3.02.2 Latin America and the Caribbean3.10.5 Sub-Saharan Africa1.6-0.3."— Presentation transcript:

1 ‘Bad Old Days’ (%) ‘Brave New World’ (%) All Developing Countries Latin America and the Caribbean Sub-Saharan Africa Table 1. Annual per capita GDP growth rates Source: World Bank, United Nations Bad old days & Brave new world

2 (%) (%) (%) Low-income countries Sub-Saharan Africa Asia Middle-income countries East Asia and Pacific Latin America and the Caribbean Middle East and North Africa Sub-Saharan Africa Southern Europe All Developing Countries Industrialised Countries Table 2. Per capita GNP Growth Performance of the Developing Countries, (%) (%) (%) Developing Countries East Asia and Pacific Europe and Central Asia Latin America and the Caribbean Middle East and North Africa South Asia Sub-Saharan Africa Developed Countries Table 3. Per capita GDP Growth Rates of the Developing Countries, Per Capita GNP Growth…

3 Austria 3 R Belgium Canada 5 515n.a Denmark n.a.3 FranceR Germany Italyn.a Japan 7 R530n.a. Netherlands n.a.11 RussiaR RRR SpainR n.a. SwedenR Switzerland n.a. United Kingdom n.a.23 United States Table 4. Average Tariff Rates on Manufactured Products for Selected Developed Countries in Their Early Stages of Development (weighted average; in percentages of value) Average Tariff1 Rates

4 “ It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations. Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth [italics added] ” (Friedrich List, The National Systems of Political Economy, 1841 [1885 translation], pp ) List

5 Kicking away the ladder- picture

6 Dollar bill

7 “Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.” (Adam Smith, The Wealth of Nations, 1776, the 1937 Random House edition, pp ). Adam Smith

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9 Austria 3 R Belgium Canada 5 515n.a Denmark n.a.3 FranceR Germany Italyn.a Japan 7 R530n.a. Netherlands n.a.11 RussiaR RRR SpainR n.a. SwedenR Switzerland n.a. United Kingdom n.a.23 United States Table 4. Average Tariff Rates on Manufactured Products for Selected Developed Countries in Their Early Stages of Development (weighted average; in percentages of value) Average Tariff1 Rates

10 Trade Policy All of today’s rich countries, except for the Netherlands and (pre-WWI) Switzerland used protectionism for substantial periods. Britain and USA were the most protectionist economies in the world in their catch-up periods. Germany, France, and Japan – the supposed homes of protectionism – were much less protectionist than Britain or the USA. Even in the post-WWII period, protection was quite high until the 1960s.

11 YearsBritainFrance Table 5. Protectionism in Britain and France, (measured by net customs revenue as a percentage of net import values) Source: Nye (1991), p. 26, Table 1.

12 Europe Belgium1114 France1830 W. Germany267 Italy2518 Netherlands117 E.E.C. Average Austria Denmark3 Finland Sweden9865 Japann.a United Kingdom2316 United States Table 6. Average Tariff Rates (%) on Manufactured Products for Selected Developed Countries in the early post-Second-World-War Period Average Tariff Rates 2

13 Regulation of FDI US (19 th century) – regulated FDI in finance, shipping, mining and logging. – especially in banking; only American citizens could become directors in a national (as opposed to state) bank and foreign shareholders could not vote in AGMs Japan (Korea and Taiwan to a lesser extent) – virtually banned foreign direct investment until the 1980s Finland – classified all firms with more than 20% foreign ownership as “dangerous enterprises” – no foreign bank branches until the early 1980s

14 State Ownership Important in Germany (textile, steel) and Japan (steel, shipbuilding) in the early days Extensively used in France, Finland, Austria, Norway, Taiwan, and Singapore in the post-WWII period – Singapore: 22% of GDP (Singapore Airlines and others) – Taiwan: 16% of GDP – France: Renault, Alcatel, St. Gobain, Usinor, Thomson, Thales, Elf Aquitaine, Rhone-Poulenc – Other examples: POSCO (Korea), EMBAER (Brazil)

15 Intellectual Property Rights Many countries explicitly allowed patenting of foreigners’ inventions. (Britain, the Netherlands, USA, France, Austria) In the 19 th century, the Germans mass-produced fake ‘Made in England’ products. Switzerland (1907) and the Netherlands (1912) refused to protect patents until the early 20 th century (Swiss pharmaceutical, Philips). The US refused to protect foreigners’ copyrights until 1891 (refused to protect copyrights for materials printed abroad until 1988).

16 Macroeconomic Policies Interest rates – Normal times: high interest rates in developing countries (8-12% in South Africa, Brazil since the mid-1990s) vs. low or negative interest rates in rich countries (-1% in Switzerland to 2.6% in Germany during ) – Crises: usurious rates in developing countries (Korea 30% to Indonesia 80% in 1998) vs. extremely low rates in rich countries (0% in Japan US to 3% in Europe – and falling) Budget deficits – Crises: surplus in developing countries (e.g., Korea: 1% of GDP surplus then 0.8% of GDP deficits in 1998) vs. deficits in rich countries (3% of GDP in Germany in ; 8% of GDP in Sweden in ; 12% of GDP likely in the US in 2009)

17 Trotsky Kamenev Lenin Lenin, Trotsky and Kamenev- photo

18 Photo of Lenin only Lenin

19 Market Protection Regulation Market, Tariffs and Subsidies- photo

20 Market Market only- photo

21 “My impression as to your cheap labour was soon disillusioned when I saw your people at work. No doubt they are lowly paid, but the return is equally so; to see your men at work made me feel that you are a very satisfied easy-going race who reckon time is no object. When I spoke to some managers they informed me that it was impossible to change the habits of national heritage.” An Australian management consultant on Japan, 1915

22 The Koreans are “12 millions of dirty, degraded, sullen, lazy and religionless savages who slouch about in dirty white garments of the most inept kind and who live in filthy mud huts”. Beatrice Webb on the Koreans during her tour of East Asia

23 The Germans are a “plodding, easily contented people … endowed neither with great acuteness of perception nor quickness of feeling … It is long before [a German] can be brought to comprehend the bearings of what is new to him, and it is difficult to rouse him to ardour in its pursuit.” John Russell, an English traveller, on the Germans in 1828.

24 Bad Samaritans- American edition photo

25 Bad Samaritans- English edition photo

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