A Comparative Historical Political Economy Approach to Tariffs and Economic Development
By Joshua Hall
In his influential book, Kicking Away the Ladder (2002), Ha-Joon Chang explains that developed nations like the US used protectionist policies like high tariffs to develop. This argument is in direct contrast to the view that laissez-faire policies were key. Chang argues that developed countries are now ‘kicking away the ladder’ by encouraging developing nations to not use high tariffs to protect domestic industry. While Chang is correct that the US did have high tariff rates in the 19th century, it is also true that they had an extremely small government. In the US, government at all levels was less than 5% of GNP for most of the nineteenth century. An alternative hypothesis for the high tariffs in the US is that tariffs were the most efficient way to raise revenue given poor property records and the lack of market income for many citizens. The reason why the US grew was not because of protective tariffs, but because government was small and using the most efficient tax available to raise revenue. These competing hypotheses could be evaluated by analyzing the growth trajectories of a number of currently developed countries in a case study format like Hall and Leeson (2007).
Published: 27 Oct, 2018