Oxford Development Studies, Vol. 31, No.

1, 2003

Kicking Away the Ladder: Infant Industry Promotion

in Historical Perspective1

HA-JOON CHANG*

ABSTRACT This article introduces a new dimension in the debate on infant industry
promotion by pointing out that, historically, the developed countries themselves did not develop
on the basis of free trade policy and laissez-faire industrial policy that they currently
recommend to, or even force upon, the developing countries. It first critically examines the
“official history of capitalism”, which sees the last few centuries as a continuous, if sometimes
disrupted, advance of the free trade system. Then it shows how virtually all of today’s
developed countries, especially the UK and the USA, the supposed homes of free trade, used
tariff protection and subsidies to develop their industries when they were in catching-up
positions. It then criticizes the orthodox counter-argument that, while using protection in the
early days of their economic development, today’s developed countries never used it as much as
today’s developing countries have done. Finally, pointing out that the supposedly “good”
policies of free trade and laissez-faire industrial policy have led to a collapse in growth in the
developing countries during the last two decades, the article argues for a total rethink on trade
policy and, more broadly, development strategy, for developing countries. Above all, it
recommends that the global rules need to be rewritten in such a way that developing countries
are allowed more actively to use tariffs and subsidies for infant industry promotion in
accordance with their development strategy.

1. Introduction
There is currently great pressure on developing countries from the developed countries,
and the international development policy establishment (IDPE) that they control, to
adopt a set of “good policies” to foster their economic development. As is well known,
these “good policies” basically consist of conservative macroeconomic policy, liberaliza-
tion of international trade and investment, privatization and deregulation.2There have
been heated debates on whether these recommended policies are appropriate for the
developing countries. However, curiously, even many of those who are sceptical of their
applicability to developing countries take it for granted that these were the policies that
were used by the developed countries in order to achieve economic development.
This cannot be further from the truth. The historical fact is that when they were
developing countries themselves the developed countries used virtually none of the
policies that they are recommending to developing countries. Nowhere is this dis-

* Ha-Joon Chang, Faculty of Economics and Politics, University of Cambridge, Austin Robinson Building,
Sidgwick Avenue, Cambridge CB3 9DD, UK.

ISSN 1360-0818 print/ISSN 1469-9966 online/03/010021-12  2003 International Development Centre, Oxford
DOI: 10.1080/1360081032000047168
22 H.-J. Chang
crepancy between historical facts and today’s conventional wisdom bigger than in the
area of industrial, trade and technology policies.

2. Official History of Capitalism

According to the “official history of capitalism” that informs today’s debate on global-
ization and economic development, the world economy developed in the following way
over the last few centuries (see, e.g. Bhagwati, 1985, 1998; Sachs & Warner, 1995).
From the 18th Century, Britain proved the superiority of free market and free trade
policies by beating interventionist France, its main competitor at the time, and estab-
lishing itself as the supreme world economic power. In particular, once it had aban-
doned its deplorable agricultural protection (the Corn Laws) and other remnants of old
mercantilist protectionist measures in 1846, it was able to play the role of the architect
and hegemon of a new “liberal” world economic order. This liberal world order,
perfected around 1870, was based on: laissez-faire industrial policies at home; low
barriers to the international flows of goods, capital and labour; and macroeconomic
stability, both nationally and internationally, guaranteed by the Gold Standard and the
principle of balanced budgets. A period of unprecedented prosperity followed.
Unfortunately, according to this story, things started to go wrong with World War
I. In response to the ensuing instability of the world economic and political system,
countries started to erect trade barriers again. In 1930, the USA also abandoned free
trade and raised tariffs with the infamous Smoot-Hawley tariff, which Jagdish Bhagwati
called “the most visible and dramatic act of anti-trade folly” (Bhagwati, 1985, p. 22, fn.
10). The world free trade system finally ended in 1932, when Britain, hitherto the
champion of free trade, succumbed to temptation and reintroduced tariffs. The
resulting contraction and instability in the world economy and then finally World War
II destroyed the last remnants of the first liberal world order.
After World War II, so the story goes, some significant progress was made in trade
liberalization through the early GATT (General Agreement on Trade and Tariffs)
talks. However, unfortunately, dirigiste approaches to economic management domi-
nated the policy-making scene until the 1970s in the developed world, and until the
early 1980s in the developing world (and the Communist world until its collapse in
1989).
Fortunately, it is said, interventionist policies have been largely abandoned across
the world since the 1980s with the rise of neo-liberalism, which emphasize the virtues
of small government, laissez-faire policies and international openness. Especially in the
developing world, by the late 1970s economic growth had begun to falter in most
countries outside East and Southeast Asia, which were already pursuing “good” policies
(of free market and free trade). This growth failure, which often manifested itself in the
economic crises of the early 1980s, exposed the limitations of old-style interventionism
and protectionism. As a result, most developing countries have come to embrace
“policy reform” in a neo-liberal direction.
When combined with the establishment of new global governance institutions
represented by the WTO, these policy changes at the national level have created a new
global economic system, comparable in its (at least potential) prosperity only to the
earlier “golden age” of liberalism (1870–1914).3
As we shall see, this is a fundamentally misleading picture, but no less a powerful
one for it; and it should be accepted that there are some senses in which the late 19th
Century can indeed be described as an era of laissez-faire.
To begin with, there was a period in the late 19th Century, albeit a brief one, when
 Kicking Away the Ladder 23
Table 1. Average tariff rates on manufactured products for selected developed
countries in their early stages of development (weighted average; in
percentages of value)a

1820b 1875b 1913 1925 1931 1950

Austriac R 15–20 18 16 24 18
Belgiumd 6–8 9–10 9 15 14 11
Denmark 25–35 15–20 14 10 n.a. 3
France R 12–15 20 21 30 18
Germanye 8–12 4–6 13 20 21 26
Italy n.a. 8–10 18 22 46 25
Japanf R 5 30 n.a. n.a. n.a.
Netherlandsd 6–8 3–5 4 6 n.a. 11
Russia R 15–20 84 R R R
Spain R 15–20 41 41 63 n.a.
Sweden R 3–5 20 16 21 9
Switzerland 8–12 4–6 9 14 19 n.a.
UK 45–55 0 0 5 n.a. 23
USA 35–45 40–50 44 37 48 14

Source: Bairoch (1993), p. 40, table 3.3.

Notes: R–numerous and important restrictions on manufactured imports existed and therefore
average tariff rates are not meaningful. n.a.–not available.
a
World Bank (1991, p. 97, Box table 5.2) provides a similar table, partly drawing on Bairoch’s own
studies that form the basis of the above table. However, the World Bank figures, although in most
cases very similar to Bairoch’s figures, are unweighted averages, which are obviously less preferable
to the weighted average figures that Bairoch provides.
b
These are very approximate rates, and give range of average rates, not extremes.
c
Austria–Hungary before 1925.
d
In 1820, Belgium was united with the Netherlands.
e
The 1820 figure is for Prussia only.
f
Before 1911, Japan was obliged to keep low tariff rates (up to 5%) through a series of “unequal
treaties” with the European countries and the USA. The World Bank table cited in note a gives
Japan’s unweighted average tariff rate for all goods (not just manufactured goods) for the years 1925,
1930, 1950 as 13%, 19%, 4%.

liberal trade regimes prevailed in large parts of the world economy. Between 1860 and
1880, many European countries reduced tariff protection substantially (see Table 1).
At the same time, most of the rest of the world was forced to practise free trade through
colonialism and through (unequal) treaties in the cases of a few nominally
“independent” countries (such as the Latin American countries, China, Thailand (then
Siam), Iran (then Persia) and Turkey (then the Ottoman Empire), and even Japan until
1911). The obvious exception was the USA, which maintained very high tariff barriers
even during this period. However, given that the USA was still a relatively small part
of the world economy, it may not be totally unreasonable to say that this was as close
to free trade as the world has ever got.
More importantly, the scope of state intervention before World War I was limited
by modern standards. States at the time had limited budgetary policy capability because
there was no income tax in most countries4 and the balanced budget doctrine domi-
nated. They also had limited monetary policy capability because many countries did
not have a central bank,5 and the Gold Standard restricted their policy freedom. They
also had limited command over investment resources, as they owned or regulated few
financial institutions and industrial enterprises. One paradoxical consequence of these
24 H.-J. Chang
limitations was that tariff protection was far more important as a policy tool in the 19th
Century than it is in our time.
Despite these limitations, as we shall see, virtually all now-developed countries
(NDCs) actively used interventionist industrial, trade and technology (ITT) policies
aimed at promoting—not simply “protecting”, it should be emphasized—infant indus-
tries during their catch-up periods.6

3. Catching-up and Infant Industry Promotion in the NDCs

3.1 Britain
Contrary to the popular myth that depicts it as a country that first developed on the
basis of free market and free trade, Britain was an aggressive user, and in certain areas
a pioneer, of activist policies intended to promote infant industries.
Such policies, although limited in scope, date back to the 14th Century (Edward
III) and the 15th Century (Henry VII) in relation to woollen manufacturing, the
leading industry of the time. England was then an exporter of raw wool to the Low
Countries, and various British monarchs tried to change this by, among other things,
protecting the domestic woollen manufacturers, taxing raw wool exports and poaching
skilled workers from the Low Countries.7
Between the 1721 trade policy reform of Robert Walpole, Britain’s first Prime
Minister, and the repeal of the Corn Laws in 1846, Britain implemented aggressive
ITT policies. During this period, it actively used infant industry protection, export
subsidies, import tariff rebates on inputs used for exporting and export quality control
by the state—policies that are these days typically associated with Japan and other East
Asian countries (see Brisco, 1907, on Walpole’s trade policy). As we see from Table 1,
Britain had very high tariffs on manufacturing products even as late as the 1820s, some
two generations after the start of its industrial revolution, and when it was significantly
ahead of its competitor nations in technological terms.
Britain moved significantly, although not completely, to free trade with the repeal of
the Corn Laws in 1846. The repeal of the Corn Laws is now commonly regarded as the
ultimate victory of the classical liberal economic doctrine over wrong-headed mercantil-
ism (see, e.g. Bhagwati, 1985), but many historians see it as an act of “free trade
imperialism” intended to “halt the move to industrialisation on the Continent by
enlarging the market for agricultural produce and primary materials” (Kindleberger,
1978, p. 196). Indeed, this is exactly how many key leaders of the campaign to repeal
the Corn Laws, such as the politician Richard Cobden and John Bowring of the Board
of Trade, saw their campaign.8
In short, contrary to popular belief, Britain’s technological lead that enabled this
shift to a free trade regime had been achieved “behind high and long-lasting tariff
barriers”, as the eminent economic historian Paul Bairoch put it (Bairoch, 1993, p. 46).
It is for this reason that Friedrich List, the 19th Century German economist who is
(mistakenly—see below) known as the father of modern “infant industry” theory,
argued that the British preaching for free trade is equivalent to someone who has
already climbed to the top “kicking away the ladder” with which he/she climbed. He is
worth quoting at length on this point.
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 tenden-
 Kicking Away the Ladder 25
cies 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].
(List, 1885, pp. 295–296)

3.2 USA
If Britain was the first country successfully to launch a large-scale infant industry
promotion strategy, its most ardent user was the USA—Paul Bairoch once called it “the
mother country and bastion of modern protectionism” (Bairoch, 1993, p. 30).
Indeed, the first systematic arguments for infant industry were developed by US
thinkers like Alexander Hamilton, the first Treasury Secretary of the USA, and the
now-forgotten economist Daniel Raymond (Corden, 1974, chapter 8; Freeman, 1989).
In fact, Friedrich List, the supposed intellectual father of infant industry protection
argument, first learned about the argument during his exile in the USA during the
1820s (Henderson, 1983; Reinert, 1998). Many US intellectuals and politicians during
the country’s catch-up period clearly understood that the free trade theory advocated
by the British classical economists was unsuited to their country. Indeed, it was against
the advice of great economists like Adam Smith and Jean Baptiste Say that the
Americans were protecting their industries.9
Between 1816 and the end of World War II, the USA had one of the highest average
tariff rates on manufacturing imports in the world (see Table 1). Given that the country
enjoyed an exceptionally high degree of “natural” protection due to high transportation
costs at least until the 1870s, US industries were the most protected in the world until
1945. Even the Smoot-Hawley tariff of 1930, which Bhagwati portrays as a radical
departure from a historic free trade stance, only marginally (if at all) increased the
degree of protectionism in the US economy. As we can see from Table 1, the average
tariff rate for manufactured goods that resulted from this bill was 48%, and it still falls
within the range of the average rates that had prevailed in the USA since the Civil War,
albeit in the upper region of this range. It is only in relation to the brief “liberal”
interlude of 1913–29 that the 1930 tariff bill can be interpreted as increasing
protectionism, and even then not by very much (from 37% in 1925 to 48% in 1931,
see Table 1).
In this context, it is also important to note that the American Civil War was fought
on the issue of tariffs as much as, if not more than, on the issue of slavery. Of the two
major issues that divided the North and the South, the South had actually more to fear
on the tariff front than on the slavery front. Abraham Lincoln was a well-known
protectionist who had cut his political teeth under the charismatic politician Henry Clay
in the Whig Party, which advocated the “American System” based on infrastructural
development and protectionism—thus named in recognition that free trade was in the
“British” interest (Luthin, 1944, pp. 610–611; Frayssé, 1994, pp. 99–100). Moreover,
Lincoln thought the blacks were racially inferior and slave emancipation was an
idealistic proposal with no prospect of immediate implementation (Garraty & Carnes,
2000, pp. 391–392; Foner, 1998, p. 92)—he is said to have emancipated the slaves in
26 H.-J. Chang
1862 as a strategic move to win the war rather than out of some moral conviction
(Garraty & Carnes, 2000, p. 405).10
It was only after World War II, with its industrial supremacy unchallenged, that the
USA liberalized its trade (although not as unequivocally as Britain did in the mid-19th
Century) and started championing the cause of free trade—once again proving List
right in his “ladder-kicking” metaphor. The following quote from Ulysses Grant, the
Civil War hero and the President of the USA during 1868–76, clearly shows how the
Americans had no illusions about ladder-kicking on the British side and their side.

For centuries England has relied on protection, has carried it to extremes and
has obtained satisfactory results from it. There is no doubt that it is to this
system that it owes its present strength. After two centuries, England has
found it convenient to adopt free trade because it thinks that protection can
no longer offer it anything. Very well then, Gentlemen, my knowledge of our
country leads me to believe that within 200 years, when America has gotten
out of protection all that it can offer, it too will adopt free trade.
(Ulysses S. Grant, the President of the USA, 1868–76, cited in Frank,
1967, p. 164)11

3.3 Other Countries

The UK and USA may be the more dramatic examples, but similar pictures emerge in
relation to other NDCs (for further details, see Chang, 2002, chapter 2). Almost all
used some form of infant industry promotion strategy when they were in catching-up
positions.
Interestingly, it was the UK and the USA, the supposed homes of free trade policy,
and not countries like Germany or Japan—countries which are usually associated with
state activism—that used tariff protection most aggressively. Tariff protection was
relatively low in Germany (see Table 1), and Japan’s tariff was bound below 5% until
1911 due to a series of unequal treaties that it was forced to sign upon opening in 1853.
Of course, tariff figures do not give a full picture of industrial promotion efforts. During
the late 19th and the early 20th Centuries, while maintaining a relatively low average
tariff rate, Germany accorded strong tariff protection to strategic industries such as iron
and steel. Similarly, Sweden provided targeted protection for the steel and the engineer-
ing industries, while maintaining generally low tariffs. Germany, Sweden and Japan
actively used non-tariff measures to promote their industries, such as establishment of
state-owned “model factories”, state financing of risky ventures, support for R&D and
the development of institutions to promote public–private co-operation.
The exceptions to this historical pattern are Switzerland and the Netherlands.
However, these were countries that were already on the frontier of technological
development by the 18th Century and therefore did not need much protection. Also,
note that the Netherlands had deployed an impressive range of interventionist measures
up until the 17th Century in order to build up its maritime and commercial supremacy
(Boxer, 1965). Moreover, Switzerland did not have a patent law until 1907, flying
directly against the emphasis that today’s orthodoxy puts on the protection of intellec-
tual property rights (see below). More interestingly, the Netherlands abolished its 1817
patent law in 1869 on the grounds that patents were politically created monopolies
inconsistent with its free market principles—a position that seems to elude most of
today’s free market economists—and did not introduce a patent law again until 1912
(Schiff, 1971).
 Kicking Away the Ladder 27
Finally, while tariff protection was, in many countries, a key component of this
strategy, it was by no means the only, and not necessarily the most important,
component. There were many other tools, such as export subsidies, tariff rebates on
inputs used for exports, conferring of monopoly rights, cartel arrangements, directed
credits, investment planning, manpower planning, R&D support and the promotion of
institutions for public–private co-operation. These policies are thought to have been
invented by Japan and other East Asian countries after World War II or at least by
Germany in the late 19th Century, but many of them have a longer pedigree.
Finally, despite sharing the same underlying principle, there was a considerable
degree of diversity among the NDCs in terms of their policy mix, suggesting that there
is no “one-size-fits-all” model for industrial development.

4. Comparison with Today’s Developing Countries

The few neo-liberal economists who are aware of the records of protectionism in the
NDCs try to avoid the obvious conclusion—that it can be very useful for economic
development—by arguing that, while some (minimal) tariff protection may be necess-
ary, most developing countries have tariff rates that are much higher than those used by
most NDCs in the past.
For example, Little et al. (1970, pp. 163–164) argue that “[a]part from Russia, the
United States, Spain, and Portugal, it does not appear that tariff levels in the first
quarter of the twentieth century, when they were certainly higher for most countries
than in the nineteenth century, usually afforded degrees of protection that were much
higher than the sort of degrees of promotion for industry which we have seen, in the
previous chapter, to be possibly justifiable for developing countries today [which they
argue to be at most 20% even for the poorest countries and virtually zero for the more
advanced developing countries]”. Similarly, World Bank (1991, p. 97, Box 5.2) argues
that “[a]lthough industrial countries did benefit from higher natural protection before
transport costs declined, the average tariff for twelve industrial countries12 ranged from
11 to 32 percent from 1820 to 1980 … In contrast, the average tariff on manufactures
in developing countries is 34 percent”.
This argument sounds reasonable, but is actually highly misleading in an important
sense: the productivity gap between today’s developed countries and developing coun-
tries is much greater than the gap between the more developed NDCs and the less
developed NDCs in earlier times.
Throughout the 19th Century, the ratio of per capita income in purchasing power
parity (PPP) terms between the poorest NDCs (say, Japan and Finland) and the richest
NDCs (say, the Netherlands and the UK) was about two or four to one. Today, the gap
in per capita income in PPP terms between the most developed countries (e.g.
Switzerland, Japan, the USA) and the least developed ones (e.g. Ethiopia, Malawi,
Tanzania) is in the region of 50 or 60 to one. Middle-level developing countries like
Nicaragua (US$2060), India (US$2230) and Zimbabwe (US$2690) have to contend
with productivity gaps in the region of 10 or 15 to one. Even for quite advanced
developing countries like Brazil (US$6840) or Columbia (US$5580), the productivity
gap with the top industrial countries is about five to one.
Currently developing countries will thus have to impose much higher rates of tariff
than those used by the NDCs in earlier times if they are to provide the same degree of
actual protection to their industries as that accorded to the NDC industries in the
past.13
For example, when the USA accorded over 40% average tariff protection to its
28 H.-J. Chang
industries in the late 19th Century, its per capita income in PPP terms was already
about three-quarters that of Britain. This was when the “natural protection” accorded
by distance, especially important for the USA, was considerably higher than today.
Compared with this, the 71% trade-weighted average tariff rate that India had just
before the WTO agreement, despite the fact that its per capita income in PPP terms
was only about 1/15 that of the USA, makes the country look like a champion of free
trade. Following the WTO agreement, India cut its trade-weighted average tariff to
32%, bringing it down to the level below which the US average tariff rate never sank
between the end of the Civil War and World War II.
To take a less extreme example, in 1875 Denmark had an average tariff rate of
around 15–20%, when its income was slightly less than 60% that of Britain. Following
the WTO agreement, Brazil cut its trade-weighted average tariff from 41 to 27%, a level
that is not far above the Danish level, but its income in PPP terms is barely 20% that
of the USA.
Thus, given the productivity gap, even the relatively high levels of protection that
prevailed in the developing countries until the 1980s, do not seem excessive by
historical standards. When it comes to the substantially lower levels that have come to
prevail after two decades of extensive trade liberalization in these countries, it may even
be argued that today’s developing countries are less protectionist than the NDCs in
earlier times.

5. Lessons for the Present

The historical picture is clear. When they were trying to catch up with the frontier
economies, the NDCs used interventionist industrial, trade and technology policies in
order to promote their infant industries. The forms of these policies and the emphases
among them may have been different across countries, but there is no denying that they
actively used such policies. In relative terms (that is, taking into account the productiv-
ity gap with the more advanced countries), many of them actually protected their
industries a lot more heavily than the currently developing countries.
If this is the case, the currently recommended package of “good policies”, emphasiz-
ing the benefits of free trade and other laissez-faire ITT policies, seems at odds with
historical experience, and the NDCs seem to be indeed “kicking away the ladder” that
they used in order to climb up to where they are.
The only possible way for the developed countries to counter this accusation of
“ladder-kicking” can be to argue that the activist ITT policies that they had pursued
used to be beneficial for economic development but are not so any more, because
“times have changed”. Apart from the paucity of convincing reasons why this may be
the case, the poor growth record of the developing countries over the last two decades
makes this line of defence untenable. It depends on the data we use, but roughly
speaking, per capita income in developing countries grew at 3% per annum between
1960 and 1980, but at only about 1.5% between 1980 and 2000. Even this 1.5% is
reduced to 1% if we take out India and China, which have not pursued liberal ITT
policies recommended by the developed countries.
Neo-liberal economists are therefore faced with a paradox here. The developing
countries grew much faster when they used “bad” policies during 1960–80 than when
they used “good” (at least “better”) policies during the following two decades. The
obvious solution to this paradox is to accept that the supposedly “good” policies are
actually not good for the developing countries but that the “bad” policies are good for
 Kicking Away the Ladder 29
them. This gets further confirmation from the fact that these “bad” policies are also
the ones that the NDCs had pursued when they were developing countries them-
selves.
Given these arguments, we can only conclude that the NDCs are in effect “kicking
away the ladder” by which they have climbed to the top. This “ladder-kicking” may be
done genuinely out of (misinformed) goodwill. Some NDC policy-makers and scholars
who make the recommendations may sincerely believe that their countries had devel-
oped through free trade and other laissez-faire policies and want the developing
countries to benefit from the same policies. However, this makes it no less harmful for
the developing countries. Indeed, it may be even more dangerous than “ladder-kicking”
based on naked national interests, as self-righteousness can be more unshakeable than
self-interest.
Whatever the intention behind the “ladder-kicking”, the fact remains that these
allegedly “good” policies have not been able to generate the promised growth
dynamism in the developing countries during the last two decades or so. Indeed, in
many developing countries growth has simply collapsed.
So what is to be done? While spelling out a detailed agenda for action is beyond the
scope of this article, the following points may be made.
The historical facts about the developmental experiences of the developed countries
must be more widely publicized. This is not just a matter of “getting history right”, but
also of allowing the developing countries to make informed choices. I do not wish to
give the impression that every developing country should adopt an active infant
industry promotion strategy like 18th Century Britain, 19th Century USA, or 20th
Century Korea. Some of them may indeed benefit from following the Swiss or Hong
Kong models. However, this strategic choice should be made in the full knowledge that
historically the vast majority of the successful countries used the opposite strategy in
order to become rich.
In addition, the policy-related conditionalities attached to financial assistance from
the IMF and the World Bank or from the donor governments should be radically
changed. These conditionalities should be based on the recognition that many of the
policies that are considered “bad” are in fact not so, and that there can be no universal
“best practice” policy that everyone should use. Second, the WTO rules and other
multilateral trade agreements should be rewritten in such a way that a more active use
of infant industry promotion tools (e.g. tariffs, subsidies) is allowed.
Allowing the developing countries to adopt the policies (and institutions) that are
more suitable to their stages of development and to other conditions they face will
enable them to grow faster, as indeed they did during the 1960s and 1970s. This will
benefit not only the developing countries but also the developed countries in the long
run, as it will increase the trade and investment opportunities available to the developed
countries in the developing countries. That the developed countries are not able to see
this is the tragedy of our time.

Notes
1. This article is based on the first two chapters of my new book, Kicking Away the Ladder—
Development Strategy in Historical Perspective (Chang, 2002). Further details, including
bibliographical sources, can be found in the book.
2. More recently, there has been an emphasis on “good institutions” as well. This has come
about because of the recognition on the part of the IDPE that what they see as “good
30 H.-J. Chang
policies” have failed to produce good economic results in most developing countries because
of the absence of supporting institutions, such as strong private property rights, a politically
independent central bank and political democracy. As a result of this new thinking, increas-
ingly the international financial institutions (e.g. the IMF, the World Bank) and many donor
governments are attaching “governance-related conditionalities” to their loans and grants.
This issue is explored further in chapter 3 of Chang (2002).
3. Renato Ruggiero, the first Director-General of the WTO, argues that thanks to this new
world order we now have “the potential for eradicating global poverty in the early part of the
next [21st] century—a utopian notion even a few decades ago, but a real possibility today”
(Ruggiero, 1998, p. 131).
4. Britain was the first country to introduce a permanent income tax, which happened in 1842.
Denmark introduced income tax in 1903. In the USA, the income tax law of 1894 was
overturned as “unconstitutional” by the Supreme Court. The Sixteenth Amendment allow-
ing federal income tax was adopted only in 1913. In Belgium, income tax was introduced
only in 1919. In Portugal, income tax was first introduced in 1922, but was abolished in
1928 and reinstated only in 1933. In Sweden, despite its later fame for the willingness to
impose high rates of income tax, income tax was first introduced only in 1932. See Chang
(2002, p. 101) for further details.
5. The Swedish Riksbank was nominally the first official central bank in the world (established
in1688), but until the mid-19th Century, it could not function as a proper central bank
because it did not have a monopoly over note issue, which it acquired only in 1904. The first
“real” central bank was the Bank of England, which was established in 1694 but became a
full central bank in 1844. By the end of the 19th Century, the central banks of France
(1848), Belgium (1851), Spain (1874) and Portugal (1891) gained note issue monopoly, but
it was only in the 20th Century that the central banks of Germany (1905), Switzerland
(1907) and Italy (1926) gained it. The Swiss National Bank was formed only in 1907 by
merging the four note-issue banks. The US Federal Reserve System came into being only in
1913. Until 1915, however, only 30% of the banks (with 50% of all banking assets) were in
the system, and even as late as 1929, 65% of the banks were still outside the system, although
by this time they accounted for only 20% of total banking assets. See Chang (2002, pp.
95–96) for further details.
6. Moreover, when they reached the frontier, the NDCs used a range of policies in order to help
themselves “pull away” from their existing and potential competitors. They used measures
to control transfer of technology to its potential competitors (e.g. controls on skilled worker
migration or machinery export) and forced the less developed countries to open up their
markets by unequal treaties and colonization. However, the catch-up economies that were
not (formal or informal) colonies did not simply sit down and accept these restrictive
measures. They mobilized all kinds of different “legal” and “illegal” means to overcome the
obstacles created by these restrictions, such as industrial espionage, “illegal” poaching of
workers and smuggling of contraband machinery. See Chang (2002, pp. 51–58) for further
details.
7. In a now almost forgotten book, A Plan of the English Commerce (1728), the famous 18th
Century merchant, politician and author of the novel Robinson Crusoe, Daniel Defoe,
describes how the Tudor monarchs, especially Henry VII (1485–1509) and Elizabeth I
(1558–1603), transformed England from a country relying heavily on raw wool export to the
Low Countries into the most formidable woollen manufacturing nation in the world through
deliberate state intervention.
8. Cobden argued: “The factory system would, in all probability, not have taken place in
America and Germany. It most certainly could not have flourished, as it has done, both in
these states, and in France, Belgium, and Switzerland, through the fostering bounties which
the high-priced food of the British artisan has offered to the cheaper fed manufacturer of
those countries” (The Political Writings of Richard Cobden, 1868, William Ridgeway, London,
Vol. 1, p. 150, as cited in Reinert, 1998, p. 292).
9. In his Wealth of Nations, Adam Smith wrote: “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 great-
ness” (Smith, 1937 [1776], pp. 347–348).
 Kicking Away the Ladder 31
10. In response to a newspaper editorial urging immediate slave emancipation, Lincoln wrote:
“If I could save the Union without freeing any slave, I would do it; and if I could save it by
freeing all the slaves, I would do it; and if I could do it by freeing some and leaving others
alone, I would also do that” (Garraty & Carnes, 2000, p. 405).
11. I am grateful to Duncan Green for drawing my attention to this quote.
12. They are Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain,
Sweden, Switzerland, the UK and the USA.
13. Of course, this is not to say that all industries should get the same degree of protection,
determined by the national productivity gap with the advanced countries. To begin with,
some industries will have smaller productivity gaps with their advanced country competitors
than others. Also, even with similar productivity gaps, different industries are likely to have
different capabilities to close the gaps, depending on their human and organizational
capabilities. Moreover, for political and other reasons, governments may have differential
abilities to “discipline” firms that fail to raise productivity despite protection. In the end, the
desirable pattern of protection will be one where different industries receive different degrees
of protection, depending on their respective productivity gaps, learning capabilities and
political situations.

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