Kicking Away the Ladder. Development Strategy in Historical Perspective

On the trade policy front, Napoleon III signed the famous Anglo-French trade treaty (the Cobden-Chevalier treaty) of 1860, which reduced French tariffs quite substantially and heralded a period of trade liberalism on the Continent that lasted until 1879.[134] However, as we can see from Table 2.2, the degree of protectionism in France was already quite low on the eve of the treaty (lower than in Britain at the time), and therefore the reduction in protectionism that resulted from this treaty was relatively minor.

The treaty was allowed to lapse in 1892 and many tariff rates, especially the ones on manufacturing, were subsequently raised. However, this had few positive effects of the kind experienced by countries like Sweden during the same period (see section 2.2.5 below), because there was no coherent industrial upgrading strategy behind this tariff increase. If anything, the new tariff regime was actually opposed to such a scheme – the author of the tariff regime, the politician Jules Meline, was explicitly against large-scale industrialization, because of his belief that France should remain a country of independent farmers and small workshops.[135]

The French government was almost as laissez-faire in its attitude towards economic matters as the then very laissez-faire British government, especially during the Third Republic. Given its political instability and divisions, France was basically run by the permanent bureaucracy, which was itself dominated by the very conservative and technocratic Ministry of Finance. The government budget was made up largely of expenditure in general administration, law and order, education, and transport – the classic areas of involvement of the ‘minimal state’. The regulatory role of the state also remained minimal.[136]

The Ministry of Commerce and Industry, the potential centre of industrial policy, was not created in its modern form until 1886; even then it controlled the smallest budget of any ministry. It concentrated largely on promoting exports and setting tariffs, and its industrial promotion activities ‘other than a rare subsidy, consisted largely of organising exhibitions, looking after the Chambers of Commerce, gathering economic statistics, and distributing decorations to businessmen’.[137] Even in these limited areas it was not very effective. Moreover, tariffs during this period were largely protective of existing industrial structures (especially agriculture) and were not of the proactive kind that was aimed at industrial upgrading.[138]

It was only after the Second World War that the French elite was galvanized into reorganizing their state machinery in order to address the problem of the country’s relative industrial backwardness. During this time, especially until the late 1960s, the French state used indicative planning, state-owned enterprises and what is these days – somewhat misleadingly – termed ‘East-Asian-style’ industrial policy in order to catch up with the more advanced countries. As a result, France witnessed a very successful structural transformation of its economy, and finally overtook Britain in terms of both output and (in most areas) technology.[139]

2.2.5. Sweden

Sweden, despite its reputation as the ‘small open economy’ during the post-war period, did not enter its modern age with a free trade regime. After the end of the Napoleonic wars, its government enacted a strongly protective tariff law (1816), banning the import and export of some items. As a result of the high tariffs, an outright ban on imported finished cotton goods, and the deliberately low tariffs on raw cotton, cotton cloth production was greatly increased.[140] Once again, it is interesting to note the similarity between this tariff regime and that used by Britain in the eighteenth century (see section 2.2.1), as well as those used by countries like Korea and Taiwan in the postwar period (see section 2.2.7).

However, from about 1830 onward, protection was progressively lowered.[141] A very low tariff regime was maintained until the end of the nineteenth century, especially after the 1857 abolition of tariffs on foodstuffs, raw materials, and machines.[142] As table 2.1 shows, around 1875 Sweden had one of the lowest tariff rates of any of the major economies listed.