Kicking Away the Ladder. Development Strategy in Historical Perspective

However, from the late 1840s, the country reverted to a laissez-faire regime, which lasted until the First World War, and to an extent until the Second World War. First of all, as we can see in table 2.1, the Netherlands remained the least protected economy among the NDCs, except for Britain in the late nineteenth century and Japan before the restoration of tariff autonomy. Second, in 1869 the country abolished patent law (which was first introduced in 1817) on the grounds that it created an artificial monopoly. This move was partly inspired by the anti-patent movement that was sweeping Europe at the time, which in fact had a strong association with the free trade movement (see section 3.2.3.B for further details). Despite international pressures, the country refused to reintroduce the patent law until 1912 (more on this later).[166] Third, the Dutch government deliberately created a private sector company in order to compete with two existing private sector companies in managing the national railway, which it organized and financed.[167] This practice was hardly heard of at the time, and although it is strictly speaking not a laissez-faire policy, it is nevertheless a precursor of modern pro-competitive activist industrial policy.

During this extreme laissez-faire period, the Dutch economy remained on the whole rather sluggish, and its industrialization relatively shallow. According to the authoritative estimate by Maddison, measured in 1990 dollars, the Netherlands was still the second richest country in the world in 1820 after the UK, even after a century of relative decline ($1,756 vs. $1,561). A century later (1913), however, it had been overtaken by no fewer than six countries – Australia, New Zealand, the USA, Canada, Switzerland and Belgium – and almost by Germany. Germany’s per capita income was only about 60 per cent that of the Netherlands in 1820 ($1,561 as opposed to $1,112), but by 1913 was only a shade below it ($3,950 vs. $3,833-for detailed income figures, see table 3.7 in Chapter 3).[168]

It was largely for this reason that the end of the Second World War saw the introduction of more interventionist policies. An active industrial policy was practised, especially in the years up to 1963. This included measures like financial supports for two large firms (one in steel, the other in soda), subsidies to industrialize backward areas, the encouragement of technical education, promoting the development of the aluminium industry through subsidized gas, and the development of key infrastructures.[169]

C. Switzerland

Switzerland was one of Europe’s earliest industrializers. Biucchi argues that Switzerland’s Industrial Revolution started barely 20 years later than Britain’s did. By 1850 Switzerland, like Belgium, was one of the most industrialized economies in the world, although the heterogenous and decentralized nature of the country meant that the degree of industrialization remained uneven across different cantons.[170]

The cotton industry in particular experienced incredible development during the 1820s and 1830s. According to Milward and Saul, ‘[b]etween one-third and one-half of the cotton yarn woven in Switzerland in 1822 was imported from Britain. Yet by 1835 imports of British yarn had almost ceased’.[171] Switzerland was a world technological leader in a number of important industries, especially in the cotton textile industry, where in many areas it was deemed technologically more advanced than Britain.[172]

Given this very small technological gap (if any) with the leader country, infant industry protection was not very necessary for Switzerland. Also, given its small size, protection would have been more costly for Switzerland than for bigger countries. Moreover, given the country’s highly decentralized political structure and very small size, there was little room for centralized infant industry protection.[173]