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Tuesday 18 August 2009

It’s often said that visiting a developing country is like traveling back in time — the conditions seem little changed from those of medieval Europe. But how did medieval Europe stop being medieval Europe? The answer is through protectionism: Britain became the reigning world power by being one of the most protectionist countries on earth, expending enormous amounts of government money to promote local industries. Eventually these industries grew strong enough to compete on the world stage and it withdrew the barriers. The United States eventually surpassed it with more of the same — many long years of tariffs and industrial intervention (to this day the US government spends an enormous amount of money on R&D). Western Europe, the so-called “Asian tigers” — all the major developed countries of our era got there by following these principles. But they don’t want others to follow in their footsteps. Instead of letting developing countries grow and compete in their own right, they’d prefer to use them as a source of cheap labor and raw materials. So enormous effort has been expended on building international institutions to prevent their economic growth. The World Bank and the IMF issue loans to countries, but only on the condition they dismantle all forms of protectionism. The WTO requires countries to agree to principles of “free trade”. Academic “experts” come up with reasons why protectionism really hurts everyone and rewrite the history of economic growth. Aaron Swartz

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