By Bernard bwoni
There is no denying the
fact that we all live in a global village and that we have to integrate with
the world economy. This is well recognised on the African continent and across
the globe. However our integration has to be selective, gradual and strategic.
We have to prioritise and pursue policy autonomy, a state led industrialisation
(this we can argue in detail if required), and import-substitution-industrialisation
and Zimbabwe’s current policies of indigenisation, empowerment and land reform
are the key catalysts of this industrialisation drive and economic
transformation that has roots on the ground. All the developed countries of
today without exception had to go through the same. There are no short cuts.
Free market policies have their place but for our industry to get off the
ground they require a period of strategic protection and promotion. Protection
sounds like such a dirty word in today’s economic order but the developed world
of today cleaned up their act and developed through protectionist policies. I
deliberately started by mentioning that we live in a global village and it
sounds like a contradiction when I make the case for protectionism, but hear me
out. Some will argue that Zimbabwe does not have the industry to protect and
that is a valid argument but for Zimbabwe to have an industry to protect, the
industry needs to come off the ground first and to do that requires promotion
and protection.
The German Economist,
Friedrich List (1841) makes very interesting observations about trade
liberalisation and the double standards of those who are now the developed
countries of today. He makes particular reference to Britain, accusing the
British of preaching free trade to developing countries while having achieved
economic supremacy through high tariffs and massive subsidies (protectionist
policies). List accused the British of ‘kicking away the ladder’ that they
climbed to reach the world’s economic summit and pole position in the world
economic order. In his 1841 masterpiece, ‘The National System of Political
Economy’, List makes a very compelling argument for infant industry protection
“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”. Most developing
countries today are advised to embrace free market policies by countries that
developed strictly on the back of strict protectionist tariffs. South Korea,
China, USA, Japan, the UK and other EU developed economies have used infant
industry protection strategies in the earlier days of their economic
development.
List (1841) goes on to say “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”. Today, countries like Zimbabwe are lectured
on the economic benefits of free markets and free trade yet these rich
developed countries of today do give this advice not to benefit Zimbabwe and
other developing countries, but to capture larger shares of these countries’
markets and to stifle the emergence of possible competitors. I am not at all
stating that free trade is entirely flawed, but rather it has its place in the
history of economic development of any nation.
Free trade in the
developed world of today was out of choice and necessity, and in the developing
world of today it has been an imposition from outside by the developed
countries. These countries stand to gain from offering such advice they did not
use when they were at this stage of development. The best performing economies
of today are those that opened their economies selectively and gradually and
examples include USA, EU developed countries at large, Britain, China, South
Korea, Japan and others. Yet in Africa and other developing countries, free
market policies are paraded as if they are the panacea of all our economic
transformation and industrialisation yet they have in fact hindered economic
growth. Ha-Joon Chang (2007) argues that ‘free trade reduces freedom of choice
for poor countries and that keeping companies out may be good for them in the
long run’. A valid argument in that by allowing big already established
companies, you inevitably destroy the capacity of domestic infant industry, but
then the counter-argument is that FDI is key to industrial growth. In Zimbabwe,
indigenisation, empowerment and land reform are good policies in the long run.
There may be losses rather than gains in the first 15 to 20 years but
eventually growth will be achieved, the difference is that these are home-grown
initiatives of growth. Alexander Hamilton in 1791, also made sound arguments on
infant industry protection insisting that American industries were still in their
infancy and as such could not be expected to compete against the mature
industries in the more advanced economies without an initial period of
deliberate government promotion and protection.
The strength of producing wealth is more fundamental than the wealth
itself and history has shown that each and every country that reached the
heights of being called a developed economy did so on the back of protective
tariffs.
There is no arguing the fact that initially protectionism can make the
price of manufactured goods very expensive but with time as a country build its
manufacturing capacity the same goods will be produced more cheaply
domestically than the price they will be imported. These are the long run
economic benefits of protectionism. Without a strong manufacturing base
Zimbabwe and the continent at large will remain unprogressive. For them to
become complex industrial forces, there is need for that period of infant
industry protection. I am aware that some will argue that in the case of
Zimbabwe, there is no industry to protect, but then the other argument is that
you can never have the industry unless and until you have protected and promoted
it first.
The argument here is not purely anti-free market economy nor is it a
case of arguing that protection should stifle healthy competition. The
fundamental point is that there is need to build up capacity and to do that you
have to go through a period of deliberate infant industry protection. In the
case of Zimbabwe it is a rebuilding exercise and to rebuild you have to cushion
the collapsed industry and along the way offer them protection until full
capacity has been built. At this stage of our economic development, free trade
only serves to expose us to the economic supremacy of the developed countries.
Protectionism is the only system that has throughout history sustained nations
to a stage where eventually free trade has been made possible and not
counterproductive. We will talk and talk but bottom line is that period of
infant industry protection.
Bernard Bwoni
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