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Cover Story Africa


State intervention has been at the core of the wealth creation and economic success stories, starting with Britain and Europe in the late 15th century, carrying through to the USA in the 19th century and Japan, Taiwan and South Korea in the 20th century, and now China and India in the 21st century, reports Osei Boateng.


From poverty to wealth … how the others did it


I


n an age of the neo-cons and neo-liberals, truth- telling economists are hard to come by. Tis is why Africa should rejoice that economists like Erik Reinert and Ha-Joon Chang are still around. Both men are a delight to read and their work can move Africa forward if the continent takes


them seriously. For example, in recent decades Africa and other developing countries have been encouraged to jump into free trade agreements with the more advanced economies because that is supposedly the only way to grow their economies. But Chang tells how all of today’s rich countries used national-


istic policies (tariffs, subsidies, restrictions on foreign investment, etc) to promote their infant industries. Te story was the same with the more recent economic suc-


cess stories of China and, increasingly, India. Teir examples, according to Chan, “show the importance of strategic, rather than unconditional, integration with the global economy based on a nationalistic vision”.


China Like the USA in the mid-19th century, or Japan and South Korea in the mid-20th century, China used high import tariffs to build up its industrial base. Right up to the 1990s, China’s average tariff was over 30%. Chang admits that China has been more welcoming to foreign investment than Japan or South Korea were, but China still imposed foreign ownership ceilings and local content requirements that demanded that foreign firms


20 | April 2011 New African


The textile industry has become a vital part of the economies of some developing countries


should buy a certain proportion of their inputs from local suppliers. Contrary to the liberalisation theory and hands-off-by-the-


state sermons preached to Africa, China has used heavy state intervention and an enlightened state-owned enterprise (SOE) strategy to grow its economy to a point where it is now an eco- nomic superpower vying for global domination with the more established big boys. In the past, all Chinese industrial enterprises were owned by the state, but today, the SOE sector accounts for 40% of industrial output.


France After the Second World War, the French government acknowl- edged that its conservative, hands-off policies had been partly responsible for its relative economic decline, and thus defeats in two world wars. To stem the tide, the French state decided to take a much more active role in the economy. It launched “indica- tive” planning, according to Chang, and took over key industries through nationalisation, and channelled investment into strategic industries through state-owned banks. To help its new industries to grow, the government im- posed industrial tariffs and maintained them at a relatively high


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