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Comment by cheriot | Hacker News Reader

Developing countries are influenced by rich countries along the lines of https://en.wikipedia.org/wiki/Washington_Consensus.

To poorly summarize the book, the path that works is

1. Land reform to give small plots to families. This boosts yield and turns unskilled labor into foreign currency.

2. Protectionist policies balanced by government requirements to export so companies have to innovate instead of milking the local market.

3. Financial controls to prevent capital flight and make capital available to strategic industries. Often at the expense of savers.

I highly recommend this book to anyone interested in History, Economics, or Current Events.

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This is exactly how Finland became developed country.

1. Land reform 1918.

2. Protectionist policies, import restrictions and increasing exports trough war reparations after WWII.

3. Strict financial controls and industrial policies. Finland ended financial controls in 80's. (Most Nordic countries ended their financial regulations in the 80's).

The interesting point in Finnish case is that the land reform was (at least nominally) a central requirement of the Red faction in the development leading to civil war in spring 1918.

The White faction won the war, and it ended in a bloodbath. with the Reds severely repressed. But the law about land reform was approved two months after the civil war ended.

Twenty years later, when Soviet Union attacked the country as Stalin believed the Reds still wanted a retribution, he faced a unified nation where the sons of Reds and Whites alike fought together, well enough to avoid occupation at the end of WWII, though the reparation payments were heavy indeed.

And then, at present day, many people say that "the land reform was the biggest mistake of the century" because it created lots of small farms instead of big, centralized agriculture.

Anyway, giving people a patch of their own land seems to be a good way to commit them to defend and work for it.

Taiwan, Japan, and South Korea were also intentionally favored by U.S. trade and industrial policy at the expense of American industry in order to develop them as a bulwark against communism

If U.S. hadn't been willing to play ball with their protectionist, export-centered industrial policies from the 1950's through the 1970's, the story could have been very different.

Despite the popular political narrative in US, protectionism was very similar in both US and Japan. Japan was just more competitive in many areas. Japan did have gradually reduced number of import quotas like everyone else. 490 quotas in 1962 and 27 in eighties.

The most-favored-nation status came trough GATT agreement 1947 and it was not US favoring other countries. It was trade agreement. Japan joined 1955.

After 1979 Tokyo Round agreement, Japan had the lowest average tariff level among industrial countries, 2.5 percent against 4.2 percent for the US.

Before 1980, most of the friction in trade was generated by U.S. industries seeking protection from Japanese imports, including textiles, steel, televisions, and automobiles. Japan solved all these cases by agreeing to to voluntarily restrain exports of the disputed items.

Japanese markets were ridiculously hard to penetrate, but often the reason was not trade barriers. Usually it was just different customer preferences and sales channels. For example, at one time US companies offered cars to sale in Japan with left-hand side steering and complained about sales.

Japanese have very protectionist agriculture policies but this seems to be universal for everyone.

The "Washington Consensus" is a rather recent term. The concept itself refers to policies that were put in place by the 70's.

The IMF and the World Bank both predate those "policies". And they were giving loans and advise before.

Truth is: they're an easy scapegoat. It's that simple.

Countries have succeded by following the IMF/WB "Neo-Liberal" advise and other countries have failed by doing the same. Countries have also succeded by not following the IMF/WB "Neo-Liberal" advise and other countries have failed by the same.

Most of the time, local politics is the real issue.

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