Nor can they abandon tariffs when these are easily the most effective mechanisms, and the cheapest, for ensuring that tax is collected on the limited range of exported goods they have to offer that are vital to their state income. And they also need tariff barriers to protect fledgling enterprises. If these impede the flow of capital to offshore centres, so be it. That is a price well worth paying. Put simply, development comes before the ideology of free movement of capital that secrecy jurisdictions espouse on every occasion.

Countries, economies, that are not developing through a shortage of capital should make sure that no one sends in any capital to aid them in developing.

Well, yes, that\’ll sort it all out, won\’t it?

4 thoughts on “What joy”

  1. Of course, as we now know, the US was economically devastated by the massive amounts of capital invested there pre-1914 by investors in the UK. Perhaps you could prevail on Ritchie to tell us how much more successful the US would have been if that flow of capital had been prevented.

  2. Um,

    China has capital controls:

    http://www.nytimes.com/2007/08/20/business/worldbusiness/20iht-yuan.4.7186691.html

    As has India:

    http://blogs.ft.com/beyond-brics/2010/05/12/capital-controls-gain-fans/

    (As did S.Korea, Taiwan, Malaysia (see Asian Crisis) and other successful developing countries)

    It is unlikely that capital controls are the source of any developmental bottlenecks.

    Tariffs are a good way to raise revenues in a country with poor infrastructure because the natural bottlenecks which form on goods entering a country make it easier to collect that an income tax. Set at a flat rate it is also a pretty non-distortionary tax.

    Of course, distortionary tariffs may have their place if you buy into the infant industry arguments which are still very vibrant in development studies (see Dani Rodrik)

    You can mock Ritchie all you want, but what he’s said is simply that there are tradeoffs, which is happily accepted by all economists, and that some intervention can push those tradefoffs into a more optimum state.

    Even 72% of Economist readers (those raging lefties!) back some form of industrial policy.

    http://www.economist.com/debate/overview/177

  3. Import and export tariffs are, by and large A Very Bad Thing, as are exchange controls, import or export quotas etc etc.

    But isn’t VAT the worst kind of import duty/export subsidy of all, as it doesn’t just affect importers and exporters (which would be bad enough), but acts as a kind of import/export duty on most purely domestic transactions as well?

  4. Oh, just to be clear, yes I think it’d be lovely for the UK to leave the EU and go all William Cobbett, but for developing countries tariffs can be a necessary evil for both fundraising and industrial policy. We can tax quite easily in the UK and aren’t trying to catch up with anyone.

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