Two questions.

MScoleman at MScoleman at
Mon Sep 7 18:57:08 PDT 1998

I don't disagree with anything below -- certainly my brief answer about protectionism only worked in a broader context. During the nineteenth century, the seeming limitless land mass of the new world made expansion seem limitless as well. Another factor was the huge increase in population -- the birthrate in the new world was almost double Europe, and immigration AFTER 1845 insured a constant flow of cheap labor (prior to 1845 there were severe labor shortages, hence the continuation of slavery and the tremendous entrance of women into waged labor).

However, I maintain that the growth of industrial relations and the dominance of capital markets controlled by the upper class in the USA (as opposed to colonial masters from overseas) happened because local markets were protected and turned to internal as opposed to external trade. While this can't be exactly applied to the twentieth century, there are similar examples. For instance, I think the tremendous growth in both Japan and West Germany following WWII took place because: prevention of investing militarily pushed investment into industrial bases which led to growing accumulation of capital, both countries relied heavily on the low paid/non-union/temporal involvement of women in the workforce, and both countries allowed industry to grow in protected environments. Similar arguments can be made for the double digit growth in the PRC where capitalist sectors receive tremendous protection from outside competition.

The rhetoric surrounding free markets tends to come from countries with established industrial bases looking for new ground to sell their finished products and technology. One can read free market to mean, let us dump our products in your country and control your industry.

maggie coleman mscoleman at

In a message dated 98-09-06 13:02:44 EDT, Jim Devine writes:

<< On the issue of why the US didn't end up economically dominated by the UK,

I sent Mike Cohen the following message off-list (in order to avoid Doug's

Draconian Limit on postings). I repond to it now because I'm under quota. I

hope that Mike doesn't mind that I make our discussion public. It's not

private stuff at all.

> maggie's right. It was protectionism -- "natural" protection due to

transportation costs, inadvertent protection due to war, and explicit

protection, especially after 1860 -- that keep British Industry from

swamping US industry.

> But there are other reasons: the technological gap between the US and the

UK wasn't very large (the US wasn't very far behind). Also, the US had a

very large domestic market [due to realatively high incomes of white

farmers and workers, the theft of land from the Indians, etc.], so that

there was a lot of room for competition behind the tariff barriers,

preventing the rise of fat-and-spoiled monopoly industries. < The latter

developed as a result of many Latin American import substitution efforts. I

should stress that the successful protectionist era stretched from 1861 or

so (when the South left Congress) until the early 1930s (when there was

reaction to Smoot-Hawley).

Mike adds: > It seems to me that the underdeveloped countries and Russia

have ample methods to deal with debt and currency crises. In particular

they have modern versions of some of the advantages you attribute to US


I don't think so. I think that the successful import-substituting

industrialization era has passed. Russia has a big technical gap unless it

figures out how to suddenly mobilize its scientific labor-power. A lot of

its capital equipment is worthless. Anyway, these days, unlike the 19th

century, catching up involves massive investment. Currently its internal

market is very limited. It sure seems that some kind of statist economy is

needed -- at least to allow survival. We can hope that there is some kind

of democratic control over that state so we don't see the downsides of

Stalinism (statist socialism) or fascism (statist capitalism).

>In the worst case they default or threaten defaults. The can control the

flow of currency via exchange boards. <

currency boards simply force a fixed exchange rate (fixing the value of the

currency relative to the dollar). I don't think that they solve fundamental

problems. Whether a foreign exchange regime works well for a country or not

depends more on the fundamental health of the economy than on the type of

foreign-exchange regime, IMHO.

I think you're thinking about capital controls, which prevent to

international flow of hot money. That seems a good idea -- as long as large

numbers of countries do it.

>They can even play Western Countries off of each other granting most

favorite nation status etc. While this will not endear themselves to

investors and distort market mechanisms there will always be capitalist

countries in general which are competing and from which they can buy

Capital goods. I think a total boycott is unlikely. All of this should be

used as a threat.<

I think that this is unlikely; the era of playing the big boys off against

each other (as India used to do with the US and USSR) has passed, with the

USSR. Maybe the EU could sub for the SU in this game, but that's in the


>I wonder if the US has threatened force in defense of its debts. If not

the only stick a creditor country has over a debtor one is a kind of

boycott. If this is what is happening or worse in these countries then you

would think these options are bocoming more attractive as time goes on.<

I think it has, especially in Latin America. In fact, I believe the US

invaded countries in the Caribbean several times over this issue.

Jim Devine jdevine at &

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Date: Sun, 06 Sep 1998 09:57:51 -0700

To: lbo-talk at

From: James Devine <jdevine at>

Subject: Re: Two questions.

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