Kicking away the ladder to development

How did the rich countries today get rich? There is no single answer to this question. However, what is apparent is that they used certain policy tools such as protectionism, subsidisation of their domestic sectors and the development and implementation of industrial policies to advance. 

In a study in 2003, Ha-Joon Chang, a South Korean development economist, examined the historical approach which today’s rich countries adopted to attain development. Dr Chang found that the economic evolution of now-developed countries differed dramatically from the procedures that they now recommend to poorer nations. He concluded that developed countries are attempting to “kick away the ladder”; with which they have climbed to the top, thereby preventing developing countries from adopting policies and institutions that they themselves have used. 

Across the Caribbean and many other developing countries, there is evidence of Dr. Chang’s findings. There was a time when several Caribbean countries were major exporters of bananas. Some countries had thriving dairy and coconut oil industries. The garment sector was once thriving, as was the light manufacturing sector. These industries were supported by a policy environment which allowed for export credits, protection in the form of customs duties and other forms of governmental support which encouraged investments in key sectors. The policy environment is now largely unfavourable to these prescriptions.

However, there is now a window of opportunity in the green industrial space for developing countries to move swiftly to lock-in certain advancements before, as history suggests, they are denied the benefits of green growth. 
In the United States (US), President Joe Biden’s recent landmark climate and spending bill has assigned $375 billion (bn) over the next decade to fight the climate crisis, including investments in renewable energy production and tax rebates for consumers to buy new or used electric vehicles. Biden’s plan is broken down to include $60bn for a clean energy manufacturing tax credit and $30bn for a production tax credit for wind and solar.
For consumers, Biden’s bill offers tax breaks as incentives to go green.
One notable offer is a 10-year consumer tax credit for renewable energy investments in wind and solar.
Across the Atlantic in Europe, EU leaders are pushing the European Green Deal. Among other things, the EU Green Deal will promote cleaner energy and cutting-edge clean technological innovation. This Deal is anticipated to make EU industries and sectors more globally competitive and resilient.
The EU, US and many other developed countries are pumping billions of dollars into green industrialisation. They are using massive amounts of state resources to pursue their objectives, with little concern as to how their policies give them an unfair advantage on the global market.
Once rich countries have achieved their green industrial objectives, it is conceivable that they will kick away the ladder to prevent other countries from imitating their strategies.
Now is therefore the time for developing countries to also advance their own green development objectives. This would require diverting resources towards investments in renewable and alternative forms of energy, such as wind and solar. 
This may require borrowing and or readjusting development outreach.
Private investment would also be key, and this would necessitate an investment climate that is facilitative of such investments. 
Given the small size of Caribbean markets in particular, a Pan-Caribbean approach may work best and the region would be well advised to pursue green industrialisation jointly. Failure in other areas of common pursuit should not detract from the need for a unified approach to pursue green development.
It is instructive that the Pacific island of Vanuatu has launched one of the world’s most ambitious climate policies, committing to 100 per cent renewable energy in electricity generation by 2030. According to the government, the cost of achieving Vanuatu’s revised commitments are estimated at $1.2bn by 2030 – expensive, but necessary.
Transitioning to green development is likely to be the next frontier in development policy and practice. It is essential to seize this moment before the window closes.

Joel K Richards is a Vincentian national living and working in Europe in the field of international trade and development.
Email: joelkmrichards@gmail.com