One of the more interesting economics job market papers this year is from Réka Juhász at LSE. In brief, she shows that Britain’s naval blockade of France protected its infant cotton industry from British manufacturing giants, stimulating the French industry for good.
I find that in the short-run regions (départements) in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in a new technology, mechanised cotton spinning, to a larger extent than regions which remained more exposed to trade.
Temporary protection had long term effects. …I first show that the location of cotton spinning within France was persistent, and firms located in regions with higher post-war spinning capacity were more productive 30 years later.
Second, I find that after the restoration of peace, exports of cotton goods from France increased substantially, consistent with evolving comparative advantage in cottons.
Third, I show that as late as 1850, France and Belgium – both part of the French Empire prior to 1815 – had larger cotton spinning industries than other Continental European countries which were not protected from British trade during the wars; this suggests that adoption of the new technology was far from inevitable.
Before you think, “Yes! More temporary protection for infant industries in developing countries!”, I’m reminded of something I was told in grad school (I wish I remember by whom).
Trade protection is like herpes. Once you’ve got it you can never get rid of it.
Juhász found the elusive temporary herpes.
P.S. Coincidentally, I happen to be partway into Sven Beckert’s Empire of Cotton. It is very, very good so far. An early candidate for a best book of the year and essential reading for development economists/political scientists.
P.P.S. If any of you know who said the herpes quote that I would appreciate having my memory corrected. I want to say Rudi Dornbusch, but that’s only because it sounds like the kind of thing he would say.