Export Opinion: A development economist poses a counterhistory of free trade

n the 1980s, as developing countries across the world struggled with crushing debt burdens and slow-growing economies, they were pushed—by the United States and international financial institutions—to embrace a set of policies that promised to rescue them. These policies, which are often grouped under the label neoliberalism, proceeded from the assumption that developing countries interfered too much with the workings of their markets. Instead, countries needed to lower tariffs and embrace free trade, privatize state-owned industries, end subsidies to businesses and consumers, balance their budgets, and be friendlier to foreign investment. If a country got its financial house in order and let the free market work its magic, in other words, it had a good chance of watching its economy boom.

But neoliberalism turned out not to be the panacea its advocates promised. Even as developing countries opened up their markets, sold off assets, and cut back on spending, their economies for the most part stagnated. In fact, over the past twenty-five years, growth rates in most of the developing world have been lower than they were during the 1960s and ’70s, when state interventionism was in economic vogue.