THE PECULIAR POST GREAT DEPRESSION PROTECTIONISM

Abstract

That the early 1930’s brought profound changes in Chile’s commercial strategy, is part of “conventional wisdom”. Economic historians generally accept that after the Great Depression the economic policy of the country shifted from its up to then “outward” oriented development strategy, into an “ inward looking”, anti trade policy, which extended over the next four decades. Judging from trade data, to identify the Great Depression as the dividing line between the mentioned out and inward looking experiences of Chile seems plausible. Total exports reached in 1933 only 38 per cent of its 1926 level. Compared to the exceptional 1928-29 years, the fall is even more pronounced, down to 28 per cent (see Table 1). Recovery during the 1930’s was slow, remaining during the whole decade well below the 1929 peak.1 Given such a drastic fall in overall exports, the economy required, no doubt, a profound increase in the relative price of traded goods. What characterized Chilean trade policy from then on and until the mid 1970 s, was not the relative price change, but the particular policy decisions through which this change was achieved. Raising tariffs was one technique, as can be seen in Table 1, but more complex and discretionary devices, such as quotas, maximum prices, multiple exchange rates, etc., were also used. It is the combined presence of all these instruments which determined trade and price policy in the following decades. In this field, more then in most other, the initial reactions to events of the early 1930’s can be seen as having a profound imprint on later developments. It is difficult to imagine the in the 1950’s and 1960’s existing trade institutions, were it not for the peculiar and, of course, highly inefficient way the above mentioned relative price change was tackled initially. After this brief Chilean trade policy overview and based on Luders and Wagner (2003) the following section describes the pre depression trade regime and offers a hypothesis aiming at an explanation of the underlying institutional Cuadernos de Economia, Ano 40, No 121, pp. 803-812 (diciembre 2003)