Did Britain Ever Adopt Free Trade?

John V.C. Nye’s paper, “Political Economy of Anglo-French Trade, 1689-1899: Agricultural Trade Policies, Alcohol Taxes, and War” is published by the American Association of Wine Economists, as AAWE Working Papers, no 38 Economics, HERE:

From the Abstract:

“Britain – contrary to received wisdom – was not a free trader for most of the 1800s and, despite repeal of the Corn Laws, continued to have higher tariffs than the French until the last quarter of the century.

War with Louis XIV from 1689 led to the end of all trade between Britain and France for a quarter of a century. The creation of powerful protected interests both at home and abroad (notably in the form of British merchants, and investors in Portuguese wine) led to the imposition of prohibitively high tariffs on French imports -- notably on wine and spirits -- when trade with France resumed in 1714. Protection of domestic interests from import competition allowed the state to raise domestic excises which provided increased government revenues despite almost no increases in the taxes on land and income in Britain. The state ensured compliance not simply through the threat of lower tariffs on foreign substitutes but also through the encouragement of a trend towards monopoly production in brewing and restricted retail sales of beer (which began around 1700 and continued throughout the eighteenth century).

This history is analyzed in terms of its effects on British fiscal and commercial policy from the early 1700s to the end of the nineteenth century. The result is a fuller, albeit revisionist account of the rise of the modern state that calls into question a variety of theses in economics and political science that draw on the naive view of a liberal Britain unilaterally moving to free trade in the nineteenth century.” (JEL Classification: F13, H20, N40, N43, N53, O13, Q17)

Comment
I received this paper this morning and was immediately attracted to it by the abstract.

Regular readers may have noted my occasional comment that Adam Smith’s free-trade reputation is often exaggerated and as often it is associated with claims that Wealth Of Nations ushered in an age of free trade policies in Britain. The mercantile political economy, of which Wealth Of Nations was heavily critical, is supposed to have been replaced by grateful legislators persuaded by Smith’s arguments.

I have long suspected that this picture is not just over done; it is absolutely wrong.

The end of the first British empire following the loss of the British colonies in most of North America (Canada, a prize won from the French, remained under the jurisdiction of Britain – from 1789 France turned in on itself; and the Caribbean island prizes remained slave colonies) did not usher in an era of free trade.

The old mercantile habits continued, and with them the lust for empire was nurtured.
In 1788 the penal colony of New South Wales was founded, to which New Zealand was added and the rest of Australia followed, by which time the disgrace that was India under the East India Company was taken over directly by London and the elements of the second British Empire took shape.

Into this mix, the idea grew that British foreign and domestic policy was one of free trade and the end of mercantile political economy with its regulations, restrictions, special interests, and jealousies of trade. I suspect this picture is untrue and I look forward to reading John Nye’s paper as a contribution to correcting part of the image.

I doubt if mercantile political economy has ever really gone away from Britain despite Adam Smith and the Wealth Of Nations and all the talk of major changes in the 19th century. The so-called industrial revolution – more like slow and gradual partial industrialisation – which produced the illusion of success affording the governments of the day the means to practise ‘business as usual’.

I shall keep you posted.

Britain's Strategic Error After 1776

There was a discussion this morning on BBC Radio 5 asking the question: ‘What are the British military forces for?’ Now I shall not comment on the ‘phone-in’ callers’ views – listening to those members of the ‘public’, who air their views on ‘phone-ins’ about the ‘big issues of the day’, often raises unwelcome doubts about the benefits of universal suffrage – but I will comment generally.

Presently, I am preparing an essay for the David Hume Institute (Edinburgh) on the defence interests of Scotland (currently interrupted by my more important paper on the 'Alleged religiosity of Adam Smith' for the annual conference of the History of Economics Society in Denver, Colorado), but, while listening, I thought of something Adam Smith wrote in 1776, which given the history of Britain since its defeat by its former colonists in North America, has poignant meaning for Britain in the 21st century.

Recall that Wealth of Nations was written as a critique of the policies of British governments since the 16th century (Elizabethan times) on domestic policy (saddling the country with what became meddlesome monopolies in the Town Guilds - ‘members of the same trade’, etc.,), restrictive monopolies in the Statute of Apprentices (limiting the spread of human capital), the Settlement Acts (corralling labourers and their families to the Parish they were born or married in), and the Navigation Acts (meant to enable Britain to defend itself as an island from marauding Continental princes, but which became an instrument to monopolise North American trade).

Wealth Of Nations also promoted the policies that Smith called mercantile political economy – jealousy of trade, wars with trading partners, political interference and rivalry in the dynastic successions of Continental sovereigns, trade protection using tariffs and prohibitions and boycotts, a preference for exports over imports, and the hoarding of gold and silver bullion. It also had the effect of participation in the slave trade, and not a little piracy.

That first empire ended fortuitously; if only legislators and those who influenced them had listened carefully to what Adam Smith said in the very last paragraph of the last chapter of Wealth Of Nations and had acted accordingly. Instead, in a crass strategic error of historical magnitude, British governments slid into a second Empire in India, Canada, Caribbean islands, Australia, New Zealand, Hong Kong, South-east Asia and, later, Africa. The millions that the North American colonies cost in two 18th-century wars, pale into insignificance beside the millions that the Victorians spent on the Royal Navy and British occupation armies (not a few of the personnel of which came from Scotland), and which British governments in the 20th century continued to spend, on top of what was exported as capital despite these costs, is unimaginable.

But Adam Smith’s proposal for a different path in 1776 was ignored by legislators and those who influenced them, and the rest, as it is said, is history:

‘The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost, immense expence, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shown, are, to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people, or that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be completed, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expence of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.’ (WN V.iii.92: 946-947; Edwin Canaan, 1937 edition, 899-900)

In the 21st century, Britain still imagines itself militarily as an, albeit, leading military police power (its defence forces are of excellent quality but their political masters are, er, not), politically as a leading player at the United Nations, in the European Community, and the Commonwealth, the G8 and G20, and the WTO. Surely it is time that British governments should distinguish between what exists 'in imagination only' and ‘endeavour to accommodate her future views and designs to the real mediocrity of her circumstances’?