Tuesday, May 06, 2008

Britain Post-Adam Smith Not a Paragon of Free Trade

EconTalk (part of the Library of Economics and Liberty) (5 May) provides an insightful look at an aspect of current policy interest through a discussion by John Nye and Russ Roberts, professors at George Mason University, on the issues raised in John Nye’s (2007) book, War, Wine, and Taxes: the political economy of Anglo-French trade, 1689-1900, Princeton University Press, NJ. HERE

The gist of Nye’s revisionist history is that Britain was not the 19th-century free trade nation that popular reportage credits it to have been. The repeal of the Corn Laws in 1846 was not the radical shift to free trade claimed for it. Not for the last time does political rhetoric make claims that the facts do not support. Their repeal was justified and necessary but it was not what it is fashionable now to call a ‘tipping point’.

Professor Nye elaborates on the data (France was less protective than Britain!), ably prompted by Russ Roberts. You should listen to the tape (64 minutes) and benefit from an illuminating excursion among the facts.

I have long the credentials of Britain’s free trade image to be suspect. Partly, this is because they imply a consciousness of economic good sense among that most unpromising constituency of politicians and those to whom they are politically susceptible, that is, those whose interests are not those of consumers.

Mercantile Britain did not end with Adam Smith’s Wealth Of Nations. There was no Damascene conversion against mercantile political economy. A set of mercantile regulations were gradually repealed (Statute of Apprentices, Settlement Acts, Navigation Acts, etc.,) but mostly 50-70 years later. His main critique was of the heavy burden on the British economy of the colonies in North America, detailed in Book IV.

Sympathetic readers may get the impression that with the defeat of the British at Yorktown in 1783 and the withdrawal of the British mercantile privileges and the military burden of defending the colonists, the British economy would benefit slowly and gradually. But they would be wrong. The great mercantile folly of the East India Company continued, becoming a British colony in the 19th century, until independence in 1947; Britain slowly developed a second empire at enormous cost in blood and treasure until its demise by the 1960s.

‘Free trade’ domestically slid into the politics of laissez faire as employers waged a rear-guard action to prevent ‘interference’ by legislators and social reformists in their business affairs, quoting the authority of Adam Smith for their behaviours. Manchester ‘free traders’ were among the most outraged opponents of shorter hours, restrictions on the employment of children, the introduction of modest fines on employers for unsafe, unsanitary, and unprotected high-speed machinery, that the Factory Inspectorate tried to implement, led by Leonard Horner (incidentally, a founder of what became Heriot-Watt University in 1821), what were modest (and diluted) Acts of Parliament, hardly enforced by local mahistrates (many of them millowners).

I have long intended to document the post-Smithian record of British parliaments, economists, and lobbyists, to see just how far they took the ‘free trade’ message of Wealth Of Nations, and what they (naming names) did to introduce under Adam Smith’s name variations on his themes, and in many cases complete fabrications of his works (for example, free trade, limited governments, laissez faire, invisible hands, and all). However, I am considering undertaking another study that would take me away from that task for a year or so.

Listening to John Nye and Russ Roberts on the British myth of free trade is about as close as I may get to my intentions, so I commend their podcast to you in the meantime. Take a look at the following extract from John Nye’s earlier article to tempt you into cutting out a mere hour to listen to them.

Below is an extract from one of John Nye's earler articles; I thought it apposite:

What politicians do and say are often quite different. That hasn't changed. Indeed, though there is much talk about globalization and unfettered trade, there is no country in existence today whose policies come anywhere near the ideal of free trade. Goods and services do flow vigorously throughout the globe, but most countries suffer from a mix of import duties and non-tariff barriers such as quotas, unnecessary inspection rules and a bewildering variety of regulations that make it impossible for any of us to benefit fully from the specialization possible in a truly open world economy."

(Nye, J. 1991, "The Myth of Free Trade Britain and Fortress France," Journal of Economic History) Read it HERE


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