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The Principles of Liberalism in 17th-Century England

Tags Free MarketsWorld HistoryInterventionism

04/24/2012Murray N. Rothbard

At the beginning of the 17th century, virtually all of England's export trade consisted of unfinished woolen cloths, which were sent to the Netherlands for finishing and dyeing and to be reexported to the north for grain. In the decade following the conclusion of peace with Spain in 1604, the woolen trade, and hence the English economy, flourished. But parliamentary refusal to approve any further taxes in protest against rising taxation, as well as the persecution of Puritan clergy, led, in 1614, to the Crown's dissolution of Parliament.

In its search for revenue, the Crown then decided to create new monopolies — and its meddling in the vital wool trade had disastrous results. On the proposal of Alderman Cockayne of the Eastland Company, the government suspended the charter of the Merchant Adventurers (an attempted monopoly in the export of unfinished cloth), and completely prohibited the export of unfinished cloth upon which the prosperity of England rested. Instead, a new charter was granted to a syndicate of Eastland Company and Levant Company merchants in a new company, the King's Merchant Adventurers, which had a legal monopoly of the export of finished and dyed cloth, half the profits of which were to be paid to the Crown.

The English government failed to realize that the English were not technically equipped for finishing and dyeing cloth; the higher costs of finishing woolens in England left an open field for the emergence of a new competitive cloth industry on the Continent. As a result, English woolen exports fell by a catastrophic one-third in two years, and the repeal of the prohibition in 1616 could not succeed in reviving the cloth trade. Not only did the tax-crippled English industry have to compete with the low-cost industry of the Continent, but the outbreak of the Thirty Years' War in 1618 brought about a Continent-wide debasement of currencies, a debasement that aided exports from the debasing countries at the expense of such other countries as England. Renewal of war in the Netherlands in 1622 further disrupted the vital market there, and the result was a continuing great depression in England in the 1620s, a depression and unemployment concentrated particularly in the cloth-making centers of East Anglia and the West Country.

Fearful of rising political opposition sparked by the depression, the government tried desperately to relieve the victims of the depression by maintaining wage rates at a high level and keeping failing companies in operation. The result was only to prolong and intensify the depression the government was trying to cure: artificially high wage rates deepened unemployment in the clothing centers and imposed higher costs on an already high-cost industry; propping up of inefficient producers wasted more capital and ruined their creditors; and the domination of inefficient monopoly companies was tightened at the very time when the industry's salvation could only come from freer competition and escape from the taxation and regulation of government. The overcapitalized monopoly companies were especially hard hit by the depression; the East India and Muscovy companies defaulted to their creditors, and the Virginia Company's difficulties resulting from the government's monopoly of tobacco sales led to its dissolution. Hence the royal assumption of power over the Virginia colony.

One growing light on the economic horizon was the exportation of the lightweight "new draperies," produced free from government control, and over which no monopoly company held sway. Export trade in these new draperies was developing in southern Europe by the 1620s. The contrast in the fortunes of the two branches of cloth trade was too great to be ignored — the connection between free trade and economic growth, and between privileges and decline, was becoming evident to contemporaries.

In successive Parliaments the representatives of the people demanded freedom in economic and political affairs and the termination of the government's restrictions, monopolies, and taxes that had brought about the depression engulfing the country. The government responded characteristically by imprisoning the opposition leaders, such as Sir Edwin Sandys and Lord Saye and Sele, for advocating free trade, radicalism, and interference with tax collection.

The Parliament of 1624 presented a list of grievances in protest against the moratoria issued to debtors against their creditors, against the increases in government officials and expenses, against extraordinary tariffs and taxes, against the government's use of informers and enforcement of regulations and controls, and against the monopoly trading companies, which were popularly regarded simply as gangs of thieves, from the East India Company to the Council for New England.

The Parliament concluded by passing the Act Against Monopolies, by which all monopolies were outlawed and all proclamations furthering them prohibited. Unlike the depression of the 1550s, which had led to the unquestioned creation of monumental government controls over the economy, the depression of the 1620s witnessed an attempt toward liberalization by removing the regulations that had caused the crisis. The movement for the abolition of the government's monopolies and regulations became a major part of the 17th-century constitutional struggle in England and had a significant influence on the American colonists, whose migration was a fruit of the government's controls.

However clear the principles of liberalism had become, the struggle for their realization in the 17th century had hardly begun.

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