Against the Tide

V

The Centenary of British Free Trade*

I

This summer it is a hundred years since the day when the abolition of the corn duties sealed the victory of free trade in Great Britain. Few of us can really take the full measure of what came to pass then; for its contemporaries it was an event that, however prosaic its subject may have seemed, burst with dramatic impact upon the scene of England’s public life and was charged with the tension of a great historical moment. Anyone who is familiar at least in outline with the motive forces of the last century’s history in general and of its economic history in particular knows the consequences of that day in June, 1846, when the Repeal Act became law after having been passed by both Houses of Parliament. But what does this breakthrough of free trade in the pioneer country of industrialism mean today for us, and what does it teach us, for better or worse? This is a question that, no doubt, everyone will admit is important, but answering it appears easy and simple only to the die-hards.

The antecedents of June, 1846, are indeed among the most fascinating episodes of the economic and social history of modern times and also constitute one of the most important chapters of British Parliamentary history. Its heroes, Richard Cobden, John Bright, Sir Robert Peel, Lord Russell, and the rest of them have repeatedly attracted biographers and occupy a permanent place in the imagination of the British people. There is much to tell: how the seed of economic liberalism sown by Adam Smith, Ricardo, and others slowly germinated in the period following the Napoleonic wars; how amid the universal poverty of the English masses the idea steadily gained ground that the protectionist system signified an absurd burden on the whole economy; how among the multitude of merchants, bankers, manufacturers, and publicists clamoring for economic freedom the figures of Cobden and Bright emerged and with their Anti-Corn Law League gave the world the rare spectacle of a mass propaganda campaign conducted with intelligence, dash, and noble sentiments; how the great political reform of 1832 gave the middle classes their due influence; how the Chartist riots reflected the growing distress of the masses and the rising fever of social unrest; how Peel, the Tory, was slowly converted and with his budget reform of 1842 and bank reform of 1844 established the cornerstone of the liberal system in England; how Prince Consort Albert influenced the queen with the liberal economic philosophy he had acquired in Germany and thus by a rare irony of history caused Adam Smith’s triumphal march, which had started in Edinburgh, to make the strange detour via Coburg, Bonn, and Göttingen—all this and more should be told. The story would approach its climax when it came to describe how at the beginning of August, 1845, the historic rain set in “that rained away the corn laws,” how Ireland was suffering famine and England scarcity, how in December, in circumstances woven into a romantic fancy by Meredith in his novel Diana of the Crossways, The Times published the sensational news that the repeal of the Corn Laws was imminent, and how, eventually, they were repealed in June, 1846, in one of the most dramatic sessions in British Parliamentary history. England literally had had to choose between revolution and free trade and took the course that had become inevitable.

All that happened a hundred years ago, and to many it may seem a thousand years away. So unreal does it appear to our generation that there should once upon a time have been a country that, against the opposition of powerful interests, and after a free and passionate debate by democratic procedures, decided, without any countervailing concessions from abroad, to stand up to all foreign competition without tariff protection such as historical tradition has made to seem almost an attribute of sovereignty and is virtually taken for granted by the lay public. In now celebrating the centenary of British free trade, we not only should recall its remarkable birth, but also the almost more astonishing fact that the subject of our celebrations very nearly reached the biblical age of a hundred years—after prolonged ailments and several paralytic strokes, British free trade died in the great year of crisis, 1931. The vast body of literature on this subject notwithstanding, we are still waiting for a sociologically and economically trained historian to make us understand how this unique experiment, which was in flat contradiction to all the unedifying laws of political psychology, could be started with a postulate of economic reason and carried out for almost a century. Today we know how many conditions had to meet at that time in a historically rare combination so as to work the miracle of British free trade, conditions of a psychological, economic, social, and political nature. To the jubilant contemporaries and to several generations thereafter it appeared as the natural and lasting triumph of reason, of peace, of harmony among nations, and of the forces of material progress. ’Tree Trade, Goodwill and Peace among Nations”—that was Cobden’s battle-cry, and its nobility stifles any attempt to smile it off with the sophistication of one above such naiveties. We have heard other battlecries since then that wiped the smiles off our faces.

In a certain sense these sanguine expectations of our liberal forebears were not really exaggerated. To be sure, it was not the dawn of the golden age of peace, and the social philosophy that regarded free trade as the guardian of international concord, rather than as one strand in a unitary overall development, seems to us as faded as the paper on which it was printed. But it is equally true that British free trade was an essential foundation of the world economy such as developed, in all its impressive strength and breadth, and with all its intricate institutions, in the course of the nineteenth century. It needed British free trade for the world to take this course of international trade, industrialism, the gold standard, prosperity, the rising tide of population growth, and commercialization, and it then had to pay the price from which we would gladly knock off something today. That is why this world collapsed together with British free trade, a catastrophe which conditions our own present and imposes upon us the gigantic task of building a world that, while it may not be a mere copy of the old one, must allow for a network of relations more international than ever.

We spoke of the faded social philosophy of the men of 1846. But that does not mean that we have any right to suspect their motives, as has become fashionable on the continent since Friedrich List and others, or to impute to them the hypocritical hardness of heart and the dry egoism that many associate with the Manchester School. If at all, such an injustice can be excused only by ignorance of the time, of its leading personalities, and of its ideas. What really happened is no doubt well described by Alexander Rüstow in the novel interpretation he puts forward in his important treatise Das Versagen des Wirtschaftsliberalismus als religionsgeschichtliches Problem.1 He is right when he says: “Uncouth disciples of Friedrich List, himself not overly discriminating to begin with, thereupon declared the whole Free Trade propaganda as a devilish trick of the English, who, like a wolf in sheep’s clothing, wanted to get the other sheep to throw open their doors themselves to British trade expansion. In the meantime it has become clear that these people were looking for others behind a door behind which they themselves wanted to hide” (p. 55).

This analysis in terms of the history of thought needs to be supplemented by recalling the facts of British economic and social history, with which not everyone may be familiar. Generally speaking, in the early decades of the nineteenth century the poverty of the English masses had been dire beyond belief, and the burden that the corn duties imposed upon a rapidly growing population more and more depending upon industrial exports had increasingly been recognized as one of the principal causes of the distress. Cobden and Bright were perfectly honest in crusading for a cause that today we would describe by the slogan “the century of the common man.” Developments after 1846 proved them right, and the broad masses of England thanked them for it. Free trade was their anticipated answer to the Communist Manifesto, in which Marx and Engels in 1847 tried to interpret the poverty of England’s proletariat in their own fashion and with German metaphysics. And the answer was to prove convincing. It was probably in some part due to it that the seed scattered by the Communist Manifesto never germinated properly in the very country that was its authors’ main concern.

II

What lesson does the imposing English venture of free trade hold for us today? Is it a perpetually valid model or a warning example still to be heeded? This question has been hotly debated by protectionists and free traders for a century, but today we can see that it is wrongly posed and hence sterile, and that is perhaps the most important reflection suggested by the centenary.

First of all, it may be pointed out that the whole question has lost its topicality today, because there is hardly anyone left even in the free trade camp who thinks it is enough to remind the world panegyrically of Cobden’s achievements and arguments. It is inconceivable that Cobden’s slogans should today launch a mass movement for free trade and lead it to victory. Our worries are not those of 1846, and today’s champion of a liberal trade policy must be prepared to answer problems far from Cobden’s and Bright’s mind. And as our tactics must be different today, so we have also learned to be more modest in our expectations, and the old free-trader’s counterpart in the modern world is a man who would be happy if only the different countries’ trade policies were content with protective tariffs as low and stable as possible and restored multilateralism to international trade by the abolition of import restrictions, exchange control, and clearing agreements. But such modesty is more than mere resignation. In most cases it certainly rests on the more or less definite feeling that integral free trade not only would today be Utopian, but in the present world situation hardly justified. In practice, no one would have the courage to be so radical as long as “goodwill and peace among nations” do not look rather more secure than they actually are, and a good many other conditions are fulfilled as well. Nor is this all. We always knew, of course, that the victory of free trade in England rested on a principle that opened the way to the mass civilization of industrialism and commercialism, but today even the most determined liberal can no longer fail to appreciate that this principle in many ways contradicts a natural order, the political rationale of which transcends the mere economic. Uncomprehendingly we stare at Macaulay’s lines in his essay “Southey’s Colloquies on Society” (1830), where he poured all his scorn upon an author who thinks the old rural cottages look prettier than a cotton factory, and who makes the ugliness of the cotton-spinners’ houses one of the standards by which to judge the new manufacturing age. Our sharper hearing has learned to distinguish sounds to which the age of Macaulay and Cobden seems to have been deaf, and we sense that for us the decision is not as easy as it was for them. We may still defend as relatively more reasonable than others the principle that the decision as to what individual nations produce or not should be left to free international trade. But we do so without enthusiasm, because we know the other side of the balance sheet, and hence in the best of cases we make reservations, qualifications, and conditions.

But it is not only the free-traders who could usefully avail themselves of this birthday for reflections on their philosophy. Those others who from the outset made free trade the target of their attacks should, in their turn, give proof that they are prepared to learn something rather than gloat over the moderation of their opponents. If they regard British agriculture as the chief victim of free trade, they should not overlook the fact that this measure hit an agrarian economy whose sound structure had already been largely destroyed by the enclosures of the eighteenth century. They should also remember the extent to which agriculture, the fate of which, after all, is the main subject of the whole debate, has in other countries been disadvantaged precisely by industrial protectionism and hence renounce the doctrine that the interests of agriculture are necessarily served by tariff protection. As Professor C. von Dietze recently once more demonstrated in his interesting article “Bauernwirtschaft und Kollektiv,”2 it is “… precisely the decades of the most complete domination of economic liberalism … [which brought with them] … an unprecedented flowering of agriculture in all parts of the world.” Even though outside England that age was by no means governed by free trade, it was at least under the influence of a basically liberal trade policy, which was incomparably less at variance with free trade than with the autarkic system of protection that many countries today think they owe their farmers. The example of Germany shows with nothing less than heartbreaking forcefulness what disintegrating economic, social, and human effects such a system is bound eventually to exercise upon peasant agriculture. Professor von Dietze describes them in his above-mentioned article, and the voices of other experts that reach us from across the northern frontier confirm the impression that the German peasantry has suffered the most serious damage to its health in the last twelve years of autarkic protectionism and now, weakened to the marrow, has to face the salf-same tasks of adaptation and conversion from which an escape was sought in autarky in the first place. We are told of the blind alley into which the policy of autarky and subsidies has led German agriculture and of the task of guilding it back to the right path of world market orientation and competitiveness. It may be that radical free trade, such as no one still seriously advocates, is unwholesome for agriculture; certainly autarkic protection is for it a sweet but eventually fatal poison. Since the old controversy between free trade and protective tariffs has now taken the new shape of opposition between the traditional policy of tariff protection and the new one of planned autarky, today’s successors of the old free-traders still uphold the liberal principle as superior even when, or rather, precisely when they adopt the new aims of a natural order and outdo all others in their insistence on a healthy farming community.

And this brings us to the crucial point of our reflections. Resistance against a liberal trade policy, of which free trade is the most radical form, is understandable enough as a defense against the encroachment on a natural order of society and economy with the justified intention of preserving it from the excesses of modern industrial and commercial mass civilization. But it is an error, and one that has repeatedly had to be paid for dearly, to believe that this dangerous process can be stopped by obstructing it with an official prohibition at only one point, that is, at the national frontier. It is wrong to hold England’s free trade and the liberal trade policy of most other countries responsible for the disastrous development of economy and society during the last century, instead of blaming that overall development itself, and of asking oneself whether free trade would have been any serious disturbance to another, more natural, more balanced, and more human development. But developments did take that fatal course, and in that given setting, liberal trade policy on the whole did more good than harm. If, on the other hand, things had developed after the event in the way we now wish, with fewer large towns and industrial centers, with a smaller proletariat, less monopoly, and less of all the other ingredients and philosophies of industrial-commercial mass civilization, then free trade would have been seen as a mere command of reason; it need not have collided with a much healthier development and would probably not have been taken as a serious threat to people’s more firmly grounded and more natural existence. Just as it is wrong to single out international economic relations from among the overall developments and make a scapegoat of liberal trade policy, so it is groundless to expect that exchange control and customs officials can make any decisive impact on the unnaturalness of our civilization as a whole. On the contrary, it is just then that the worst disturbances and distortions must be expected, and things are bound to go from bad to worse.

This should make clear what was meant earlier in saying that the problem was stated in the wrong terms. We know now that the question no longer turns on free trade or protective tariffs, but on the contrast between essentially free international economic relations and the shackles of planning and autarky. Of the two opposing parties, one is primarily after international economic freedom, the other, among many other things, after protection against the anonymous forces of a worldwide mass civilization. Both, I think, are wrong—the first when it believes that its aim can still be achieved without at the same time solving the whole problem of our mass civilization, and the second when it overlooks the fact that the desired protection can only be found in that same solution of the general problem, and that to shackle foreign trade is harmful in any event. If both parties were made up only of philosophers and not of vested interests as well, they should have no undue difficulty in agreeing on a joint program. It would be the program of a natural order, in which freedom of economic life, both national and international, is logically connected with a policy designed to preserve and promote values and institutions to which, no doubt, Cobden and Bright gave little thought, or if they did, slightly contemptuous thought, when a hundred years ago they had their moment of triumph in the English Parliament. But this program would lack the most important ingredient if it were not at the same time inspired by the universalism and supra-national attitude of these men, who, with all their errors, had the saving grace of deep longing for peace and goodwill among nations.

* Neue Zürcher Zeitung, June 17 and 18, 1946.

1 “Istanbuler Schriften” No. 12 (Oprecht, Zürich, 1946).

2 Schweizerische Zeitschrift für Volkswirtschaft und Statistik (June, 1946).