History of Free Trade

We have already glanced at some of the triumphs of that great struggle to reform our commercial legislation which may be said to have begun in 1776, when Adam Smith's immortal work on the wealth of nations was first given to the world. We have now, however, arrived at a period when it becomes necessary to write in a more connected form the narrative of the struggle. Though less showy in its effects than those great political revolutions and military events which have hitherto formed the staple of the historian's materials, it constitutes in itself a revolution of vast importance to human welfare, and one which has extended and is still extending its beneficent influence throughout the world. That that revolution began in England, that the principles of commercial liberty were first clearly proclaimed by English writers, and carried into practical effect by English statesmen, must for ever constitute one of the soundest claims of our country to the respect of the more enlightened among all nations. Dr. Smith's triumphant demonstration of the absurdity of the system of monopoly and state interference, however, was too directly opposed to the spirit of his time to be received at first with favour. The statesmen of that age had been educated amid ideas altogether different from those liberal and enlightened views on the subject of commercial liberty and political justice which the great apostle of free trade proclaimed to the world. Throughout the Continent, and particularly in France, our near neighbour and oldest rival, the protective system was seen in its fullest development, guarded on all sides by enormous duties and prohibitory laws. That these barriers were absolutely necessary to the well-being of a nation, and that their removal would lead to the speedy destruction of native industry and the commercial triumph of a foreign rival, was devoutly believed in, not only by the un- instructed multitude, with whom the maxims of protection to native industry were most popular, but by almost all writers and speakers on political subjects. In the pamphlets and newspapers of the time, in the discourses of Parliamentary orators, and in the speeches prepared by Ministers to be delivered from the throne, the truth of these doctrines was invariably assumed. The greater part of the sanguinary wars of the last century were undertaken for reasons in some way connected with them. To obtain the exclusive monopoly of some branch of foreign trade, to strike a blow at the commerce of a rival power, to rigidly exclude the foreigner from our own markets, and from all dealings with our colonies - these were the selfish and mistaken objects which the most enlightened among our statesmen did not hesitate openly to avow. As Bentham sneeringly remarked, our soldiers had conquered for us a " prodigious right of trade " in all parts of the globe, and this without any very sensible result, save in an enormous addition to our own taxation. We were, moreover, encumbered with treaties which virtually bound us to purchase certain articles of particular nations in opposition to the national course of unrestrained commerce; and in return had obtained only stipulations for the sale of our own productions in markets, where the people, if left to themselves, would, in many cases, have been willing to purchase them under any circumstances. So strongly rooted did these ideas appear, that Dr. Adam Smith himself declared that he regarded the adoption of the views which he had established, with so much labour of meditation and research, as hopeless. "To expect," he says, "that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but, what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market - were the former to animate their soldiers in the same manner as the latter inflame their workmen, to attack with violence and outrage the proposers of any such regulation - to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them that, like an overgrown standing army, they have become formidable to the Government, and, upon many occasions, intimidate the Legislature. The member of Parliament who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more, if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists." The truth of these views will be found remarkably exemplified in the history of Sir Robert Peel's effort to reform our tarif? seventy years later; but that revolution which Adam Smith himself declared hopeless is now happily accomplished, and carried probably far beyond anything which this illustrious writer contemplated even as a Utopian dream.

The policy of monopoly and restriction is generally described under the name of "the commercial system," or that system which is based upon the assumed superiority of money or the precious metals over every other kind of merchandise - a doctrine which, though sometimes recognised in the earlier periods of the world's history, had only obtained its full development during the last two centuries. But the artificial regulation of industry and commerce was of far earlier growth, and far more generally rooted in the minds of nations and their rulers. That commerce must not be left to itself; that the interests of the individual labourer, manufacturer, agriculturist, merchant, or home trader would, if not looked after, lead them into courses injurious to the welfare of the state, are among the oldest beliefs both of practical statesmen and political thinkers. The greatest minds of antiquity have not been able to extricate themselves from the dominion of these errors, which a few simple propositions now established have served almost entirely to overthrow. The great Lord Bacon enumerates among the "first remedies" of disorder in a state, principles which a youth of these days, who had attended the lectures of a professor of political economy, could not hear without a smile, as, for instance, the " well balancing of trade by Government regulation," the " cherishing" of manufactures, " the repressing of waste and excess by sumptuary laws," and the "regulating of prices of things vendible." He lays down the absurd maxim that the increase of any wealth must be at the expense of the foreigner, "for whatever (he says) is somewhere gotten is somewhere lost." The fact that in foreign trade both parties are satisfied with their interchange of commodities, and willing, if let alone, to continue the traffic indefinitely, did not suggest to him that there can be no loss in the transaction, but only a mutual advantage. His notions upon the lending of capital - that fruitful source of useful industry - appear equally puerile. Not to lend money gratuitously was, in the opinion even of the founder of inductive philosophy, a sign of " hardness of heart," but a thing which, in the depraved condition of human nature, must be tolerated. Ignorant of the truth that the lender of money is in no different case from the lender of lands, houses, or goods, or any other kind of values, and that there can be no difference, as far as the hirer is concerned, between hiring a ship and hiring the money with which to build or buy a ship, he declares it only better to mitigate the system of borrowing and lending by public law than "to suffer it to rage by connivance." How far this great philosopher and thinker upon political and social questions was from obtaining even a glimmering of the modern doctrine of free trade may be understood from the fact that he proposes that the law should establish two rates of interest for money, the one free and general for all, the other under license only to certain persons and "in certain places of merchandising." Without regard to the number or the wants of borrowers, or to the amount of capital disposable for lending, he recommends the state to reduce interest " in general to five in the hundred, and let that rate be proclaimed free and current." This, he adds, "will preserve borrowing from any general stop or dryness - this will ease infinite borrowers in the country - this will, in good part, raise the price of land." In addition to this, he recommends that certain persons be licensed to lend to known merchants at a high rate, but with certain " cautions." The rate, even with the merchant himself, is in this scheme to be somewhat more easy than he used formerly to pay, " for by that means all borrowers shall have some ease by these reformations." There is to be "no bank," but "every man be master of his own money; not," Bacon adds, " that I altogether dislike banks." These licensed lenders were to be in number indefinite, " but restrained to certain cities and towns," for then, he remarks, they will hardly be able to pass off other men's money in the country as their own, by which he means that it will be necessary to keep the lenders at the lower rate from gaining higher interest through the agency of the " usurer;" for no man, he observes, " will lend his money far off or put them into unknown hands."* Such are the childish speculations on commercial legislation of that "deep-browed Verulam," whose name is a synonym throughout the civilised world for human wisdom. Instances of similar peculiarities in the opinions of men less eminent for political sagacity may easily be cited. The celebrated Dean Swift devoted a considerable part of his writings to the task of persuading the Irish people that the true remedy for their social and political evils was the consumption of such commodities as only Ireland herself produced, unaware of the fact, that, as foreign commerce is but an exchange of home products for the productions of other countries, it must occasion as much industry at home as any other kind of commerce.

This selfish but foolish tendency to impose mischievous restrictions on trade has, through the influence of a later struggle for the repeal of the customs duties upon agricultural produce of all kinds, become popularly associated with the landed interest; but in truth it has been a political vice common to all parties. To the merchants belongs the credit of an earlier conversion to the doctrines of free trade than was manifest in other classes; but formerly no class was more clamorous for protection. Manufacturers have always been jealous of the free importation of foreign articles; but if we could see the principle of meddling with the free development of trade carried to its highest point of absurdity, we must seek it in the regulations with which cities and chartered corporations have at all times surrounded their own internal industry and traffic - regulations many of which still exist, though more or less fallen into disuse before the light of general progress. An excellent view of these regulations may be obtained from the "Liber Albus, or White Book of the City of London," compiled in the year 1419 by John Carpenter, town clerk of London, and one of the four executors of the will of the well-known Richard Whittington, the hero of the child's story. No part of this volume is more curious than that which contains the various ordinances which anciently regulated the internal trade of the city. No kind of craft could be followed within the walls, except under such restrictions and regulations as make it at first hard to imagine how any trade could have existed at all. In these days, indeed, the commerce of any town would, under such conditions, inevitably languish and die out; and if in those times they did not prevent the city from attaining a certain kind of commercial prosperity, the reason is easily seen. In fact, if vexatious hindrances be now imposed on trade in any particular spot, the trade will simply betake itself elsewhere. But the old citizens of London had no "elsewhere " which, notwithstanding their grievances at home, was not far less preferable. Every political economist now knows what would be the condition into which a community would, under the circumstances, finally settle down. Those trades which were exceptionally burdened would simply exact from their customers, in the shape of higher profits, a compensation for their annoyance. The usurer, and the " regrater," or " forestaller," of every kind appear to have been peculiarly visited with such regulations, restrictions, fines, and penalties. No dancing-master compelled by a cruel tyrant to go through an elaborate dance in a complete suit of armour, could have been more embarrassed than a citizen who ventured to make anything for the consumption of his neighbours. Let him resolve how he would to be just, and honest, and to walk by the light of civic laws, it would be difficult to avoid finding himself in the pillory some morning. Nor could the unfortunate Lombards, the trembling predecessors of the Smiths, Paynes, and Grlyns, have hoped long to escape being led through the city (as some were) with their heads uncovered, unshod, and without girdle, upon horses without saddles, and being escorted to one of the city gates, and there bid depart for ever. Protectionism was, in fact, carried to its highest point in those early times, though, unlike the ordinary limitations upon free trade, the great majority of the civic regulations were intended not to favour the trader against the purchaser, but the purchaser against the trader. Such, for instance, was the ancient ordinance that the baker's dozen should, in defiance of arithmetic, consist of thirteen articles. Such was the rule that fishmongers should sell all the fish brought to market, and not attempt to correct an over-supply by withdrawing a portion for sale elsewhere; and such was the peculiarly harsh regulation that no butcher should salt his meat, which appears to have had no object, but to help the people to profit by the butcher's misfortune when he happened to have a large stock, in warm or clamp weather. Such rules were, of course, always self-defeating; but wiser heads than those of mediaeval aldermen have even now made but small, progress in the appreciation of the truths of economical sciençe.