Why Did Britain Abandon Free Trade?

Roy Douglas

[A paper delivered at the 1979 Joint Georgist Conference, San Francisco, California]

A few years ago, I spoke to an International Conference about the way in which the United Kingdom came to adopt Free Trade in the middle of last century. Yet we all know that Britain is no longer a Free Trade country. What happened? Did Free Trade prove itself in some way deeply unsatisfactory? < br>
After the notorious Corn Laws were abandoned in the period 1846-49, remaining restrictions on trade were rapidly removed. The thirty years which followed 1849 were a period of rising prosperity in all social classes. Then, suddenly, everything seemed to go wrong. In 1879 there was an appalling harvest. Grain from the United States and elsewhere was imported in great quantities to assuage the danger of famine; but during the 1880's cheap food from abroad continued to pour in, and improvements in refrigeration technology brought meat as well as grain. Thus agriculture faced a flood of foreign competition. About the same time, British industry met a new challenge, though this was not immediately recognised. Coal was the primary source of power, and iron the chief component of machines. Britain had long been the main source of both. Production continued to rise; but in the last two decades of the century Britain was being overhauled by Germany and the United States. By the turn of the century, the general standard of living was stagnant.

As prosperity faltered, so did political thinking burgeon. The 1880's and 1890's saw an immense turmoil of ideas - often mutually inconsistent, but all radical: Georgism and peasant-proprietorship; socialism of both Marxist and Fabian varieties; a new and more militant Trade Unionism; imperialism and protectionism.

War -- the South African War of 1899-1902 - brought further instability. Once the conflict was over, Colonial Secretary Joseph Chamberlain launched the idea of "Tariff Reform", in the wake of the new imperialism. Britain and her Empire should constitute a sort of Common Market-with internal Free Trade, but tariffs towards the rest of the world. The self-governing parts of the Empire proved reluctant to participate, and the campaign moved towards a demand for protection in Britain. The Free Traders were on strong ground in opposing this, for "Tariff Reform" would demonstrably produce a rise in food prices, and the population was overwhelmingly urban. Even rural folk foresaw more harm than good from Protection -- however disguised, and the Liberals, the Free Trade Party, won a, great victory in the 1906 election.

A great battle had been won; but the struggle was not over. Not only did vast and visible poverty and squalor remain, but they were not perceptibly abating. The Liberals tackled that problem in a variety of ways. There was "Welfare State" legislation: Old Age Pensions and National Insurance. There was a complex struggle about the land question, which got itself tied up with a constitutional battle over the House of Lords. The public at large was excited over questions like Women's Suffrage and Irish Home Rule. These issues were unrelate or only tenuously related, to each other; but most of them were still unresolved when war came in 1914.

After the war, a Coalition Government was in office. The Prime Minister, Lloyd George, was a Liberal; most of his supporters were Conservatives. Some relatively minor encroachments were made on Free Trade, but the main question was still not settled when the Coalition broke in 1922. The Protection issue was suddenly raised again by Conservative Prime Minister Stanley Baldwin in the following year; but the lines of battle were rather similar to those of 1903-06, and the result was the same: victory for the Free Traders.

The struggle over Free Trade after the First World War must be set against a new background: mass-unemployment. In the pre-1914 period, unemployment usually ranged between 2 and 6%; from 1921 onwards it was never below 9%, and often far higher than that. Baldwin's campaign of 1923 had been specially angled to unemployment; but people still saw it as a temporary phenomenon. As time went on, it became more and more the central issue of politics.

The Conservatives ruled Britain from 1924-29, and most Conservatives were Protectionists; but they were in no mood to launch a frontal attack on Free Trade. The lessons of 1903-06 and of 1923 suggested that Protection was a certain vote loser. The Labour Party took office in 1929; but in the autumn of that year there came the Wall Street crash, and thereafter the chronic unemployment of the previous decade rapidly became acute. By the summer of 1931 it was around the 20% mark, and showed no signs of abating. At that moment a short and sharp political crisis pitched out the Government, replacing it by a National Government supported by Conservatives, Liberals and a small but important group 'from the Labour Party. Later in the year the National Government went to the polls, and won the most sweeping majority any British government has ever had. Of the M.P.s returned, the vast majority were Conservatives; but the facade of a National Government was retained.

In this atmosphere, the Protection issue acquired new urgency. The Government itself was deeply split; but pressure from Conservatives became intense, and early in 1932 the National Government decided in favour of a general policy of tariffs. There was trouble within the Cabinet; but the overall result was inevitably the abandonment of Free Trade.

Why, we may ask, was the upshot so different from that of 1906 or 1923? The argument for Protection was no stronger than it had been at any point in the previous 86 years; but desperate people were prepared to adopt any remedy which was offered with enough insistence. Glancing over our shoulder, we note that other countries were suddenly accepting new and drastic ideas in response to the upswing in unemployment which they also were experiencing. The United States was turning to Roosevelt; Germany to Hitler.

The real strength of the Protectionist argument did not lie in any power to convince people that it would operate for the general good, or even for the selfish good of particular individuals, but rather in the fact that a society exhibiting great disparities of wealth and poverty is necessarily unstable. In times of rising general prosperity people will tolerate it; but when there is a serious downswing in conditions of life they often turn to "remedies" which are strongly pressed, even though these not merely cannot improve matters, but tend to make them worse. That is why Britain went Protectionist in 1932; it is also essentially the reason why many countries have turned to the even more pernicious "remedy' of communism. People who appreciate the fundamental wrongness of the quack "remedies" are often unwilling to tackle the real disease. As this audience will appreciate, we are back to Henry George and the land question.